There is a trade-off between higher transaction volumes and shrinking profits.
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This article comes from Cointelegraph , the original author: Rachel Wolfson
Odaily Translator | Moni
Recently, cryptocurrency exchange Deribit has released an analysis report in which many cryptocurrency companies are trying to adopt services in traditional financial institutions.
The report states that crypto companies, including exchanges, are expected to provide users with interest-bearing accounts, tax services, and more cost-effective trading methods. In fact, the service functions in these traditional financial institutions are likely to become standard functions of cryptocurrency exchanges in the next two years.
Encryption popularization is going well
In fact, the community has noticed that many crypto companies are beginning to adopt features provided by traditional financial institutions. The only difference is that crypto companies are making these features more attractive to customers in ways that traditional banks cannot, or won’t.
For example, the crypto lending platform Celsius offers users outside the United States and Japan a bitcoin deposit rate of up to 8.1%, which is clearly an attractive customer loyalty program. In contrast, while most traditional banks also have savings accounts and loyalty programs that allow investors to earn interest, it is almost impossible for them to reach such high levels as Celsius.
According to Alex Mashinsky, CEO of Celsius, with the rise of crypto lending platforms, it is difficult to obtain higher returns by relying solely on the rise of cryptocurrency prices, so he triedIncrease investor returns with higher interest rates paid with Celsius’ CEL tokens. Alex Mashinsky explained:
“In order to increase the yield, we want to do other things besides paying the cost of Bitcoin, so we decided to pay with CEL tokens. We also have other levels of loyalty programs to show How much interest users will receive. Basically, we persuade customers to join Celsius by paying more. “
Like traditional banks, some crypto companies and projects provide compound interest for cryptocurrency deposits, such as Nexo and DeFiprime.
Crypto-lending startup BlockFi also recently announced that users can earn compound interest when trading mortgage-based loans. Taking Coinbase’s stablecoin USDC as an example, BlockFi initially provided an annual return on assets of 8.6%, while Litecoin The annual return on assets can also reach 3.78%.
Michael Arrington is the founder of venture capital giant TechCrunch and hedge fund Arrington XRP Capital. He pointed out that higher interest income has stimulated more and more people to try cryptocurrencies, which has also promoted the popularization of cryptocurrencies. Michael Arrington explains:
“I know that some users who are new to cryptocurrencies start buying stablecoins to get higher interest rates than normal savings.”
Arrington XRP Capital believes that cryptocurrency lenders have great potential because the market size of the entire cryptocurrency loan industry has reached $ 4.7 billion. Michael Arrington continues:
“Arrington XRP Capital is paying close attention to the rapid growth of the crypto industry, especially those crypto companies that provide compelling interest rates and the use of stablecoins to provide low-cost loan services. The growth trajectory is very similar to the early stages of successful fintech companies, such as PayPal. “
Although crypto lending platforms provide users with interest rates much higher than those offered by traditional banks, they usually only provide mortgage-guaranteed loans, unlike traditional banks, which have different types of loan products. According to Credit Karma, the largest financial backflow platform in the U.S., mortgage-backed loans usually have higher risks because the repayment period is shorter.