Crypto Lending and DeFi Can Become Threat to Banking System

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2020 marks a new milestone in digital finance. Cryptocurrencies have received a powerful impetus, a lot of new products have appeared in this area, and the capitalization of the digital asset market is growing rapidly. The main cryptocurrency has risen in value several times during the year thanks to the increased interest of both private and institutional investors, causing a significant increase in demand. At the same time, the greatest attention is paid to the opportunities that open up decentralized finance, which already offers almost a full range of financial services.

It Looks Like the Future of Finance Is Crypto

The cryptocurrency broke its own value record set in 2017. Investments by whales and institutions in the cryptocurrency have been pushing the price of Bitcoin and altcoins upward throughout the fall. And although the digital currency is still an asset with high volatility, the behavior of its price is becoming more predictable and typical for financial assets, so naturally attracts more and more investments.

Financial Worlds Interact to Offer a Convenient Service

Last year, DeFi, decentralized finance, has rapidly burst into the banking and lending services industry, which has begun to occupy a niche in which fiat currencies once reigned supreme and only relatively recently they began to be squeezed out by cryptocurrency financial services. DeFi quickly became popular among cryptocurrency users, offering almost all of the same services that online banking had previously offered. However, there is no doubt that decentralized finance has its drawbacks, which are stopping many potential users so far. For example the following:

• Vulnerability to hacking due to the use of open-source code.
• Difficulty scaling up. Smart contracts used in DeFi systems have low transaction throughput.
• The similarity of products working on smart contracts, in which the same errors are often copied, often cause the loss of digital funds.

Now the creators of some DeFi products are creating mixed systems based on decentralized networks, however, they are combined and managed centrally, which helps to completely neutralize or at least, as far as possible, reduce these disadvantages. Such systems are usually:

• have closed source code, which does not allow attackers to easily use it to hack the system;
• allow to scale up, excluding the use of smart contracts from the applied technology, each desired extension can be easily added;
• unique technologies of hybrid systems that do not copy other people’s systems and errors, being subjected to rigorous tests.

One of the successful examples of such a hybrid system is BitcoLoan, which provides secure financial services – lending with cryptocurrencies, as well as the opportunity to make money on providing cryptocurrency for such loans, that is, on crypto investments.

Make Money by Lending Cryptocurrencies

The 2020 corona-crisis has hit financial markets, making most traditional investment vehicles ineffective or too risky. Many areas of business have suffered from the effects of the lockdown, especially the restaurant and hotel business and passenger transportation, and it is natural that their shares have ceased to generate income. This could not but affect the number of opportunities for earning money on the investment.

Decentralized financing services provide a way to make money on cryptocurrency investments, which is needed for loans. The past year and the explosive growth in popularity of DeFi have shown that cryptocurrency lending, as well as investments in it, are very relevant in the current situation around the world due to COVID-19. Such investments do not require a lot of capital to be able to invest in crypto-lending, and they also carry very low risks.

DeFi crypto-service platforms securely connect both parties of a transaction, allowing lenders to find reliable investment options, as well as for borrowers – to find affordable options offering suitable loan terms. In this way, lender investors are protected from many of the problems associated with lending.

How Mixed Decentralized Finance Systems Stand Out from Others

According to many crypto experts, the technology of decentralized financing is still relatively crude, and therefore the services and products associated with them will become more acceptable, convenient and secure not earlier than in a few years. This could be seen in the first cryptocurrencies example.

Today, the most reliable options are hybrid services like BitcoLoan, which provide users’ finances with a reliable platform to work with. Such centralized systems are ready now to be accepted by the masses of people interested in various financial services without high risks.

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