CoinMarketCap Launches Tool to Discern Best Interest Rates
Cryptocurrency data provider CoinMarketCap has enabled a new tool on its website for users to find out the best interest rate on each platform to earn a lending yield. With the advent of DeFi, more and more people are looking at methods of earning passive income on their holdings via interest, October 16, 2019.
Improving Financial Data in Crypto
Lending cryptocurrency can be done over, both, centralized and decentralized platforms. Within these two broad classifications, there are a number of platforms that have varied interest rates for the same asset.
CoinMarketCap’s new tool encompasses cryptocurrencies that can be lent out on any recognized platform. Unsurprisingly, most of the tokens are based on Ethereum.
Some companies like BlockFi allow for flexible lending; you can lend any of BTC, ETH, or Gemini USD (GUSD) and receive interest in any of the three tokens, as per your choice.
This is a positive event for information symmetry and aggregation in crypto. A one-stop-shop to view the active interest rate to lend or borrow tokens will go a long way in making the market more efficient in terms of interest rates.
Financial data in cryptocurrency is a necessity, especially considering how young the market and all of its trends are. Many companies are focusing on this to help investors make smarter decisions.
An Interesting Discrepancy
Looking at the interest rates across assets, the disparity in lending/borrowing rates across centralized and decentralized platforms is quite intriguing.
Bitcoin cannot be lent out or borrowed over a decentralized platform, but there is a difference of almost 100 percent in lending yields on wallets and financial providers (BlockFi and Crypto.com) and exchanges (Binance and Bitfinex).
After observing interest rates for Ethereum and other ERC-20 tokens, it becomes obvious that decentralized platforms have much lower yields than their centralized counterparts.
One of the more prominent reasons is the existence of a single point of failure. Decentralized networks have much lower custodial and storage risks, and these protocols simply serve as facilities rather than intermediaries.
Decentralized lending protocols follow a market-driven approach to setting interest rates while centralized platforms set a fixed rate, which is frowned upon in cryptocurrency as it essentially recreated the flaws of traditional banking.