This article explores Hyperlane’s core features, growing ecosystem, the upcoming HYPER token’s airdrop and HYPER’s tokenomics.

Hyperlane is a permissionless, modular interoperability protocol designed to facilitate secure cross-chain messaging and asset transfers without relying on centralized intermediaries. It empowers developers to build custom bridges and interchain applications with unparalleled flexibility.

Hyperlane is a permissionless interoperability protocol for cross-chain communication across blockchain ecosystems. It allows 

 (DApps) to exchange arbitrary messages and transfer assets across chains seamlessly — without centralized relayers or approvals.

 (ISMs) — part of a modular system that lets developers define the way that cross-chain messages are verified, offering unmatched flexibility. It supports cross-VM communication, including EVM, SVM (Solana), and 

, making it ideal for today’s multichain and modular blockchain environments. 

Hyperlane’s architecture eliminates lock-in and promotes composability, laying the groundwork for a truly interconnected 

Hyperlane was co-founded by Jon Kol, Asa Oines and Nam Chu Hoai, all seasoned innovators with experience at corporations such as Morgan Stanley, Galaxy Digital, Celo and Google. In 2022, the protocol secured $18.5 million in seed funding, led by Variant Fund, with notable participation from Galaxy Ventures, CoinFund, Circle and Figment Capital.

The funding underscored growing institutional confidence in permissionless interoperability infrastructure. Hyperlane hasn’t conducted a public 

, but early community contributors and developers are expected to receive token rewards. 

The project’s approach mirrors LayerZero and Wormhole in incentivizing both users and integrators, with a focus on long-term decentralization.

Launched in August 2024, the Hyperlane Foundation governs the protocol as a 

 (DAO). It manages treasury grants and protocol upgrades, and ensures decentralization in the governance process. 

The foundation also introduced the Hyperlane Alliance, a collective aimed at expanding adoption and standards for intent-based messaging and cross-chain interoperability. 

Governance will be powered by the HYPER token, with voting rights extended to developers and users shaping Hyperlane’s future.

Hyperlane combines security, flexibility and scalability in a single messaging layer.

Hyperlane currently supports over 140 blockchain networks, including Ethereum, Arbitrum, Solana, Celestia, Base and Blast. Its messaging framework is used for:

Hyperlane’s integration with ABC Stack allows sovereign rollups to maintain control, while gaining seamless access to the broader blockchain ecosystem.

Hyperlane’s native token, HYPER, will officially launch on Apr 20, 2025, 

. To claim tokens, users must register by April 13 on the official website.

HYPER will play a central role in the Hyperlane ecosystem, as follows:

Based on official documentation, the total HYPER supply will be allocated as follows:

The community will receive 57%, broken down into 25.5% for expansion rewards, 20% for staking rewards and 11.5% for strategic launch provisions. Meanwhile, 25% will be allocated to core contributors, 10.9% to early backers and 7.1% to the Hyperlane Foundation.

Hyperlane’s distribution strategy prioritizes general message passing (GMP) activity over short-term engagement. To prevent airdrop farming, anti-

 mechanisms assign trust scores based on historical interaction, wallet behavior and transaction quality in order to ensure rewards go to real users who contribute meaningful value to the ecosystem.

Beginner

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Hyperlane (HYPER): Interoperability protocol connecting over 140 blockchains

In this article, Bybit Learn explores how Mind Network is pioneering fully homomorphic encryption (FHE) tech, what makes FHE different and how you can trade FHE on Bybit Spot.

Imagine a digital world where your data stays encrypted — not just during storage and transfer, but even while it's being processed. No leaks, no vulnerabilities — and no trust required. That's the future Mind Network is building with its 

Mind Network is developing the foundational cryptographic layer for a secure and decentralized internet. By enabling computations on encrypted data, it's solving critical privacy and security challenges across 

 and AI. In this article, Bybit Learn explores how Mind Network is pioneering this tech, what makes FHE different and how you can get involved with the FHE token.

 is an infrastructure project pioneering fully homomorphic encryption (FHE) for web3 and AI. Its mission is to create a fully encrypted internet where data remains private at every stage — from storage and transmission to processing.

