Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
The new Bitfinex Borrow platform will allow users to get access to peer-to-peer lending and borrowing by putting their Bitcoin (BTC) and Ethereum (ETH) holdings as collateral.
On Wednesday, November 11, crypto exchange Bitfinex introduced a new crypto-loan platform dubbed Bitfinex Borrow. This new platform allows users to get a loan by putting their crypto holdings as collateral and get a loan in USD or Tether (USDT).
The platform is currently accepting only two cryptocurrencies – Bitcoin (BTC) and Ethereum (ETH) as collateral – for offering the loan. Interestingly, Bitfinex will allocate this collateral to a different customer as part of its separate product called Bitfinex Funding. All the transactions from one product to another happen in a peer-to-peer manner. Speaking to CoinTelegraph, Bitfinex chief technology officer Paolo Ardoino said:
“Bitfinex Funding, Lending Pro and Bitfinex Borrow are all part of the same, peer-to-peer lending markets. These are different products, using the underlying same pool of funding.”
With the Bitfinex Borrow, users can choose between a fixed-rate-loan and a variable rate depending on the Flash Rate Return (FRR). The borrowing rates can vary anywhere between 5.5% Annual Percentage Rate (APR) to about 18.25% APR. All other details like the annual and daily rates along with the lending and repayment amounts are all calculated automatically. These calculations also depend on factors like the loan amount, borrowing period, amount of digital tokens put as collateral, etc.
Users can also reduce their daily interest rates by making partial or full repayment on principal and interest. However, they will have to manage their own risks for the fluctuating Bitcoin (BTC) and Ethereum (ETH) prices.
Bitfinex Borrow Taking on the DeFi Sector
The decentralized lending market has recently got a major boost with the surge in the DeFi market. For the last few months, a number of new DeFi protocols have hit the market offering decentralized lending and borrowing. However, the sector is still full of new players similar to the ICO boom of the early days.
With Bitfinex launching its own peer-to-peer solutions, it will be directly competing with other DeFi protocols. As said, the borrowing rates on the Bitfinex platform will vary from 5.5% to 18.25% APR. Also, users get the option to select between the fixed-rate or a floating rate called the Bitfinex Flash-Rate Return (FRR). Explaining it, Ardoino said:
“The FRR represents a moving average of interest rates proposed on Bitfinex’s peer-to-peer financing market. The moving average of what is available in the market is recalculated every hour. The crypto loan is provided on a peer-to-peer basis through Bitfinex’s financing matching engine (separate and apart from the trading matching engine).”
Note that only fully verified users will have access to Bitfinex Borrow.