An Increase in Blockchain Loans as Traditional Lenders Struggle
Recent data from RWA, a tracker of asset-backed loans in the real world, indicates a significant increase in the blockchain loans sector. As interest rates rise, loan buyers are gaining confidence in blockchain-based alternatives over traditional lenders. The volume of loans has reached $582 million, doubling compared to the previous year.
The Boom in Blockchain Lending
Blockchain-based loans allow borrowers to retain ownership of their assets while accessing liquidity through digital assets used as collateral. Prominent blockchain credit protocols include Centrifuge, Goldfinch, Maple, Clearpool, and Credix. These loans utilize leading cryptocurrencies like USD Coin (USDC), tether (USDT), and Dai (DAI).
RWA’s data reveals that loan applicants increasingly prefer blockchain-based options. In 2023, the total value of active tokenized private credit reached $582 million, a 128% increase from the previous year. The average annual percentage rate (APR) for blockchain credit protocols is 9.65%, compared to bank interest rates ranging from 5.0% to 11.5% for small businesses.
Key Contributors to the $582 Million Market
Companies like Divibank and Fasanara Capital are playing a significant role in the growth of blockchain-based loans in the United Kingdom. Fasanara Capital secured a $38.3 million loan from Clearpool with a 7% annual interest rate.
Centrifuge holds 43% of the current active loans market with a value of $255 million, while Goldfinch and Maple hold $143 million and $103 million respectively. The consumer goods and automotive sectors have emerged as major contributors, with $197.7 million and $186.8 million invested in loans, respectively.
Other notable participants include the Carbon project with $39.5 million in funding and Crypto Trading with a $30.5 million loan. The fintech sector has contributed $105.2 million, and the real estate sector has borrowed $40.0 million through blockchain credit protocols.
The Growth Potential of Blockchain Loans
Despite its growth, the market for blockchain-based loans still lags behind traditional private credit, representing only 0.3% of the $1.6 trillion traditional credit market.
Hot Take: The Rise of Blockchain-Based Loans
The increasing popularity of blockchain-based loans highlights a shift in borrower preferences towards decentralized lending solutions. With the advantages of asset ownership retention and access to liquidity, borrowers are finding greater value in blockchain alternatives compared to traditional lenders.
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