Almost all people know what you are talking about when borrowing money. Then you go to the bank and you may receive a sum of money. For example, to start your own business, you can contact traditional or non-traditional financial institutions such as New Horizons (https://newhorizons.co.uk/quick-loans/). Yet nowadays there are also other things that you can borrow than the euro. Namely cryptocurrency. But how can you borrow such a cryptocurrency? Let’s take a look at Bitcoin Lending.

What is Bitcoin lending?

This is a way for bitcoin holders to earn extra money. You lend your cryptocurrency to someone else for a certain amount. It works just like fiat money or just borrow money. In this way, you can also borrow cryptocurrency. Cryptocurrency is sometimes used as collateral for loans, but that is not the case here. The whole idea is that someone will borrow cryptocurrency to make a profit with it.

Finally, after a certain period, he returns the cryptocurrency to the original owner, with an extra sum of money. The borrower can then sell the borrowed goods and buy a new one for a profit. This way both parties can earn a little extra. Will 2020 be the year in which cryptos will be adopted en masse?

Peer to peer borrowing

Bitcoin lending, also called bitcoin financing, is a form of peer to peer lending. But what exactly does that mean? Peer to peer borrowing is basically investing your money in a loan from a private person. It is a loan that does not involve a bank. An example of this p2p borrowing is: Someone is urgently looking for 2000 euros and you have that left. You then lend that directly to that person, who returns it with interest after a while.

The same works for cryptocurrency. Someone wants a specific cryptocurrency, you have that, you lend it to that person. After a while, it returns the amount of cryptocurrency with a sum of money. What he does well with your loan in the meantime doesn’t matter. You won’t lose anything with it.

Blockchain as an ideal loan aid

Blockchain is very useful when you want to apply for a loan. That does not only have to be borrowing money but can also be done when borrowing cryptocurrency. Many people don’t really know what blockchain is and what it actually means. That’s because it hasn’t been around that long. It was conceived at the same time with the arrival of the bitcoin system. But what is it anyway? Perhaps this article about Bitcoin for dummies helps you to understand things better.

A blockchain can easily be compared with a ledger. A lot of data, including financial facts, is stored together. The biggest difference between a ledger and a blockchain is that a ledger is linked to a specific thing. For example, the accounting of a company. A ledger is used for this.

Open and decentralized

However, a blockchain is open and decentralized, meaning that nobody owns the data. So it belongs to everyone. It is an open network in which everyone can participate if they want to. You can, therefore, compare this part with the internet. It belongs to nobody and anyone who wants can use it. The advantage of this is that the data is spread everywhere and therefore cannot easily be stolen or manipulated.

In short, a blockchain is a large list of data that everyone can see and has access to. Everyone can make an adjustment, which is immediately implemented for everyone. The advantage of a blockchain is that you can only add data at the bottom of the list. Old data cannot be deleted or modified. Because of this, many people rely on a blockchain.

This is the principle that is also used with bitcoins. Since cryptocurrency is not something tangible, you cannot just check whether someone actually has it. You can easily check that in a blockchain. You can only enter a transaction if the cryptocurrency has been sold to you before. This of course also gives a safe feeling when borrowing and lending cryptocurrency.

You agree that you purchase a quantity of cryptocurrency and that the initial owner will buy it back later. Suppose you would borrow a bitcoin from someone for € 200. Then you buy the bitcoin for, for example, € 2000, – and later the owner buys back what you borrowed from you for € 1800. You can see that money as collateral.

Conclusion borrowing cryptocurrency

Bitcoin lending is the purchase of cryptocurrency such as bitcoins with the agreement that the seller will buy back the bitcoin. In a sense, the money is the collateral for the loan. Bitcoin lending is made possible by blockchain, a long list with a lot of data that is accessible to everyone. Such a list of data is also used for other purposes, such as applying for a mortgage loan. Do you have Bitcoin in your portfolio and are you prepared to earn extra money with this? Think about securing your Bitcoins with Bitbond.