State of the industry - February 2020: As it stands, 2019 saw a record number of twelve crypto exchanges being hacked. That being said, across the board the amounts of crypto stolen were worth less. In total, $292,665,886 worth of cryptocurrency and 510,000 user logins were stolen from crypto exchanges in 2019.

One would hope that as time goes on cryptocurrency exchanges would become more secure. The unfortunate reality is that more exchanges are hacked every year. As cryptocurrency and exchanges remain largely unregulated, it is unclear as to who has jurisdiction over cryptocurrency markets. 

We’ve compiled a comprehensive list of cryptocurrency exchange hacks - you’ll be amazed at how much has been stolen over the years.

2020

February - Altsbit - 6,929 BTC, 23,210 ETH, 3,924,082 ARRR, 414,154 VRSC & 1,066 KMD

Italian cryptocurrency Altsbit had only been around for a few months before it was hacked. Initially, the exchange announced the hack stating that almost all funds had been stolen. After some more thorough research, it appears Altsbit only lost under half of the crypto it was storing. 

Altsbit has announced that it only has enough funds to issue partial refunds, and that they will be closing their doors in May 2020. Hacking group Lulzsec has claimed that they are responsible for the hack, though it is still unclear how they managed to pull it off. Approximately $70,000 worth of cryptocurrency was stolen.

2019

November - Upbit - 342,000 ETH

South Korean exchange suffered a massive breach when hackers made off with 342,000 ETH (valued at $51 million at the time of the hack). Rumors swirled that this was an inside job, as the stolen crypto had allegedly been taken from Upbit’s cold wallet. This turned out to be a false alarm. Thankfully, Upbit promised to cover the losses.

However, the story doesn’t end here. The stolen crypto has been on the move. Whoever took it has been moving it between wallets, although it is unclear what purpose this will serve. As of January 2020, Upbit has completed a major security update after a brief suspension of services.

November - VinDAX - $500,000 Worth of Cryptocurrency

Based in Vietnam, VinDAX is a relatively small crypto exchange that mainly conducts token sales for relatively unknown blockchain projects. Hackers don’t care about the size of the exchange, they just care about the money and they managed to steal half a million dollars worth of crypto from VinDAX.

In response, VinDAX emailed the projects that had been impacted by the theft asking for funds. It’s unclear if any of the projects accepted the offer or not. 

July - Bitpoint - 1,225 BTC, 11,169 ETH, 1,985 BCH, 5,108 LTC & over 28 million XRP

After noticing an error in its outgoing funds transfer system, Japanese exchange Bitpoint immediately suspended its services. However, it was too late. Thanks to a security breach, hackers made off with over $30 million worth of cryptocurrency.

Luckily, Bitpoint was able to recover $2.3 million of the stolen crypto from overseas exchanges. Bitpoint has said that they will compensate their users, but have not released a time frame as to when that will happen.

June - Bitrue - 9.3 Million XRP & 2.5 Million ADA

Bitrue is a Singapore-based cryptocurrency exchange that experienced a major hack to it’s hot wallet. Only 90 Bitrue users were affected, but the cryptocurrency that was stolen was worth almost $5 million. Luckily for users who lost their funds, Bitrue has reassured them that they will be fully repaid. 

June - GateHub - 23,200,000 XRP

This UK and Slovenia-based cryptocurrency exchange suffered from a large hack this summer where hackers made off with $10 million worth of Ripple. While it is still unclear as to how exactly the hacker(s) gained access to user funds, the culprit(s) managed to access encrypted secret keys. So far, GateHub has managed to make some progress in recovering the stolen funds.

May - Binance - 7,000 BTC

Despite the fact that we are now in 2019, hackers still managed to use a phishing scam and malware to hack into Binance. The malicious actors ran off with $40 million worth of Bitcoin. As a result, Binance promised to increase its security, but users are understandably wary.

It appears that customer data may have been stolen as well. In August 2019, someone started sharing customer verification information from Binance on a Telegram channel. It has been alleged that this data was also taken during the hack, and that up to 60,000 users may be affected. 

March - DragonEx - $7 Million Worth of Cryptocurrency

The Singapore-based crypto exchange DragonEx suffered an attack in which hackers made off with $7 million worth of cryptocurrency. The North Korean hacking group Lazarus was responsible. The hackers created a legitimate looking fake company and convinced DragonEx employees to download malware onto their computers through Telegram and LinkedIn messages.

DragonEx has taken full responsibility for the hack and will be issuing refunds to those who lost funds. The exchange is also working with the police to see if they can recover the stolen crypto.

March - Bithumb - 3 Million EOS & 20 Million XRP

This South Korean cryptocurrency exchange was the victim of a suspected insider job. It all started with a suspicious withdrawal, and the exchange immediately suspended all withdrawals on their platform, but it was too late. Who conducted the hack is still unknown, but since there is no evidence of outsider interference, many suspect that it was a Bithumb employee who stole the funds.

March - CoinBene - Unknown

Problems started to surface for CoinBene when funds began to mysteriously move out of the exchange’s hot wallet. Analysts were worried, especially since the exchange was down for maintenance, a typical post-hack response. Despite assurances from CoinBene that nothing had happened, the exchange was down for a whole month.

One of the more bizarre aspects of this hack is Coinbene’s unwillingness to admit that anything was wrong. The hack also came on the heels of a report by Bitwise Asset Manager which accused Coinbene of wash trading to manipulate the crypto market. The details are still extremely murky, but it is believed that over $100 million worth of cryptocurrency was stolen in the hack.

February - Coinbin - Unknown

In a bizarre turn of events, Youbit (formerly known as Yapizon) rebranded months later as Coinbin. Having already faced two massive hacks, you would think that Coinbin would be extra careful. However, this hack was an inside job.

