Crypto Lending: High Returns Come with Hidden Risks
Crypto lending platforms promise high returns on investments, but what you keep is not your coin, but a claim to get it back. This claim's value depends on who's sitting on the other side and which law applies when things go wrong.
In crypto lending, you hand over your balance for a certain period and hold a claim afterwards. The decisive step happens when you confirm the transaction, and your coins move into the custody of a company or a smart contract. What remains in your account is a number representing a right to repayment.
The return on investment comes from traders who want to enlarge their position with borrowed capital. When many participants use leverage, lending yields rise, but persistently double-digit rates are a warning sign rather than a badge of quality.