Defi banking can be hard to understand. We want to make it simple and easy for people. This blog post goes into detail about we generate interest.
Outlet is a high interest way to manage and save your USD, similar to a bank account. Our customers receive up to 10% interest on their USD. Outlet matches your funds with people that issue cryptocurrency backed loans. You can use Outlet just like a bank account, but we are not a normal bank. This blog post gives you more information behind what we are supporting, and where the funds you deposit go in order to achieve the amount of interest they generate.
Defi, or Decentralized Finance describes a financial system that is built on top of blockchain technology, such as Bitcoin or Ethereum. These decentralized financial products are typically transparent, and are not owned by a sole entity and are accessible to anyone. Ethereum has proven itself to be an incredible technology, and will likely become one of the most transformative movements in finance.
These protocols and companies issue loans. These loans secured loans backed by cryptocurrency. When we lend your money, the person borrowing has to secure the loan by depositing collateral. Currently, if a borrower wants to borrow $100 they would need to deposit $200 in collateral. This assures that your money is safe if the borrwer were to default on the loan.
Lending out your cryptocurrency to protocols and organizations that issue loans backed by cryptocurrency is the type of cryptocurrency lending we are speaking of when you see it on our site.
When you lend out your cryptocurrency you are typically lending it to a smart contract on the Ethereum blockchain. This smart contract provides the decentralized mechanisms that allow anyone to lend cryptocurrency to anyone who is looking to get a loan.
Outlet loans stable coins to companies and individuals that are looking for funds to back cryptocurrency loans. In return for providing the capital to fulfil the loan we give the interest rate back to our users.
Cryptocurrency loans are safe. Cryptocurrency loans are required to be over collateralized due to how volatile the asset is. The loans themselves are collateralized at a high rate of around 150-200% meaning that people would have to put up $2 in cryptocurrency for every $1 lended to them. This is much safer in comparison to banks that give mortgages to just about anyone.
People want to take out a loan on their cryptocurrency for multiple reasons. These are a few good reasons why someone would want to take out a loan on their cryptocurrency.
Outlet has the lowest interest rate in comparison to other similar bitcoin loan platforms. Outlet allows you to get cash for locking up your cryptourrency. You can use this cash to buy more crypto to continue trading.
When you typically buy Bitcoin you dont anticipate having to turn it back into cash. It can be a mess between taxes, exchanges, and fees. Taking out a loan gives you the right of owernship over your crypto, but also gives you the USD to pay for anything you would like.
Outlets interest rate is often times much lower than other fiat rates. You can take advantage of the cryptocurrency you own by using it to refinance other debt.
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