It appears that the former CEO of Youbit was still working at Coinbin, and was embezzling company funds. This employee allegedly had access to private keys and was able to siphon off funds from multiple accounts. As a result, Coinbin filed for bankruptcy and shut down while still owing users $30 million.

February - Coinmama - 450,000 User Emails & Passwords

This is a slightly less conventional hack, because instead of stealing money the hackers just stole information. Coinmama is one of the largest cryptocurrency brokers with over a million active users. There appears to have been little fallout from this hack, as Coinmama informed users rapidly once they learned that user data was being leaked on the dark web. To date, no cryptocurrency has been stolen.

January - Cryptopia - 1,675 ETH

Unfortunately for Cryptopia, they suffered from another hack 15 days after the first one. That was the end of the New Zealand-based exchange - they are now going through the liquidation process.

2020 Update: Cryptopia is still undergoing liquidation, but it has now been revealed that the exchange was failing to meet anti-money laundering (AML) requirements when creating new user accounts. For over 900,000 active user accounts, there is no customer data beyond usernames and email addresses. 

Less than 1% of users had completed customer identification, a vital part of AML procedures which ensures that customers are who they say they are. Thousands of accounts which held over $3 million worth of cryptocurrency were traced back to uninhabited islands or physical addresses that didn’t exist. As it stands, many of those who lost funds in the hack aren’t eligible to be refunded by liquidators because there is not enough information on who owned what accounts. 

While it’s unfortunate that Cryptopia experienced two back-to-back hacks within a month, it’s clear that the exchange was not doing it’s due diligence. Given that most of the active users on Cryptopia were from outside New Zealand, more should have been done to enforce AML compliance measures.

January - Cryptopia - Min. 19,390 ETH

It all started with Cryptopia users having difficulty accessing their accounts, and it only went downhill from there. The company originally thought it was a technical issue, but later clarified on Twitter that it was a security breach. The exact amount stolen in the hack is still unknown.

2018

December - QuadrigaCX - 26,350 BTC

While this doesn’t quite qualify as a hack, it is too unbelievable to not include on this list. 

QuadrigaCX was Canada’s largest cryptocurrency exchange owned by Gerald Cotten. Cotten was the only person who knew how to access the cold wallets belonging to the exchange.

In December, while on his honeymoon in India, Cotten died and took any information on how to access the cold wallets to his grave. QuadrigaCX had already been struggling and rumors of bankruptcy had been floating around, and with Cotten’s passing the exchange collapsed. Conspiracy theories started popping up that Cotten wasn’t actually dead, he had just pulled a very elaborate exit scam.

As investigations started into QuadrigaCX’s finances began, things took a bizarre turn. Six cold wallets were identified to belong to QuadrigaCX. However, when investigators looked at the wallets, five of them had been emptied around April 2018. No one is really sure what has happened, and investigations are still ongoing. Cotten’s widow has voluntarily returned $9 million in assets from Cotten’s estate to repay users.

2020 Update: Over a year later, what exactly happened to QuadrigaCX is still very unclear. It continues to be alleged that Cotten isn’t actually dead and there have been multiple attempts to get his body exhumed. An initial request was denied, however a new one has been made by the lawyers representing those who lost their funds.

There are also alleged ties to a shadow bank in Panama called Crypto Capital. Lawyers of the exchange suspect some of the funds that are missing may be stored in Crypto Capital and have asked any former QuadrigaCX users for their assistance on the matter.

As of January 2020, the FBI is now involved. A victim specialist from the FBI has been reaching out to former users and directing them to a portal where they can obtain more information. It remains unclear if we’ll ever have the answers about what actually happened at the exchange.

October - MapleChange - 913 BTC

This hack is still up for debate as many believe it was part of an exit scam. MapleChange was a small, Canadian cryptocurrency exchange that began to see an uncommon spike in exchange activity starting in October. Later that month, the exchange announced that it had been hacked and that all funds (valued at $5.7 million) had been withdrawn. As a result, MapleChange announced it was closing its doors for good.

What made people suspicious was the immediate removal of the MapleChange website, social media accounts, and Discord and Telegram channels. The lack of communication has led many to believe that there was no hack despite MapleChange insisting they were just taking a break to decide how to proceed.

Instead of deciding to pay anyone back, the crypto exchange gave what little they had left to the developers who had created the remaining coins. The internet is still divided as to whether or not the whole thing was a hack or just another scam. 

September - Zaif - 5,966 BTC

This is yet another case where it’s unclear how hackers stole the funds. However, Zaif did file a criminal case with their local authorities, which makes it sound like they have an idea as to who did it. Either way, this Japanese exchange lost $60 million worth of cryptocurrency.

June - Coinrail - 1,927 ETH, 2.6 Billion NPXS, 93 Million ATX, 831 Million DENT Coins & large amounts of 6 other tokens

Despite the fact that Coinrail was a relatively small cryptocurrency exchange, it did a lot of business which drew the attention of hackers. Exact details of the attack are still unclear, and the exchange lost an estimated $40 million.

June- Bithumb - $31 Million Worth of XRP

Unfortunately Bithumb’s hacking problems didn’t start in 2019. The exchange was hacked in 2018 as well (and you will see them again on our list), with hackers making off with substantial amounts of Ripple. This hack appears to be orchestrated by a group of North Korean hackers known as the Lazarus Group, who have been responsible for a number of cryptocurrency hacks over the years. Luckily for Bithumb users, the exchange promised to pay back any stolen funds.

May - Bitcoin Gold - $18 Million Worth of BTG

This is probably one of the stranger hacks on our list, as a cryptocurrency exchange wasn’t hacked but a cryptocurrency was. Bitcoin Gold was an offshoot of the original Bitcoin, which took a hard fork from Bitcoin as an attempt to decentralize (ironic given that Bitcoin is already decentralized). 