The project tackles key challenges in decentralized environments, including data privacy, transaction confidentiality and consensus fairness. With its 

, developed by its team in collaboration with industry partners, Mind Network aims to upgrade the web from hypertext transfer protocol secure (HTTPS) to a fully privacy-first framework.

Mind Network is led by CEO Christian Pusateri, a cryptography advocate and the visionary behind CitizenZ, Mind Network's initiative for digital sovereignty in a 

The project is backed by Binance Labs, Cogitent Ventures, HashKey Capital, Animoca Brands, Chainlink and more, and has 

. Its team has also partnered with Zama Capital to 

 — a production-ready Rust-based FHE library — into real 

The project has earned two Ethereum Foundation research grants, specifically for its FHE innovations, marking it as a standout leader in post-quantum cryptographic research.

What is fully homomorphic encryption (FHE)?

FHE is a type of encryption that allows data to be processed without ever decrypting it. This means users and systems can compute directly on encrypted data, thus ensuring full privacy at every stage.

Traditional encryption requires data to be decrypted before use, exposing it to potential threats. With FHE, the data stays encrypted during processing, eliminating those risks and removing the need to trust intermediaries.

FHE is based on lattice cryptography, which was 

 in 2024 as a post-quantum encryption standard. This makes FHE inherently quantum-resistant, future-proofing it against tomorrow's security threats.

Mind Network applies FHE across its ecosystem to support secure AI operations, encrypted consensus and decentralized governance. Resulting benefits include quantum-resistant encryption, zero-trust scalability and crypto-economic integrity.

 of the Mind Network ecosystem. It's used to activate AI agents, pay for secure computation and participate in decentralized governance.

The total supply is capped at 1 billion tokens, with 41.7% allocated to the community and airdrops. As of Apr 14, 2025, its circulating supply stands at 249 million FHE.

 is currently live, with eligibility open to CitizenZ Passport holders, vFHE voters, testnet participants and more. Tokens can be claimed on MindChain or BNB Smart Chain.

, giving users a simple and secure way to buy, sell and hold the token. As a global exchange, Bybit offers a user-friendly interface, low trading fees and fast execution speeds.

Bybit is running an exciting campaign for new and existing users, lasting through Apr 24, 2025, 9AM UTC. Simply deposit and trade FHE for a chance at winning a share of 3,600,000 FHE. Head to the 

Intermediate

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Mind Network (FHE): Pioneering fully homomorphic encryption tech

Re introduces a new use case for Ethena Labs' USDe and sUSDe stablecoins, allowing users to lock them as reserve assets to support global insurers via the Resilience Foundation.

The S&P 500 futures fell after a 0.17% dip Tuesday, pressured by Nvidia's drop and U.S.-China trade tensions. Gold surged past $3,240, rising over 6.5% as safe-haven demand spiked on US-China trade tensions and falling Treasury yields. Investors are watching Powell’s speech and retail sales data for further cues. The Coindesk Indices, which tracks the broader crypto market, are down by 2.10%, with Bitcoin and Ether down by 1.06% and 2.43%, respectively in the past 24 hours. Trade these markets and more with up to 500x leverage on Bybit MT5 using this 

Today's top performer is STRK, up 5.9%, following Argent's launch of Easy Bridging to simplify self-custody on Starknet.

Starknet (STRK), founded in 2018, is a Layer 2 Ethereum solution that uses zero-knowledge rollups and STARK proofs to scale transaction processing efficiently. 

, a feature that simplifies funding its mobile wallet by allowing users to send crypto from any chain, exchange, or wallet directly into Argent on Starknet. Powered by Layerswap, the process mimics a simple transfer: pick a token and chain, copy the deposit address, and send. Layerswap bridges assets using liquidity pools, making the transition from CEXs or other wallets to Starknet fast and frictionless. With no seed phrase, 2FA, low fees, and seamless UX, Argent is making self-custody on Starknet accessible to all.

