TL; DR
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If we want to see more money flowing into the crypto space, we will have to make it easier for large institutional players to enter the space through loans. Coinbase makes this possible.
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Coinbase has set aside a whopping $57 million to launch its lending business, but the company will also expand its reach by allowing customers to get in on the action.
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All loans are over-collateralized – meaning Coinbase will never lend more than you give it (e.g. you lend them $1, they lend $0.80).
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With Coinbase’s lending system, unlike traditional banks that pay an average of 0.43% annual interest, it is an opt-in service and will (if it even remotely resemble the rest of the crypto lending world) 3 yield -8% per year.
Full story
If you are a large company and want a loan, there are MANY trusted banks you can go to to raise money… but what if you want a loan? cryptocurrency loan?
There isn’t exactly a sea of trusted/regulated companies you can turn to for much of the change.
And that’s a problem.
If we want to see more money flowing into the crypto space, we will have to make it easier for large institutional players to enter the space through loans.
Good news is that Coinbase is taking one for the team and making it happen.
Now. Here you can benefit:
Coinbase has set aside a whopping $57 million to launch its lending business, but the company will also expand its reach by allowing customers to get in on the action.
The basic idea is this:
You lend the people at Coinbase some crypto → they lend it to big investors → Coinbase pays you interest on your loan.
The risks = these borrowers could default on their loans and you could lose your crypto (this risk increases significantly if/when the markets crash).
The guarantees = these loans will be made to large institutional firms (not rapiers), meaning they are more likely to have decent cash reserves, ensuring they will pay back on time and in full.
In addition, all loans will have too much collateral – meaning Coinbase will never lend more than you give (e.g. you lend them $1, they lend $0.80).
This is why we love this:
If you have a bank account, your bank not only charges you a monthly fee to have one, but also lends your money to institutional investors whether you like it or not.
(You pay an average of 0.43% per year for this).
With Coinbase’s lending system, it’s an opt-in service and (if it’s anything like the rest of the crypto lending world) will bring in 3-8% per year.
Same, but better.