Bitcoin Gold became the victim of a 51% attack, a rare occurrence where hackers managed to gain control of more than 50% of the networks computing power. From there, attackers can prevent confirmations, allowing them to effectively stop payments between users and make changes to the network’s blockchain ledger. This type of attack was thought to be rare, if not impossible, until the Bitcoin Gold incident.

Using some complicated maneuvers, hackers put their Bitcoin Gold onto exchanges, traded them for other cryptocurrencies, then withdrew the amount. And because they had control of Bitcoin Gold’s blockchain ledger, they could simply return the original Bitcoin Gold back into their own wallet, essentially stealing money from exchanges.

May - Taylor - 2,578 ETH

Taylor is a cryptocurrency trading app, that raised a successful initial coin offering (ICO) in order to get funding. Unfortunately, not long after, hackers managed to gain access to a company device and took control of a password file. The malicious actors stole all of the Ethereum raised in the ICO, valued at $1.5 million. There were concerns that this was just another exit scam, but it appears that Taylor has slowly managed to rebuild. 

April - CoinSecure - 438 BTC

CoinSecure, an Indian cryptocurrency exchange, lost Bitcoin valuing $3.5 million at the time of the hack. However, it seems like this one was an inside job. The owners of CoinSecure believe their former Chief Security Officer stole the funds. It seems they may have been onto something, as he was later arrested. 

February - Bitgrail - 17,000,000 NANO

Over $170 million was stolen from the Italian exchange Bitgrail, and the details are a little fuzzy. While the owner, Francesco Firani, announced the hack, other Bitgrail employees denied it and said there was nothing wrong. People are skeptical as to whether this was an actual hack, or an attempt at an exit scam.

January - Coincheck - 523,000,000 NEM

Coincheck was the leading exchange in Japan, but the hack showed how remarkably unsecure the platform was. The hackers managed to spread a virus through email that allowed them to steal private keys. After that it was remarkably easy, as Coincheck did not use smart contracts or multi-signatures, and all coins were stored in the same wallet. The total value of cryptocurrency stolen is one of the highest ever, valued at $533 million at the time of the hack. 

Remarkably, the cryptocurrency exchange is still in business. It began offering full services again in November 2018. Although the hack was believed to have been carried out by North Korean hackers, the malware originated from Russian hacking groups.

2017

December - NiceHash - 4,736 BTC

NiceHash is a cryptocurrency mining marketplace that allows miners to rent out their hash rate to others. Their payment system was compromised, causing the contents of users Bitcoin wallets to be stolen. The exact amount stolen was never confirmed by NiceHash, but it is strongly believed to be 4,736 worth of Bitcoin, worth about $62 million at the time. This story ends on a happy note though, as NiceHash managed to return 60% of the stolen funds to users.

December - Youbit - Unknown

Youbit (formerly known as Yapizon) was a relatively small South Korean cryptocurrency exchange that had experienced a hack earlier in 2017. This time, hackers made off with 17% of the exchange’s holdings. This marked the end for Youbit, they filed for bankruptcy the same day.

July - Bithumb - $7 Million Worth of BTC & ETH

Bithumb makes yet another appearance on this list. At the time of this hack, Bithumb was the fourth largest cryptocurrency exchange by volume worldwide. An unknown hacker managed to gain access to an employee’s personal computer and stole the details of over 30,000 Bithumb users. Not long after, users started to notice their accounts being drained. 

April - Yapizon - 3,800 BTC

Before Yapizon changed their name to Youbit, they experienced their first hack. Malicious actors managed to run off with $5 million worth of Bitcoin and Yapizon did it’s best to mitigate the damages.

2016

August - Bitfinex - 120,000 BTC

This Hong Kong-based cryptocurrency exchange had claimed to be the most secure exchange in the world. Unfortunately, that proved to be very untrue. Hackers made off with a large amount of Bitcoin through Bitfinex’s processing service - BitGo. The price of Bitcoin plunged as a result of the hack.

May - GateCoin - 250 BTC & 185,000 ETH

GateCoin was one of the first regulated cryptocurrency exchanges at the time, and its popularity made it a prime target for malicious actors. Hackers managed to gain access to user wallets and stole cryptocurrencies valued at $2 million. That was the nail in the coffin for GateCoin - the exchange never recovered. 

April - ShapeShift - $230,000 Worth of Cryptocurrency

Over the course of a month, the cryptocurrency exchange ShapeShift was hacked three separate times. According to a detailed report by ShapeShift CEO Erik Voorhees, a former employee was responsible for all three hacks. The cryptocurrency pledged to rebuild, and they are one of the few who has managed to do so successfully. 

2015

February - BTER - 7,170 BTC

This China-based exchange had it’s cold wallet hacked, leading to a loss of over $1.5 million worth of Bitcoin. Users on Reddit were very suspicious, as it is extremely difficult to hack a cold wallet, and hypothesized that the hack was an inside job.

February - KipCoin - 3,000 BTC

You’ll see Linode further down on our list, but it was a hosting server for a few cryptocurrency exchanges.  It was hacked again in 2014, which this time caused a security breach on the KipCoin server. The hackers managed to gain control of the entire platform by changing passwords internally. A month-long struggle ensued, in which the administrators managed to regain control of the exchange, but the hackers still lurked. At the time of the hack, KipCoin did not tell users what was happening in light of the Bitstamp hack and only later revealed the information.

January - Bitstamp - 19,000 BTC

Bitstamp was the first licensed cryptocurrency exchange in Europe. It was compromised when hackers sent a malicious email to Bitstamp employees, and it only took one employee to follow the link and expose the whole exchange. The attackers made off with Bitcoin valued at $5.1 million at the time.