Check out the latest prices, charts, and data of 

 a new use case for Ethena Labs' USDe and sUSDe stablecoins, allowing users to lock them as reserve assets to support global insurers via the Resilience Foundation. Users can earn up to 23% APY, including 5x Ethena rewards, while their capital helps underwrite health, property, business, and climate insurance. This connects crypto-native assets to the $1T+ reinsurance market, providing additional sources of returns and contributing to real-world risk coverage. Deposits are capped at $50M, with quarterly redemptions available.

Yesterday, BTC spot ETFs saw $38.2M in net inflows, all from non-GBTC funds.

, a decentralized edge AI platform backed by NVIDIA and Forum Ventures with $15M in funding, has launched a rewards system tied to an upcoming confirmed airdrop. Users can earn points by completing simple tasks after connecting their EVM wallet and social accounts. As part of CoinMarketCap’s Accelerator Program, ByteNova aims to support low-latency, secure AI applications. Early participation is encouraged to maximize airdrop eligibility.

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Re unlocks new use case for USDe & sUSDe stablecoins, connecting crypto to the $1T+ reinsurance market

The megaphone pattern is a technical trading chart formation characterized by its distinctive diverging trendlines. Learn more about how it works here.

, everyone’s shouting from the rooftops about the next big trade to take in the ever-changing world of crypto. One such trading pattern that traders typically promote in the midst of volatility is the megaphone pattern. With its signature diverging trendlines, it’s a sign of sheer volatility and indecision for a particular asset, as traders with 

Curious as to what this entails in the grand scheme? Our guide to trading the megaphone pattern will teach you everything you need to know about what it, the various mechanics involved and the pros and cons of trading this pattern that’s come to be associated with volatility.

The megaphone pattern is a technical trading chart formation that’s characterized primarily by its distinctive diverging trendlines. 

Also known as a broadening top (or broadening formation) among experienced traders, the megaphone pattern can seem daunting to newer traders. By highlighting the way an asset is trading at higher highs and lower lows, the increasingly wide price swings effectively create a visual shape resembling an expanding megaphone. 

Unlike other trading patterns that instantly give chart analyzers an immediate gauge of directionality, megaphone patterns reflect increased market volatility and indecision as buyers and sellers battle for dominance before a breakout of the trendline causes a significant price move.

The megaphone pattern emerges as wild price fluctuations occur and widen over time, signifying growing uncertainty among traders. It can typically manifest in both bullish and bearish scenarios.

A bullish megaphone typically begins with an initial upward move setting the first peak. Prices then retrace downward, but remain above previous lows. Subsequent bullish rallies then create higher highs, while bearish pullbacks form lower lows. This creates the expanding 

 that the pattern is known for. Eventually, bulls regain control with a decisive move above the upper trendline as a breakout beyond current resistance levels. This confirms bullish momentum, and signals potential upward continuation.

On the opposing side, a bearish megaphone pattern starts with a downward move establishing an initial low. Prices then bounce upward, but fail to sustain momentum above previous highs. Successive swings create lower lows and higher highs until bears finally push prices below support levels, and prices sink beneath the lower trendline, confirming bearish conditions and potentially leading to further downward moves.

Megaphone patterns typically form either during periods of heightened market uncertainty or after significant price trends. For volatile assets such as cryptocurrency, these chart patterns frequently appear during critical market junctures that impact high-beta assets and emerge when driven by the following factors.

Now that you’re familiar with the “ins and outs” of megaphone patterns, let’s consider the benefits and risks of relying on them when planning and executing trades.

Benefits of trading the megaphone pattern

Enhanced awareness of crypto market volatility

Identifying a megaphone pattern can provide traders with a crucial early warning system for impending periods of increased market volatility. This heightened awareness supports proactive 

By recognizing the expanding price ranges, traders can anticipate sudden and significant price movements, enabling them to adjust their existing allocations, tighten 

 orders or even temporarily reduce exposure to the market. This proactive approach helps mitigate potential losses and preserve capital during periods of heightened uncertainty. Furthermore, this advanced recognition helps the trader to prepare for possible high-profit trades, instead of being surprised by the volatility.

Defined trading boundaries for strategic positioning

The diverging trendlines that form the megaphone pattern create clear and distinct support and resistance levels. These well-defined boundaries offer traders a strategic advantage, enabling them to pinpoint precise entry and exit points. Traders can utilize these levels to strategically position themselves for potential bullish breakouts or bearish reversals. By aligning trades with these key levels, traders can enhance their risk-to-reward ratios, maximizing potential profits while minimizing potential losses. 

