Overview
Traditionally, financial services such as lending and borrowing were only available through recognized financial institutions and banks. The implementation of these processes was hindered by the need to comply with many conditions, which limited the number of potential customers.
Institutions involved in the provision of borrowing and lending services had to find a solution that would allow borrowers to obtain credit without a credit check, making loans available to those customers who may not be eligible for a bank loan.
A potential solution to this problem appeared after the introduction of blockchain technology. When the development and dissemination of the cryptocurrency concept began, the discussion turned to a new set of considerations, namely decentralized finance (DeFi) and centralized finance (CeFi).
Solution
One of the appropriate ways to provide customers with borrowing and lending services that meet the specified conditions is crypto lending. Crypto lending has become one of the most successful and widely used services, and many crypto exchanges and other crypto platforms offer them to their customers.
CeFi lending platforms act as a link between the traditional monetary system and the crypto-asset market. Those services allow users to borrow fiat money and crypto assets directly and use their crypto holdings as collateral.
Centralized finance platforms are attractive to users because they offer the possibility to earn interest and receive loans via their cryptocurrencies, securely protecting private keys. Thus, the performance, trust, and cost-efficiency of transactional services are optimized. CeFi solution is the mix of yield advantages that DeFi produces with reliable and simplified typical financial service products.
How does Crypto Lending Platform work?
Crypto lending process includes the following steps:
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Borrowers deposit their crypto assets into their accounts as collateral.
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Borrowers determine the loan amount, collateral amount, and their currencies.
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When borrowers secure loans through the lending platform, then their assets are frozen.
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When borrowers repay the loan with interest, then their secured assets become available.
Benefits of CeFi Crypto Lending Platform
Services Variety
The platform provides a huge range of different financial services, including direct fiat support. Not only cryptocurrency but also fiat currency can be used as a loan.
Security
Our lending platform implements KYC and AML practices to enable system integrity protection from illegal activities. Therefore, you can be sure of the high-security level of the solution.
Liquidity
This solution provides borrowers with an innovative platform to achieve liquidity from their crypto assets without having to sell them.
Cross-chain services
CeFi services support the trading and lending of LTC, XRP, BTC and other coins issued on independent blockchain platforms. It is a significant advantage of the solution as many of the frequently traded and highest-market-cap coins exist on independent blockchains and don’t implement interoperability standards.
Lower Credit Rates
Solutions in centralized finance are more stable and are not influenced by market pressure, that’s why such a crypto lending platform can set lower credit rates than DeFi. It makes the platform more attractive to potential customers.
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Why Crypto Lending Platform development with Velmie
Experienced Team. Our team has proven experience in the development of blockchain-based solutions for different business cases. The wide variety of clients allows us to speak of a wide range of expertise
Technical Expertise. Velmie team possesses profound experience in both web and mobile domains and can perfectly understand the needs of clients.
Seamless Support. Our support helps clients to establish one-on-one communication. Ongoing software support and maintenance are also parts of our services.
Significant Results. We provide our clients with high-quality solutions and demonstrate meaningful outcomes. We make sure you see value in your investments.
Rapid Development. We provide you with customized products suitable for your target audience along with smooth and accelerated development and deployment.
How do Centralized Crypto Lending platforms ensure security?
Centralized crypto lending takes place on platforms that emulate traditional banking rules and infrastructure. Platforms such as BlockFi, Nexo, and Binance are integrating Know Your Customer (KYC) and Anti-Money Laundering (AML) among other regulatory protocols. Some CeFi platforms offer deposit insurance.
What is the main risk of Centralized Crypto Lending?
Liquidity Risk: Borrowers may be exposed to liquidity risk when using centralized crypto lending platforms. For example, if their collateral falls below the value that maintains the integrity of lenders, they will need to provide more liquidity to the protocol or lenders risk losing their initial investment in liquidation.
What are the examples of Centralized Crypto Lending Platforms?
BlockFi is an exchange that supports crypto borrowing and lending. Coinbase is another CeFi platform that supports crypto lending. Its lending services are available in most countries and about twenty U.S. states. Binance allows you to borrow and lend numerous cryptos directly from both the website and app.
What is the main difference between CeFi and DeFi Crypto Lending?
The user experience at CeFi is much simpler, with one account required for users to start earning income from their cryptocurrency positions. These crypto companies will then lend money directly to borrowers, processing crypto transfers, underwriting, etc. CeFi platform users simply deposit their funds and then receive their monthly income.
An important difference between DeFi and CeFi is that when a user interacts with DeFi, they simply have to trust that the smart contract is written in a secure way. DeFi is peer-to-peer lending that does not require the same level of trust as interacting with a CeFi company.
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