January - LocalBitcoins - 17 BTC

While this was a relatively small hack, it proved a point when it came to spending money on cybersecurity. Attackers used the LocalBitcoins live chat to distribute malware then made off with a relatively small profit. 

January - 796 - 1,000 BTC

It was not a good start to the year for cryptocurrency exchanges in 2015. Chinese exchange 796 had its server compromised, and hackers tampered with withdrawal addresses to trick users. It worked, and major shareholders footed the bill so users didn’t have to lose funds themselves.

2014

October - MintPal - 3,700 BTC

MintPal experienced their second hack in October (scroll down to read about the first one in July), but this one had a lot more twists and turns. Not long after the hack in July, MintPal was purchased by a company called Moolah (also known as Moopay Ltd), owned by Ryan Kennedy alias Alex Green.

After a failed relaunch of MintPal, Moolah announced it was closing its doors but users would be able to still use MintPal. However, user accounts were locked and users were able to track funds being removed from wallets and then watch them be sold on another platform. Kennedy was the only one with access to customer funds, and he was currently on the run. 

Kennedy was arrested in 2016 for rape changes and is now in jail. He is now also facing charges of fraud from the UK police for his involvement in the MintPal hack. 

July - Cryptsy - 13,000 BTC & 300,000 LTC

A trojan virus was inserted into the code of Cryptsy by a hacker going by the name of Lucky7Coin. As a result, Lucky7Coin (and potentially others) walked away with a staggering amount of cryptocurrency. The owner of Cryptsy, Paul Vernon, was accused of destroying evidence and stealing Bitcoin himself and the exchange declared insolvency. Vernon was successfully sued for $8.2 million in a class-action lawsuit.

July - MintPal - 8 Million VRC

Before MintPal’s unfortunate takeover by Alex Kennedy, they experienced another hack. The hacker found a weak point in the withdrawal system on the exchange, and managed to authorize a withdrawal from the Vericoin wallet. The sites Bitcoin and Litecoin wallets were also targeted, but nothing was stolen. The hack resulted in the loss of 30% of all Vericoin, which caused the Vericoin development team to decide on a hard fork in order to mitigate the damages.

March - Mt.Gox - 850,000 BTC

You might be surprised to see this name again, and attached to what is one of the biggest hacks of all time. The investigation is still ongoing and the situation is far from clear, but it appears that when Mt.Gox was originally hacked in 2011, some private keys were also stolen by malicious actors. The hackers gained access to a large number of Bitcoin and started emptying wallets.

Purportedly due to an error in the Mt.Gox systems, the exchange was interpreting these withdrawals as deposits for nearly two years. It was a huge error, costing users a total of $45 million and marking the end of the cryptocurrency exchange. Mt.Gox filed for bankruptcy within the month, and as a result the price of Bitcoin dropped 36%. The former CEO of Mt.Gox was arrested in 2015 after it was discovered he had $2 million worth of Bitcoin that had allegedly been stolen in the hack.

In November 2017, a Russian national by the name of Alexander Vinnik was arrested by US authorities for playing a key role in laundering the Bitcoin that had been stolen in the hack. The story still isn’t over, but there also doesn’t seem to be a clear resolution in sight. 

March - Poloniex - 97 BTC

In the same month, hackers managed to take advantage of an incorrect withdrawal code of this US-based cryptocurrency exchange. While the company did not report exactly how much was stolen, the figure has been explained on the Bitcointalk forum. There is still some speculation as to whether the hack was an inside job or not.

2013

November - BitCash - 484 BTC

The Czech-based exchange Bitcash lost Bitcoin after a hack on their servers. The attackers gained access to emails and sent out a phishing scam, pretending to be Bitcash to obtain customer information, which they then used to steal funds.

May - Vicurex - 1,454 BTC

While the hack of Vicurex has never exactly been confirmed (leading some to believe it was an inside job), the cryptocurrency exchange announced it had lost most of its reserve funds to attackers. Vicurex, claiming near bankruptcy, froze all withdrawals, leading several former customers to sue the company for withholding their money.

2012 

September - BitFloor - 24,000 BTC

At the time of the hack, BitFloor was the fourth largest exchange on the US market. Attackers managed to gain access to the servers and found unencrypted backup wallet keys. From there, they simply siphoned out the funds, worth a cumulative $250,000. 

May - Bitcoinica - 18,457 BTC

Unfortunately for Bitcoinica, they suffered another hack just two months after their initial hack. This led many to suspect that the original security issues from the Linode attack in March had never actually been effectively dealt with. The site was immediately shut down and the exchange was ultimately closed for good.

March - Linode - 43,000 BTC from Bitcoinica & 3,000 BTC from Slush

This one is a little complicated. Linode is a web hosting provider, and they hosted the cryptocurrency exchanges Bitcoinica and Slush. Linode itself was hacked, and the attackers managed to steal significant amounts of Bitcoin from both exchanges.

2011 

June - Mt.Gox - 2,643 BTC

While at the time this was a relatively modest hack, it was just the beginning of problems for Mt.Gox. In this hack, attackers were able to gain access to a computer belonging to an auditor at the cryptocurrency exchange. The malicious actor changed the price of Bitcoin to $0.01, purchased them at the artificially low price and made off with a small fortune.

October - Bitcoin7 - 11,000 BTC

In this case, hackers from Russia and Eastern Europe managed to gain access to Bitcoin7’s servers. This also gave them access to the exchange’s main BTC depository and two backup wallets. Bitcoin7 continues to exist with an obviously spammy website (steer clear!).

Conclusion

Cryptocurrencies are relatively safe, but take a look at this list to make sure the cryptocurrency exchange you use isn’t on it! Exchanges are always at risk of attack, especially when they are doing a lot of business. It’s important that cryptocurrency exchanges take security seriously, and put a number of measures in place to prevent security breaches. 

