Bitfinex Introducing Borrowing Service to Compete with DeFi

The decentralized finance (DeFi) space is also part of the crypto industry and it has seen significant growth throughout the year. Amidst this growth, a new lending service was introduced by Bitfinex, a crypto exchange based in the British Virgin Islands, known as Bitfinex Borrow. Paolo Ardoino, the chief technology officer at Bitfinex said that this borrowing platform is not about lending out your cryptocurrency and then getting a rate of return on it. He disclosed that the crypto loan is obtained through the peer-to-peer lending platform of Bitfinex, even though it might have a pool of available credit. 

Put simply, this means that crypto loans and borrowing are not directly connected to an immediate and direct opposite party. Bitfinex Borrow simply provides the crypto exchange a chance to offer its customers loans. When crypto assets are put up by customers as collateral for these loans, the exchange will allocate these assets to another customer as part of a different product known as Bitfinex Funding. Therefore, it has been classified as peer-to-peer. Ardoino said that Bitfinex Borrow, Lending Pro and Bitfinex Funding are all belong to the same, peer-to-peer lending markets. The products might be different, but they use the same pool of funding. 

Customers can get the dollar-pegged Tether or U.S. dollar in return for their crypto assets, which will be held by Bitfinex until customers pay off the loan. Collateral is something that’s given to the lender by the borrower for holding until they pay back the loan. At this time, Bitfinex Borrow is accepting two forms of collateral, which are Bitcoin (BTC) and Ether (ETH), respectively. 2020 saw the speculation and interest in decentralized finance space reach bubble territory. There has been immediate parabolic growth in random new projects, with their assets also skyrocketing. 

The DeFi space started off as a very straightforward system of crypto-based borrowings and loans, but it transformed into speculators looking for the highest return on their capital. The DeFi sector did cool down slightly, as Bitcoin took center stage with its rising price action. But, the last few days have seen the price action surging in the DeFi space as well. The structure of Bitfinex Borrow seems to be quite similar to the DeFi loan structure before the recent bubble, rather than a continuing of the same trend. DeFi hadn’t been that complicated before speculators had begun borrowing and loaning capital across various projects and yield farming in search for compounded interest. 

There is a wide range of interest rates that are applicable in the service, which are between 5.5% and 18.5%, depending on a number of factors. These include the size and length of each loan. As far as time is concerned, interest rates go up in cost according to the loan period. Ardoino said that the rates were higher for longer-term loans. Moreover, borrowed funds can only be held by customers for 120 days. There are also fixed and floating rates that are derived from FRR (Flash Return Rate) from Bitfinex.

Leave a Reply