Blockchain-based lending is experiencing a resurgence, with the value of active tokenized private credit reaching $582 million, marking a remarkable 128% increase from a year ago, according to data from real-world asset loan tracker RWA.xyz. Although still below its peak of $1.5 billion in June 2022, the recent surge in blockchain-based lending suggests a growing interest in alternative financing options amid a rise in traditional interest rates.
The average percentage rate for blockchain-based credit protocols stands at 9.64%, compared to small business bank loan interest rates ranging from 5.75% to 11.91%, as reported by NerdWallet. The data indicates that loan-seekers are opting for larger blockchain-based loans, with RWA.xyz tracking $4.5 billion in blockchain-based loans across 1,804 deals, averaging approximately $2.5 million per loan.
Prominent participants in the blockchain-based lending market include UK-based asset management firm Fasanara Capital, which secured a $38.3 million loan from Clearpool at a sub-7% base annual percentage yield (APY). The Brazilian bank Divibank is also actively involved in the market.
Ethereum-based Centrifuge dominates the market, holding over 43% of the active loans with $255 million, representing a 203% increase from the beginning of 2023. Other key players include Goldfinch and Maple, with $143 million and $103 million in active loans, respectively.
Popular cryptocurrencies facilitating these loans include Tether (USDT), USD Coin (USDC), and Dai (DAI). Stablecoins pegged to the United States dollar are widely used in blockchain-based lending.
The largest blockchain-based loan-seekers are from the consumer sector ($197.7 million) and automotive sector ($186.8 million), followed by fintech, real estate, carbon credit, and cryptocurrency trading, as per the available data.
Despite the recent surge, the $506 million active loan market remains a fraction of the traditional private credit market, which stands at $1.6 trillion. It is essential for loan-seekers to carefully consider factors such as insolvency, collateralization, smart contracts, and security risks before opting for loans from blockchain-based protocols. As the trend continues, blockchain-based lending provides an alternative avenue for financing with its own set of opportunities and risks.
(BRAYDEN LINDREA, COINTELEGRAPH, 2023)