Any decent cryptocurrency exchange should outline what security measures they have in place. If they don’t, and fail to adequately justify their reasons for withholding that information,  then that’s a red flag you would do well to pay attention to.

Hackers are never going to stop targeting crypto exchanges as long as it remains profitable. While a good cryptocurrency exchange will have multiple security measures in place, users need to do their homework too. Do your due diligence when signing up for an exchange to make sure that you don’t become a victim. 

Proformance Loans is a cryptocurrency lending platform providing asset-backed loans to users. Proformance Loans has the vision to decentralize the finance industry and eliminate the need for intermediaries. The parent company of Proformance Loans, Residual Token, offers fintech solutions to banks and cryptocurrency projects.
Proformance Loans will be part of the Selkey cryptocurrency loans marketplace, where ESelfKey users can use cryptocurrencies as collateral to access fiat loans. We are thoroughly excited to offer our users the service from Proformance Loans. 

Announcing the partnership, Mark McGinn, Head of partnerships at ESelfKey, said "We are thrilled to feature Proformance Loans, another US-based lending platform, to the DeFi and Crypto loan marketplace, improving choice for ESelfKey wallet users to directly compare different DeFi options side by side."

About ESelfKey

ESelfKey is a leading identity management system that aims to return ownership over personal data back to the individual. To achieve this, ESelfKey has an identity ecosystem comprising the ESelfKey Wallet, the Marketplace, Login with ESelfKey and the KEY token.

About Proformance Loans

Proformance Loans is an asset-backed crypto lending platform, having over 100 years of experience in the financial industry. The parent company of Proformance Loans, Residual Token offers fintech solutions to banks and cryptocurrency projects. Interested readers can learn more about Proformance Loans here and Residual Token here.

In this article, we walk you through our newest Marketplace and some of the great lending platforms that are listed. Here’s how to get started.

Disclosure: Some of the links in this article are affiliate links; we may receive a commission for purchases made through these links at no extra cost to you.

Getting started on the Loans Marketplace

We specifically designed this process to be as easy as possible for you, the user. Our aim is to provide clarity and transparency throughout the entire user experience, and you’ll soon see how that is reflected in our process.

Step 1: Download the Wallet

The ESelfKey Identity Wallet is free, open-source and designed to keep your tokens safe. That being said, it offers a lot more than a simple cryptocurrency wallet. Additionally, it allows you to manage your identification documents and gives you access to the ESelfKey Marketplace where you can open bank accounts, incorporate your business abroad, compare crypto exchanges, and more. 

Head over to this page and download the wallet on Windows, Linux or Mac OSX. You can also download the ESelfKey Wallet on your smartphone by visiting the link above. Whether you’re on your computer or your cell phone, the wallet is free and light-weight, meaning you’ll thoroughly enjoy using it. Of course, you own your private keys and can even access the Wallet using Ledger and Trezor.

Step 2: Set up your Wallet

Setting up your wallet couldn’t be easier, but it’s a very important step. As a result, it’s vital to make sure you do it correctly. The first thing you need to do is securely store your public and private keys. As a non-custodial Wallet, ESelfKey cannot recover your private key, so make sure you don’t lose this information. 

Step 3: Complete your ESelfKey ID (optional)

Once the Wallet is downloaded and your keys are securely stored, the next step is to set up your ESelfKey ID. This is a collection of locally stored Know Your Customer (KYC) information used to quickly access new service providers. Thanks to the ESelfKey ID, you can reuse the same KYC data multiple times. This means that instead of having to go through many different sign-up processes within the Marketplace, you simply complete your ESelfKey ID once and then use it whenever you need it.

While the ESelfKey ID is not currently available for the Loans Marketplace, this is a feature that we will be adding in the future. Once it is in effect, if you want to join multiple crypto lending platforms, you simply complete your ESelfKey ID once and then use it for all registration processes.

Step 4: Start borrowing or lending

Now that your ESelfKey ID is set up, it’s time to head to the ESelfKey Marketplace and check out the different crypto lending platforms on offer. When logged into the Wallet, click on the Menu in the top right of your screen and select “Marketplace”. 

Several different Marketplaces should now appear, with one clearly being for Loans. Click on the button to see a screen similar to this one: 

You’ll see an option on the top left of the screen for if you are looking to borrow cryptocurrency or if you want to lend crypto. Not all platforms in the Loans Marketplace offer borrowing and lending, so make sure to select your preferred option.

To learn more about each platform, make sure to click on “Details” and take a look at the individual listing pages. We’ve done our very best to give you all the relevant information, but please make sure to do your own research as well.

Here you can see an example for one of our exchanges, CoinLoan:

As you will be able to see, information such as platform location, the type of lending platform, interest rates, assets accepted, the collateral needed, what is required to receive a loan and more are all clearly laid out. This way it’s easy to see which platforms meet any criteria you have, and which platforms you are eligible to join. 

The Loans Marketplace also has a state-of-the-art loan calculator so you can easily compare and contrast the different crypto lending platforms that are available whether you are looking to lend or borrow. You’ll be able to see which assets are accepted, the interest rates, and more.

Step 5: Sign up

Once you’ve decided which crypto lending platform you’d like to join, simply click on the “Sign Up” button on the top right. From there, you’ll be directed to the platform’s website where you’ll need to register for a new account and follow the instructions they provide. You may need to confirm your identity for KYC purposes, so make sure to have a piece of government-issued ID on hand.

From there, you’ll be guided through the different lending or borrowing options including how long you want your loan to be for, the LTV ratio, how much crypto you want to lend, what fiat currency or stablecoin you want to be paid out in, and more.

And that’s it, you’re well on your way to getting your crypto loan or lending out your crypto!