This clarity allows for more disciplined trading decisions, reducing the impact of emotional biases while trading volatility.

The inherent volatility of megaphone patterns can certainly create opportunities for substantial gains. Wide price swings within the pattern can lead traders to to significant gains if their trades are executed with precision and timing. In highly volatile markets like crypto, these amplified price movements can translate into outsized returns. 

However, this potential for high rewards is accompanied by increased risk. Opportunistic traders can thus leverage these opportunities by employing sound risk-management strategies, such as setting appropriate stop-loss orders and managing position sizes. Potential high rewards can then be realized by correctly timing the market and maintaining the discipline needed to exit the trade.

A prominent risk associated with megaphone patterns is the occurrence of false breakouts. These misleading signals occur when prices briefly breach the trendlines, creating the illusion of a 

 only to reverse direction shortly afterward. These false breakouts can lure traders into premature trades, resulting in significant losses if not managed carefully. 

The lack of substantial volume confirmation during this type of breakout further exacerbates the risk. Therefore, traders must exercise caution and seek additional confirmation signals such as volume analysis or other 

, in order to avoid falling victim to these false signals.

Whipsaws and difficulty in risk management

The erratic and wide-ranging price swings characteristic of megaphone patterns often lead to “whipsaws,” whereby rapid and unpredictable price reversals can trigger stop-loss orders and generate unexpected losses. The volatile nature of these patterns makes it challenging to establish reliable stop-loss (SL) and 

Moreover, the expanding volatility ranges within the pattern require traders to adopt a more flexible approach to risk management, potentially widening their stop-loss orders to accommodate the increased price fluctuations. Conversely, this increased range also increases the potential loss per trade — so risk management is of key importance.

 and other chart patterns, the megaphone pattern can be subjective in its overall identification. This inherent subjectivity stems from varying trendline interpretations, differing time frame analyses, market-specific nuances and psychological biases. Such a combination of subjective factors makes its identification and analysis a complex and potentially contentious process. 

The lack of a universal definition — combined with the difficulty of distinguishing signal from noise during periods of high volatility — poses a significant challenge for those unfamiliar with trading megaphone patterns. As such, inexperienced traders need to 

 prior to trading the megaphone pattern, in order to minimize the risk of misinterpretation and subsequent financial losses.

Traders typically employ several practical strategies when approaching the megaphone pattern in the crypto space. The following are some suggestions when it comes to trading it.

Always implement disciplined risk management practices by setting strategic SL and TP orders based on measured moves within clearly defined boundaries.

Tools and indicators to complement the megaphone pattern

You may have noticed that we’ve suggested making use of MACD and RSI indicators to confirm the price action of any potential breakout. These handy technical tools in your arsenal may help enhance entry and exit accuracy when trading megaphone patterns.

All in all, incorporating these indicators is bound to significantly improve your decision-making accuracy by validating potential trade signals and ensuring you make the most informed trading decision.

Is the megaphone pattern an effective gauge?

Overall, the megaphone pattern serves as an effective tool for beginners and experienced traders alike — provided that the volatile trading pattern is approached cautiously with disciplined risk management practices. While it does offer clear signals regarding market volatility and potential breakouts, trading it can be another story, since its effectiveness heavily depends upon accurate recognition, combined with strategic positioning using complementary indicators.

Compared to other popular chart formations such as channels, the megaphone pattern uniquely highlights expanding volatility, rather than narrowing ranges or sideways movements. Thus, traders seeking opportunities amidst heightened uncertainty may find analyzing megaphones particularly beneficial.

The megaphone pattern offers powerful insights into crypto market volatility through its distinctive widening structure that signals intense trader indecision around critical junctures. By clearly understanding its mechanics, taking into account bullish and bearish megaphone variations and complementing analysis with robust indicators (such as volume analysis or momentum oscillators), crypto traders may increase their odds of confidently navigating volatile markets safely. 

