Overview of best crypto interest rates 2021 – DeFi and CeFi
An overview of several leading DeFi and CeFi crypto lending platforms and who offers the highest crypto interest rates.
Who offers the best crypto interest rates? With the growth of DeFi & CeFi applications, crypto lending, margin exchanges, and stakable cryptocurrencies over the last few years, it can be difficult to know where the best yields for your idle capital are. Following on from our guide to crypto yield farming, this survey looks into the major crypto lending platforms and examines the different interest rates offered by them.
First, an understanding of the difference between ‘crypto lending’ and ‘crypto borrowing’ in the context of this article is important. If you are lending in the scenarios below you are loaning your assets to the platforms featured with the expectation that you will earn interest on your crypto assets. Your goal is the return of your original sum, with earned interest. This article does not explore crypto borrowing – where you would borrow assets (or fiat in some cases) from a platform, which you would be required to repay – with additional interest.
The question of which is the best crypto lending platform is open to debate – as each has its own approach and processes – but certainly annual interest rates paid are a good place to start. All interest rates were recorded on the 1st of March 2021 and are subject to change.
1. DeFi Lending
Demand for borrowing in the DeFi world comes as a result of either margin trading on decentralized exchanges or from borrowing on DeFi applications. The constant fluctuation of demand and supply on DeFi applications results in yields that are fairly volatile. Due to the majority of DeFi applications being on the Ethereum network, borrowing and lending consists mainly of Ethereum, ERC-20 tokens, and wrapped Bitcoin, which is an ERC-20 token that is backed 1:1 with Bitcoin. The business model of the platforms can differ slightly.
is a DeFi platform for lending and margin trading.
Best Defi Interest Rates
Compound
Fulcrum
Cream
dYdX
AAVE
DDEX
BTC (Wrapped)
0.32%
2.13%
1.2%
0.01%
0.02%
0%
Ethereum
0.15%
0.02%
2.87%
0.15%
0.17%
0.01%
USDC
5.56%
12.09%
12.35%
5.56%
6.28%
9.18%
DAI
5.09%
20.66%
12.78%
5.09%
5.7%
0.20%
USDT
2.74%
11.24%
17.94%
2.74%
16.88%
7.29%
2. Centralized Lending
In addition to DeFi lending there are also many centralized crypto lending companies. Because loan origination happens in a centralized fashion with these companies, the interest rates are typically more stable as the lending entity sets the rate rather than pure market forces. Interest rates on centralized lending platforms are usually higher than other platforms, which is appealing to lenders.
Best CeFi Interest Rates
NEXO
Block-Fi
YouHodler
CoinLoan
Celsius
Crypto.com
Hodlnaut
BTC
6%
6%
4.8%
7.2%
6.2%
6.5%
6.2%
Ethereum
6%
5.25%
5.50%
7.2%
5.05%
5.50%
6.7%
USDC
10%
8.6%
12%
12.30%
10.51%
12%
8.3%
DAI
10%
–
12%
12.30%
10.51%
12%
8.3%
USDT
10%
9.3%
12.7%
12.3%
10.51%
12%
8.3%
An introduction to crypto loans
The other side of lending is of course borrowing. If you are interested in taking a loan out (for USD for example) many of the providers above also provide that service.
Most major Lending and borrowing protocols across both CeFi and DeFi require borrowers to lock up an asset in order to take out a loan. These types of loans are called collateralized loans.
Collateralization is a borrower’s commitment to pledge a number of assets as a means for a lender to recoup their capital in the instance that the borrower defaults on the loan. If a borrower continually missed payments on a loan obligation then the lender has the right to possess the collateral pledged in the case that the loan defaults.
Collateralized, or more specifically ‘overcollaterized loans’, are at the core of efficiently operating DeFi lending markers. DeFi lending protocols enable open, permissionless, and pseudo-anonymous financial services. There are no credit score requirements for borrowers and generally no formal KYC or AML requirements.
In order to maintain a balance between open access and systemic stability the value of the collateral that needs to be pledged for DeFi loans has to exceed the value of the loans. If for example, a DeFi user wants to directly take out a USD100 DAI loan on Makerdao, they need to put up at least USD150 worth of Ethereum.
Borrowing from DeFi protocols can often be a precarious and time-intensive process that goes beyond simply paying back interest in installments.
The loan-to-value ratio (LTV) needs to be carefully monitored to ensure that the collateralization requirement that was agreed upon before the loan was executed is maintained. Maintaining this LTV ratio is made more difficult if borrowers put up volatile assets like ETH as collateral. If the value of ETH changes suddenly in US dollar terms, loans can be liquidated very quickly and borrowers are not protected by mechanisms that exist like loan insurance.
For these reasons, due to the complex nature of unique specific DeFi protocol agreements that go beyond interest rate payments, BNC has chosen not to include details around DeFi protocol borrowing rates.
Programmable Money: Tools that find the best interest rate for you automatically
These days yield optimization platforms like Yearn.finance exist. They use the Ethereum blockchain’s capabilities to facilitate programmable money to make it easier for users to find optimal interest rates automatically. Before Yearn, users seeking to maximize their yields needed to manually move their stablecoins between lending protocols. A slow, labor-intensive process that Yearn aims to avoid.
The protocol works by creating pools for each asset that is deposited. When a user deposits their stablecoins into one of these pools, they receive yTokens that are yield-bearing equivalents of the coin that was deposited. If for example, a user deposits DAI into the protocol it will issue back yDAI.
Assets are automatically shifted between lending platforms in the DeFi ecosystem like Compound and Aave, where interest rates for deposited assets change dynamically. Every time a new user deposits assets into a pool on Yearn, the protocol checks whether there are opportunities for higher yield and rebalances the entire pool if necessary. At any time a user can burn their yDAI and withdraw their initial deposits and accrued interest in the form of the original deposit asset.
The protocol has evolved to offer more complex solutions that can efficiently maximize yields on user deposits. The yCRV liquidity pool built by Yearn on the Curve finance platform contains the following yTokens: yDAI, yUSDC, yUSDT, yTUSD and pays back a yCRV token that represents the index. Users can deposit any of the four native stablecoins into the pool and earn interest back from yield-bearing yCRV tokens. Depositors also earn trading fees from Curve for providing liquidity to other users of the platform.