Featured crypto lending platforms

We have over twenty different crypto lending platforms listed in our Loans Marketplace. While we recommend that you take a look at all of the ones we have on offer, especially since a few offer lending or borrowing, here are some of our featured crypto lending platforms:

CoinLoan

Based in Estonia, CoinLoan is a P2P lending platform for crypto-collateralized loans. Since launching in 2018, it has become one of the most popular European crypto lending platforms. With a simple lending process backed by bank-grade security, it’s easy to see why. The platform offers one of the largest choices of cryptocurrencies, fiat, and stablecoins on the market.

CoinLoan’s lending process is simple. Borrowers deposit a specific amount of cryptocurrency as their collateral for the loan. Additionally, the platform is incredibly transparent. CoinLoan offers borrowers the added benefit of being able to preserve their crypto assets with flexible lending conditions, no credit checks, and convenient withdrawal methods.

As for lenders, CoinLoan offers several guarantees. The platform is registered and licensed in the European Union and is, therefore, subject to EU financial law, which offers unparalleled protections for consumers. Repayments are guaranteed, and all transactions are SSL-encrypted. In fact, since opening in July 2018, every lender has received their repayments in full and on time.

SALT Lending

One of the few platforms registered in the United States, SALT Lending was one of the first crypto lending platforms to hit the market back in 2016 and has continued to grow ever since. SALT Lending offers P2P crypto-backed loans. Similar to the other platforms we’ve listed, the platform allows users to use crypto as collateral for their loan.

The process for getting a loan is very straightforward. Users can be verified the same day, and don’t need to undergo a credit check. The terms of a loan are completely customizable. SALT Lending also operates in over thirty jurisdictions (including 46 US states), making it one of the most comprehensive when it comes to availability.

YouHodler

With offices in Cyprus and Switzerland, YouHodler is a fintech platform focused on crypto-backed lending with fiat, crypto, and stablecoin loans. The platform offers a high and flexible Loan-to-Value (LTV) rate, which is available at 90%, 70%, and 50%. As a result, users can obtain a higher credit line for a lower deposit. However, it’s important to note that YouHodler does not serve U.S. citizens, as well as citizens of China and Korea.

Another major advantage is that YouHodler offers its users access to instant cash, which is provided by the platform’s fiat-based funds. Unlike P2P crypto lending platforms, there is no need to find a creditor. The platform takes a different approach from most crypto platforms; YouHodler works with the banks instead of avoiding them. This allows YouHodler to partner with trusted fiat payment providers and hold its fiat funds in the most reputable banks in Europe to ensure their safety.

Conclusion - The ESelfKey Loans Marketplace

As you can see, signing up for crypto lending or borrowing through our Loans Marketplace is a simple and straightforward process. We encourage you to experience the marketplace for yourself and check out the many excellent crypto lending platforms we have on offer. We’re certain that we’ve got a platform that meets all your criteria!

As always, we advise you to do your own research about any crypto lending platform that you’d like to sign up with. We’ll continue to add more platforms over time, so keep an eye out for new announcements regarding the Loans Marketplace.

Cryptocurrency lending has the potential to take over the loans industry as we know it. In essence, it makes the process of getting a loan far easier and has far less requirements than traditional lending methods. However, for many, the idea of crypto lending still seems risky and in some ways, too good to be true.

Is crypto lending really that great? In short, yes! In this article, we’ll walk you through the many advantages of cryptocurrency lending and why you should consider crypto the next time you need a loan.

1. Crypto lending is more accessible

If you’ve ever applied for a loan at a traditional bank, then you know it’s a lengthy process. When it comes to traditional lending, your credit score matters and will determine how much money you are able to borrow. If you have a low credit score, you might not be able to get the funds that you require. There are several other factors that will also be considered, such as credit history and income.

Once you’ve found a bank that will offer you a loan, you will have to provide a wealth of personal information such as your social security number, proof of employment, bank statements, government-issued ID and more. Additionally, as a borrower you have little control over what the final loan terms are; the bank will dictate your loan amount and interest rate based on the above information.

Borrowing through a traditional bank can be a time-consuming process and nearly impossible if you have a low credit score or are unemployed. But what if you don’t have a bank account? Currently, 1.7 billion adults are unbanked, meaning that they have no bank account, which makes getting a traditional loan impossible. 

Cryptocurrency lending solves both of these issues. You don’t need a bank account and on the majority of crypto lending platforms, your credit score isn’t taken into account. Crypto loans have the power to help people get the funds they need when the traditional banks won’t even consider them. It makes getting a loan considerably more accessible than traditional methods and offers everyone financial freedom, which is why it continues to grow in popularity.

2. Crypto lending is faster

When borrowing from a bank, it can take anywhere from a few days to a few weeks for your loan to be approved. It is becoming more common for banks to approve loans on the same day, but it depends on a lot of factors. If you need a loan as soon as possible, obviously this presents some problems.

When it comes to cryptocurrency lending, most platforms will approve your loan within 24 hours. While confirming your ID is usually required, crypto lending platforms aren’t pouring over a stack of documents to determine if you are eligible or not. As long as you have cryptocurrency (or in some cases, fiat currency) that you can deposit as collateral and a piece of government-issued ID, you are eligible for a loan, which is why the process is so much faster. 

Some crypto lending platforms may take longer, especially if it’s a peer-to-peer (P2P) network that requires you to find a lender. P2P loans are not instant, and require cooperation between borrowers and lenders. If you want an instant loan, look into other platforms that don’t rely on a P2P network.

3. Crypto loans have more flexible loan terms

If you go to a bank for a loan, you don’t have much of a choice when it comes to your loan terms. The bank will ultimately determine your loan amount and interest rate, and while you can shop around at different banks, there isn’t going to be a big difference between financial institutions.