On top of doing research about the megaphone pattern, crypto traders should exercise caution by using strict risk management practices such as precise SL/TP placements to protect their trading capital.

Mastering how to decode volatility signals through careful analysis of intriguing megaphone patterns not only equips you with enhanced technical skills, but also fosters prudent decision-making — which is essential for long-term success in cryptocurrency trading. For more on trading similar volatile chart patterns, please check out more of our 

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Megaphone pattern: Decoding volatility signals in crypto markets

DeFi

Cryptocurrency lending allows investors to lend crypto to borrowers in return for interest payments. But what are the risks & should you invest in it? Learn more.

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Cryptocurrency lending is a feature of Decentralized Finance (

), in which investors lend cryptocurrencies to borrowers in return for interest payments. If you’re holding on to cryptocurrency with the expectation of future price appreciation, you might also receive steady passive income from your assets through lending. You could receive weekly or monthly interest when you deposit cryptocurrency in the wallet of a crypto lending platform.

On the borrowing side, crypto lending or crypto loan allows you to borrow fiat money (using your crypto as collateral) so that you won’t have to sell your cryptocurrency assets in an emergency. 

 refers to blockchain-powered financial applications, protocols, and platforms that can be used to manage money. These tools provide many of the same opportunities that traditional financial institutions do for fiat money.

Unlike the conventional financial system, 

 run without any centralized authority and are independent of banks, government-issued currencies, remittance platforms, and other traditional finance infrastructure.

DeFi offers an alternative to the existing traditional financial system and creates new solutions. It connects users in peer-to-peer (P2P) networks. This allows them to interact without knowing the other users because of underlying smart contracts, which safeguard each counterparty.

The smart contract that serves as the foundation for decentralized finance is transparent, open and self-executing, and doesn’t require supervision. Smart contracts can execute predetermined tasks, and users can access them using simple interfaces, as with regular applications. Because Etheruem was the first platform to introduce the concept of DeFi, most applications are built on the Ethereum blockchain.

Traditional lending and cryptocurrency lending both provide loans, but in different ways. 

A key feature of crypto lending is over-collateralization. Collateral is the security deposit pledged for a loan, and it can be liquidated in case of default. Over-collateralization means borrowers must provide up to twice the value of the loan amount they seek as a security deposit. Over-collateralization gives the lender comfort if the price of a highly volatile cryptocurrency crashes. 

 ensures lenders have a margin of safety. More importantly, borrowers don’t need a credit score to access crypto loans, unlike traditional bank lending. This means that cryptocurrency lending is more accessible to the under-banked, those with poor credit scores or without a credit history, and self-employed people who find it challenging to meet stricter traditional lending requirements.

While it takes several days of processing time for a traditional loan to clear, cryptocurrency loans are instant. 

What if you need money urgently but have most of it invested in assets? Selling those assets might incur capital gains taxes, and you would also miss any investment performance by dipping into investment capital. This is where crypto lending shines.

Decentralized lending platforms provide the opportunities to loan crypto without intermediaries. DeFi lending protocols enable lenders to earn interest on supplied digital assets while borrowers pay interest when taking the loan.

Let’s say you have 10 ETH, and an emergency that requires cash comes out of the blue. But you don’t want to sell any of your ETH because you’re convinced that prices are on the verge of soaring. You may also be afraid that if you liquidate any Ether now, you won’t be able to repurchase as much in ETH later. 

Here comes cryptocurrency lending to the rescue. Crypto lending platforms allow you to use your Ether as collateral and take out loans in USDT or any other 

. However, due to cryptocurrency’s volatility, you’ll have to over-collateralize the loan. That means you have to lock up significantly more ETH than the value you receive as a loan.

The lending platform will release your cryptocurrency once you’ve repaid the loan with the agreed-upon interest. And if the price of ETH has indeed appreciated, as you predicted, you will still have profited from it. 

You’ll only risk losing your cryptocurrency if you fail to repay your loan or if the value of your collateral (contrary to your optimistic outlook) falls below the value at which you borrowed.

Parties Involved in a Typical Crypto Lending Transaction

Cryptocurrency lending involves a borrower who needs liquidity but prefers to keep assets invested, a lender who wants passive income, and a lending platform. 

