Blockchain-based lending has regained momentum in 2023, with the value of active tokenized private credit now reaching $582 million, a whopping 128% increase from a year ago.
While still a long way from the June 2022 peak of $1.5 billion, according to data from real-asset lending tracker RWA.xyz, this resurgence comes amid a recent increase in lending, with lenders seeking to leverage blockchain-based alternatives to traditional financial institutions. This may be a sign that you are looking for alternatives. interest rate.
According to a December 1 report from NerdWallet, the average rate for blockchain-based credit protocols is currently 9.64%, with financial institutions offering small business bank loan rates ranging from 5.75% to 11.91%.
The amount borrowed is also considerable. RWA.xyz tracked $4.5 billion in blockchain-based loans across 1,804 transactions, meaning the average loan was worth about $2.5 million.
One of the most notable recent loan applicants is Fasanara Capital, a UK-based asset management company. The company received a $38.3 million loan from Clearpool at an APY of less than 7%.
Brazilian bank Divibank is another financial institution participating in the market.
Ethereum-based Centrifuge now owns more than 43% of the active lending market, with $255 million, a 203% increase from $84 million at the start of 2023.
Goldfinch and Maple are the second and third largest blockchain credit protocols, with $143 million and $103 million in active loans, respectively.
Stablecoins pegged to the US dollar Tether (USDT), USD Coin (USDC), and Dai (DAI) are the three main cryptocurrencies used to facilitate these loans.
Related: Making Crypto Lending Mainstream: How This Platform Is Breaking Down DeFi Barriers
According to the data, the largest applicants for blockchain-based loans come from the consumer ($197.7 million) and automotive ($186.8 million) sectors, followed by fintech, real estate, carbon credits and cryptocurrency trading.
Even with recent increases, the $506 million active lending market is only about 0.3% of the size of the $1.6 trillion traditional private credit market.
However, taking out loans on blockchain-based protocols comes with risks. Anyone seeking a loan should consider bankruptcy, collateral, smart contracts, and other security risks before taking out a loan.
magazine: Home loans using cryptocurrencies as collateral: do the risks outweigh the rewards?