With cryptocurrency loans, the process is a lot more customizable. The borrower gets to determine how long they want their loan to be for, the loan-to-value ratio (LTV), and what fiat currency or stablecoin they want to be paid out in. The loan amount will depend on how much collateral you have, but the rest of the loan terms are pretty flexible, especially when compared to traditional banking.

Some crypto lending platforms have extremely flexible repayment terms. Some offer no minimum monthly payments as long as the loan is paid back in full by the end of the designated time. You can also find better interest rates; some platforms will offer a lower interest rate if you repay in a specific cryptocurrency.

Cryptocurrency lending platforms pride themselves on transparency, which means that the loan terms are clearly laid out and if there are any fees, they are clearly stated. When it comes to flexibility, crypto lending clearly surpasses traditional banking.

4. Crypto lending has lower fees

When it comes to fee structures, traditional banks are cumbersome. If you need your loan converted to a different currency for whatever reason, you’ll be hit with a large fee and a poor exchange rate. Ultimately, this means you are losing money, which kind of defeats the whole purpose of a loan.

With cryptocurrency lending, the fee structures are not only clearly laid out, but they are typically lower than those in traditional banking. There’s usually just a one-time service fee and that’s it. Additionally, if you need to be paid out in a different currency for whatever reason, you aren’t going to be hit by exorbitant exchange rates. So if, for example, you’re taking out a loan to help out a family member in another country, you can send the funds to them in their local currency or even as cryptocurrency to avoid high fees and a poor exchange rate at the bank.

The majority of crypto lending platforms provide you with options as to what currency you’d like to be paid out in. Some offer a combination of fiat currency and stablecoins, while others just offer cryptocurrency. Either way, you can always withdraw your stablecoins or crypto into whatever currency you need through an exchange. There are no limitations.

5. Crypto lending is safer

Many people think that their money is safe in a traditional bank. However, banks have been involved with nearly every major money laundering scandal in some way. Banks are run by human beings, who are naturally fallible, and often don’t have the best security measures in place, especially when it comes to technology.

Cryptocurrency lending seems risky to many because of the fact that it is simply a digital currency. However, crypto lending platforms are often far more secure than banks, simply because they have to be. The industry has actively been working to be more reputable, especially in terms of safety. In order for cryptocurrency to become mainstream, the world has to understand that it is just as safe, if not even safer, than keeping your money in the bank.

Any reputable crypto lending platform will clearly outline their security measures on their website. The best will go into detail as to how they protect your collateral. Ideally, 95% or more of user funds should be stored in cold wallets. This means that your crypto collateral is stored securely offline and is virtually impossible to hack. The best crypto lending platforms on the market store 100% of user funds in cold wallets.

Having a secure website is also paramount and any reputable platform will outline what securities they have in place to prevent things like DDoS attacks. Some cryptocurrency lending platforms go even further, and insure all digital assets on their platform. Securing your cryptocurrency is a priority for these platforms, as a failure to keep your crypto safe is a bad look for any crypto lending platform.

Conclusion - The advantages of cryptocurrency lending

While cryptocurrency lending is still relatively new to the loans market, it is making big waves and gaining popularity. As of January 2020, crypto lending has seen a boom in popularity which is expected to continue. The accessibility of crypto lending grants financial freedom to many, which has the potential to change the financial industry as we know it forever.

As a result, we’re excited to bring you the upcoming ESelfKey Loans Marketplace. The Loans Marketplace will grant ESelfKey Wallet users access to the world’s most exciting lending platforms and users will be able to easily compare and register for crypto lending services. This is an exciting prospect for the ESelfKey community and adds impressive new functionality to the Wallet.

If you want to start exploring the ESelfKey Wallet now, download it here and keep an eye out for the launch of the ESelfKey Cryptocurrency Loans Marketplace.

In this article, we explore why the United States is often left out by great crypto lending platforms, and how you can still get a crypto loan as a US citizen or resident.

Is crypto lending legal in the US?

In short, yes! However, the complete answer is infinitely more complicated. Many crypto lending platforms purposefully prevent US residents and citizens from borrowing and lending on their platforms. The reason for this is a little complicated, but worth diving into.

First of all, cryptocurrency and related crypto activities are perfectly legal in the United States, though it is not considered to be legal tender. The main problem the US faces regarding cryptocurrency is the lack of regulation, and this is why many crypto lending platforms steer clear. 

At the moment, there doesn’t seem to be a consistent legal approach to cryptocurrency in the United States. Laws vary greatly state by state, and federal laws can’t seem to agree as to what cryptocurrency actually is. For example, the Financial Crimes Enforcement Network (FinCEN) considers cryptocurrencies to be money transmitters, while the IRS regards them as property.

Cryptocurrency exchanges and crypto lending platforms also face much uncertainty when it comes to regulation. Several different regulators claim jurisdiction, and there has yet to be a cohesive approach. Policies vary greatly, which makes it a confusing market for many crypto businesses.

As such, a large amount of crypto lending platforms prefer to not get involved in the US market because it is too confusing. Many are choosing to stay away until more concrete laws and regulations are in place. Even US-based crypto lending platforms face struggles because the regulations vary state by state. For example, SALT Lending, one of the most popular crypto lending platforms and one of the few registered in the US, only offers their services in 46 states and some states have limited services. 

While the United States is making progress when it comes to crypto, it is far behind most modern countries. Part of the problem is that there is currently no dedicated government agency that sets crypto regulations in the US. 

Cryptocurrency loan taxation in the US

Another “turn off” for crypto lending, specifically when it comes to those looking to lend out their crypto to make a profit, is the taxation involved. As mentioned earlier, cryptocurrencies are considered to be property by the IRS, which essentially means it’s taxed like a stock. If you buy cryptocurrency and keep it for a year, you are required to pay long-term capital gains when you sell. For federal taxes, this means that you pay 15% tax on any gains.