A borrower approaches a lending platform, such as Compound or Aave, for a fiat loan from a lender, using cryptocurrency assets like 

Once the lender and borrower have agreed to terms and conditions, including a specific interest rate, the borrower receives the cryptocurrency loan. Just as in a traditional bank loan, the lending platform releases the collateral to the borrower once the lender has been paid in full.

Cryptocurrency lending on DeFi crypto lending platforms lets borrowers and lenders interact directly without intermediaries. However, cryptocurrency lending is also available on 

 (CeFi) platforms such as Nexo and BlockFi.

In contrast to a DeFi platform, a CeFi crypto lending platform has a centralized organization with a legal entity backing it and managing the loan platform.

Cryptocurrency staking and lending offer opportunities to make money from your idle assets but in different ways.

 is the process of “locking up” a cryptocurrency asset to serve as a validator in a decentralized network. Validators maintain the security, integrity, and continuity of the network. The network encourages stakers (or validators) by rewarding them with new coins.

On the other hand, cryptocurrency lending pays interest as a reward for allowing the provider (or other users on the platform) to use your crypto assets.

While staking, on average, pays a lower return, it offers more security. Crypto lending typically pays higher returns, but the market is volatile, and rates change quickly.

Unlike traditional bank lending and CeFi crypto lending, Defi lending doesn’t rely on a central authority to oversee and enforce the loan’s terms and conditions. Instead, it relies on 

. Users can stake their crypto assets on the platform for lending. A borrower can directly borrow from the DeFi platform through P2P (peer-to-peer) lending, without credit checks. 

Getting a DeFi crypto loan is hassle-free. All you have to do is log on to your decentralized crypto lending platform, apply for the loan, and send your crypto collateral to a specified wallet. You don’t have to provide your personal information. You don’t need to worry about your credit score or any other documentation requirement. The most critical factor is the value of the crypto you’re offering as collateral and how large a loan it can get you.

That brings us to the loan-to-value (LTV) ratio. 

The loan-to-value ratio is precisely that: the ratio between the loan value and the collateral value. Let’s say you’re taking a $400 loan, and the LTV is 40%. In this case, you would need to put up $1,000 worth of crypto as collateral for a $400 loan, since $400 is 40% of $1,000. As compared to traditional finance, the LTVs for crypto lending or crypto loans, in general, is low due to the volatile nature of cryptocurrencies. For example, BlockFi’s LTV value goes to a maximum of 50% only. This may be a pass for investors, users who prefer to get bigger loans can benefit from the low LTV. As it helps minimize the risks of triggering a margin call. 

DeFi lending comes with a lending rate, which is the cost of borrowing. DeFi lending interest rates vary depending on the lending platforms, amounts, and the terms and conditions of the loan. DeFi lending platforms offer either fixed or floating interest rates.

A fixed interest rate means that you’ll pay a fixed (constant) interest rate throughout the loan tenor. In contrast, a floating interest rate varies according to the market — which means the rate can rise or fall at any time. When borrowing, fixed rates are typically higher than floating rates. Although floating rates can be lower, they may also shoot up at any time. This means that you have no way to know when, or how high, they’ll increase. 

Motivated by the dramatic increase in Bitcoin’s (and other cryptocurrencies’) prices, many investors aim to hold their positions and profit from an expected long-term market price increase. However, this buy-and-hold strategy, known as HODLing, throws up a challenge. What do you do when most of your assets are tied up in cryptocurrency — but you need physical cash?

Luckily, cryptocurrency lending solves this problem because you can hold your crypto assets and still spend fiat currencies. Cryptocurrency investors can borrow money against their holdings or lend their crypto in return for interest. Investors can also let their assets work for them to generate passive income.

As a lender, your cryptocurrency assets don’t just lie around in a wallet; they work and earn passive income for you. Here is why you should lend your crypto.

Cryptocurrency lending can provide returns without you having to sell any of your assets. Some exchanges currently offer annual percentage yields (APYs) as high as 25% to borrow your cryptocurrency. 

Sounds fantastic, right? Compare this with the best-yielding savings accounts in the U.S., which pay a paltry 0.55% average.

