5.1.0. Frequently Asked Questions
As a lender, you are entitled to receiving interest on the crypto asset that you loan out. All you do is deposit your crypto in a lending platform, and you will start to receive interest.
(1). Where does the interest you receive come from?
As mentioned several times, the interest you receive for depositing your crypto in a lending platform comes from borrowers who use your deposited crypto.
(2). Are there no risks to your deposited asset?
Yes, there are risks. Such risks include not receiving the interest and outright loss of your funds due to insolvency of the borrower. But these are extreme cases as risks.
To avoid such extreme risks, lending platforms require that no borrowing can be made beyond the Threshold Limit. The Threshold Limit brings stability to the system.
(3). When can I withdraw my funds?
There are basically two kinds of deposited assets: Locked and Unlocked.
A Locked Asset (also known as a Fixed Deposit) is one that you cannot withdraw until expiration of the contract. Any untimely withdrawal will attract some penalty charges.
An Unlocked Asset (also known as a Savings Asset) is one you can withdraw at any time.
(4). How much interest is paid?
This varies from one lending platform to another. Hence, it is your duty to find out which lending platform gives the best interest rate. Generally, Locked Assets yield better interest rates than Unlocked Assets.