Crypto-Based Passive Income Methods #1: Lending — Part 1
This is one of the easiest methods to earn passive income anywhere. You simply lend cryptos that you own, to a borrower, in return for the borrower paying you interest on this loan.
There are many advantages to lending your money in the crypto world compared to the non-crypto world (traditional lending of fiat or paper money to another):
1. Lending cryptos will typically earn you a MUCH HIGHER INTEREST than lending fiat (paper) money.
Your Fixed Deposits (FDs) or Certificate of Deposits (CDs) which is money you put in a bank in return for the bank giving you interest on your money (you are in fact lending the bank your money) are currently giving you an APR of 2% – 4% a year.
However, lending certain cryptos can earn you 2-4 times higher interest, of between 4% – 16% a year.
Think about that.
Simply by lending cryptocurrency instead of fiat currency, you INSTANTLY DOUBLE, TRIPLE OR QUADRUPLE your returns.
2. ANYBODY can lend his cryptos to anyone else
There is no requirement for a borrower in the crypto world to undergo KYC (Know Your Customer) processes, have a good credit score, provide income statements, etc.
ANYBODY can be a Borrower.
There is also currently no licensing requirement in the crypto world in many jurisdictions for the lender who wants to lend cryptos in return for interest and do this as a business.
ANYBODY can also be a Lender.
This is unlike in the non-crypto world where if you want to operate a money-lending business, you will need to apply for and have a license.
Because many jurisdictions still haven’t drawn up laws to regulate the crypto industry and its many applications including lending, due to many factors.
Thus anyone with cryptos can instantly be a money lender to multiple borrowers and earn a much higher interest on his money, starting immediately.
You can choose to take advantage of this fact now, before the regulations come into play.
But even when they do, there’s still a way to do this in the crypto world and the authorities may not be able to enforce any laws against lending cryptos as a business. More on this later.
3. Crypto Lending vs Fiat Lending
1) Crypto lending can take place on decentralised exchanges (DEXs).
DEXs are powered by blockchain technology, which eliminates intermediaries like banks.
2) You can lend crypto to anyone in the world.
You are not restricted to where you are geographically, like when you’re lending your fiat money to your local bank.
3) In fiat lending, creditworthiness and repayment history are important factors to determine the borrower’s loan eligibility.
In crypto lending, the borrower only needs to provide a collateral for his loan. This collateral is another digital asset that he owns. As long as he provides another digital asset as collateral for his loan, he can immediately borrow cryptos from another.
What are these digital assets? I’ll cover them in Part 2 of this lesson.
4) Lending in the non-crypto world involves lengthy paperwork, approvals and other processes before the loan can be released.
In the crypto world, you can borrow cryptos from another IMMEDIATELY — as in RIGHT NOW — if you wish.
And your loan will also be APPROVED INSTANTLY the moment you want it.
Both lending and borrowing in the crypto world have huge advantages over the non-crypto world.
But most people don’t know about them.
This is to be expected, as the crypto world is only about 14 years old (it started with bitcoin being released in 2009).
It also doesn’t help that it’s extremely technical, with its beginnings in cryptography, programming and computers, with a lot of new jargons and terms that the masses have never seen or heard of before. It will take time for educators (like me) to simplify things for everyone due to the sheer amount of information and opportunities in this space.
Now this lesson has Lending as the focus because of the money you can make completely passively, but you’ll also discover that Borrowing can also earn you more money than if you don’t borrow, as long as you borrow correctly, and execute your plans based on the borrowings properly.