While you may lend any cryptocurrency you want, lending stablecoins allows you to grow your assets without the various risk associated with crypto. Stablecoins are cryptocurrencies that are designed to match the value of a real-world currency. For example, USDT is pegged to the US dollar.

The stability afforded by stablecoins also means you know how much you’ll earn from lending your crypto.

While crypto lending offers significant upside and lets your assets work for you, it’s not entirely without risks. 

Cryptocurrencies typically experience wide price swings. As a borrower, your collateral is subject to volatility risk because the platform can liquidate some of your collateral due to drops in market value. If you don’t respond to a margin call by adding more collateral, the platform will liquidate your crypto instantly to restore the LTV ratio of the loan to the agreed-upon level.

DeFi crypto lending platforms use smart contracts to manage your cryptocurrency lending transactions. Unlike CeFi platforms, no humans are involved in the operations. This means you don’t have anyone to rely on if the smart contract fails and you lose your cryptocurrency. Smart contracts and the functions they control can also be hacked or suffer security bugs.

Cryptocurrencies are a new asset class, and the regulations guiding them are still unclear. Lawmakers can decide to introduce new laws regarding legality or taxation, which may or may not be to your advantage.

You can speak to tax consultants in your jurisdiction for guidance to minimize this risk.

Again, DeFi providers don’t have any legal entity behind their platforms, and they operate without a license. This provides a unique problem from a legal perspective, as you don’t have anyone to sue when things go wrong. It also means investors don’t know how regulations might affect them in the future.

CeFi crypto lending platforms use the cryptocurrencies they receive from savers and borrowers to make money. They lend the crypto to counterparties — hedge funds, cryptocurrency exchanges, and other institutional investors. This creates counterparty risk because the counterparties to these transactions could fail to return the asset, making your provider insolvent. 

Investors on these platforms don’t know the risks their providers take with these transactions. In addition, unlike with traditional bank savings products, regulators such as the Federal Deposit Insurance Corporation (FDIC) in the U.S. don’t protect your cryptocurrency investments.

DeFi platforms only lend directly to borrowers on their platforms. They do not lend to third parties. This eliminates counterparty risk because collateralization is built into the smart contract. 

Lending cryptocurrency gives you the benefit of holding on to long-term investment performance while earning additional money passively. Loans are over-collateralized, and even if a borrower defaults, you’ll still have access to their cryptocurrency as compensation.

Cryptocurrency lending platforms offer high-interest rates, paid out weekly in some cases. Fiat and stablecoins earn the highest rates — up to 12.7% APY. Other major cryptocurrencies, like BTC and ETH, typically command rates as high as 6%. This is far higher than traditional banking interest rates.

Among the decentralized lending platforms, 

remain top with one of the highest TVL within the platform.

Image Source: DeFi Pulse — July 9, 2021.

Opportunities: Wide range of loan options and flash loans.

 allows borrowers to put up collateral to support the protocol. At the same time, their contribution is represented in aTokens. On the flip side, flash loans offer fixed interest loan rates.

Opportunities: Higher LTV rates and lower liquidation threshold

 allows lenders to earn interest by supporting the protocol. The amount of digital assets a user supplies is represented by cTokens. The tokens can typically be used to keep track of the fund’s loan as collateral and the interest earned. Interestingly, Compound only liquidates 50% of the under-collateralized loan, and the penalties come at a fixed rate.

 allow lending crypto to yourself. The Maker Vault is open for anyone to mint DAI by locking up your digital assets as collateral and paying back the loan based on the predetermined contract. Maker offers one of the highest 75% LTV rates for crypto loans.

Decentralized finance or DeFi is one of the most disruptive uses of nascent blockchain technology. By using self-executing smart contracts, DeFi replaces traditional institutions with platforms where users can borrow and lend money directly to each other, earning fees and interest in the process. While DeFi offers new opportunities to make money, it also improves the existing financial system by providing more trust, transparency, and efficiency. Still, always do your own research before lending crypto.

Explained: What Are Crypto Lending and Loans in DeFi?

Grab Up to 5,000 USDT in Rewards

Grab Up to 5,000 USDT in Rewards