Momentum regained
The world of blockchain-based lending is experiencing a resurgence this year, as the value of active tokenized private credit reaches an impressive $582 million. This marks a staggering 128% increase from the previous year, indicating a growing interest in blockchain-based alternatives to traditional financing options. While still far from its peak of $1.5 billion in June 2022, this upward trend suggests that loan-seekers are turning to blockchain for its unique advantages in the face of rising interest rates.
Competitive interest rates
Data from real-world asset loan tracker RWA.xyz reveals that the current average percentage rate for blockchain-based credit protocols stands at 9.64%. In comparison, financiers have been offering small business bank loan interest rates ranging from 5.75% to 11.91%. This competitive pricing further enhances the appeal of blockchain lending for borrowers.
Significant loan amounts
RWA.xyz has tracked a total of $4.5 billion in blockchain-based loans across 1,804 deals. This means that the average loan size amounts to approximately $2.5 million. These substantial loan amounts demonstrate the growing confidence in blockchain-based lending.
Notable borrowers
One prominent loan-seeker in recent times is Fasanara Capital, an asset management firm based in the United Kingdom. The company secured a loan of $38.3 million from Clearpool at a sub-7% base APY. Brazilian bank Divibank is also actively participating in the blockchain lending market, further showcasing the global reach of this financial solution.
Leading blockchain credit protocols
Ethereum-based Centrifuge is the dominant player in the current active loans market, with a share of over 43% and a value of $255 million. This represents a remarkable increase of 203% from the start of 2023, when the value was $84 million. Goldfinch and Maple are the second and third largest blockchain credit protocols, with active loans worth $143 million and $103 million, respectively.
Main cryptocurrencies facilitating loans
Tether (USDT), USD Coin (USDC), and Dai (DAI) are the primary cryptocurrencies utilized to facilitate blockchain-based loans. These stablecoins, pegged to the United States dollar, offer stability and reliability in transactions.
Loan-seekers by sector
The data reveals that the largest blockchain-based loan-seekers originate from the consumer sector ($197.7 million) and the automotive sector ($186.8 million). Following closely are fintech, real estate, carbon credit, and cryptocurrency trading. This diversity of sectors highlights the versatility of blockchain lending.
Room for growth
Despite the recent surge, the $506 million active loan market only represents about 0.3% of the traditional private credit market, which is valued at $1.6 trillion. This indicates immense potential for further growth and adoption of blockchain-based lending.
Risks to consider
While blockchain-based lending offers unique advantages, borrowers should be aware of the risks involved. Factors such as insolvency, collateralization, smart contracts, and other security risks should be carefully evaluated before proceeding with a loan.