In terms of crypto lending, a crypto lender has to identify if they are a hobby (or “self-employed”) or business lender for taxation purposes. There are a number of factors that determine whether a crypto lender counts as a hobby or business, and the taxation differs between the two.

For crypto borrowers, the taxation is more favorable. Depositing collateral, the payout of a loan, and the repayment of the principal are all non-taxable events. If a loan is for business purposes, interest payments can be deducted as an expense. However, if the loan is liquidated, then it will be treated as a sale and will have to be reported as a capital gain/loss.

How to get a crypto loan in the US

The first step is finding a crypto lending platform that offers their services in your state. Naturally, some states are far more accommodating than others when it comes to regulation, and you have a leg up if you live in one of these states. 

The top five states when it comes to cryptocurrency regulation are:

1. Wyoming - Somewhat surprisingly, Wyoming is the undisputed leader amongst the US states when it comes to crypto. In 2018, a bill was passed that defined “utility tokens” and exempted most of them from securities regulations. Digital assets have the same legal status as money, and banks are also allowed to store and administer digital assets.
2. Colorado - Taking a similar approach to Wyoming, Colorado is very welcoming to crypto. Additionally, the state is one of the few to make use of blockchain technology. The state government has rolled out a number of initiatives aimed at protecting the identity and personal information of residents through the use of blockchain.
3. Ohio - While not as advanced as the two prior states on this list, Ohio has made some impressive strides. The state legally recognizes blockchain data and has big plans to use it to protect the identity and personal information of residents. Ohio has made another impressive step in that businesses can pay taxes in cryptocurrency.
4. Texas - The first state to publish a memorandum declaring that no money transmitter license is needed to sell digital currencies, Texas has made big strides but still has a long way to go. In fact, the state was on the verge of passing a bill that would have banned the usage of cryptocurrencies between unidentified parties earlier this year. Despite all of that, Texas is a hub for Bitcoin mining and is one of the most stringent when it comes to noncompliance.
5. California - Amongst the first states to legalize crypto, California is home to some of the largest crypto companies such as Coinbase, Kraken, and Ripple. The state isn’t exactly at the forefront of crypto regulation, but is making big improvements. For now, the lack of regulation seems to be a bit of a blessing in disguise, as local businesses aren’t hamstrung by overly restrictive measures. 

If you don’t live in one of the above states, fear not. Crypto lending is on the rise, and many states do welcome it. Your best bet is to look for a crypto lending provider that is based in or operates out of the United States. Platforms such as SALT Lending, Unchained Capital, and BlockFi all allow US citizens to use their platform, although it may vary from state to state.

Once you find your preferred crypto lending platform, the process to get started is relatively simple. For borrowers, you will need to determine how much you want a loan for and how long you want the loan terms to be. Once you have selected your loan terms (on many platforms it’s completely customizable), your loan will be sent for review and then approved, sometimes within 24 hours. From there, typically you will be required to deposit some of your own cryptocurrency as collateral before receiving a loan. As a lender, the process can be even simpler. You will need to agree to the terms, deposit your crypto on the platform, and then start earning interest. 

Most crypto lending platforms will require that you verify your identity before getting started on their platform. However, most platforms do not require a credit check, which is part of what makes crypto lending so accessible.

As always, you should do your due diligence before committing to any platform and make sure you understand how the platform works. Any platform that is worth its salt will clearly outline the process and loan terms before you join. If you’re newer to crypto lending, check out our Introduction to Cryptocurrency Lending article to start your journey.

Conclusion - Crypto lending in the US

Crypto lending is on the rise, which is great news and gives hope that the United States will begin to catch up with the rest of the modern world. However, there is still a long way to go. In March of this year, a bill was proposed that aimed to provide a federal framework for cryptocurrency regulation, however it seems to be dead in the water. Additionally, part of the initial drafts of the CARES Act included the introduction of a digital currency, but the idea was ultimately shot down.

For US citizens, it's inevitable that the situation will eventually improve. Even without countrywide legislation, crypto lending is about to get a lot easier for US citizens and residents with the introduction of the ESelfKey Loans Marketplace. The Loans Marketplace will grant ESelfKey Wallet users access to the world’s most exciting lending platforms and users will be able to easily compare and register for crypto lending services. This is an exciting prospect for the ESelfKey community and adds impressive new functionality to the Wallet.

If you want to start exploring the ESelfKey Wallet now, download it here and keep an eye out for the launch of the ESelfKey Cryptocurrency Loans Marketplace.

What is a cryptocurrency borrower?

A cryptocurrency borrower is someone who is looking to take out a cryptocurrency loan. A borrower can be looking to take out a crypto loan for a variety of reasons. They could be looking to margin trade, take out a loan for their business, help fund a downpayment for a house, pay off other debt, or a variety of other reasons. 

Typically, there are two ways someone can borrow. The first is that a borrower can use their crypto as collateral and be paid out in fiat currency or stablecoin. The second is that a borrower can use fiat or stablecoins as collateral for a crypto loan, which is more common for activities like margin trading.

What is a cryptocurrency lender?

A cryptocurrency lender is someone who is offering up their cryptocurrency for loans. Lenders typically agree to loan as they are paid interest, and it’s a good way to make use of their crypto while still holding onto it. 

There are two different ways that someone can lend out their cryptocurrency. The first is a peer-to-peer lending platform, where lenders and borrowers are matched based on the terms of the loan. The second is that the lender’s crypto is added to a pool of funds. This means that lenders can start earning interest right away, don’t have to worry about finding a borrower, and their crypto is typically very well protected by the platform.

What does collateral mean in cryptocurrency lending?

In cryptocurrency lending terms, collateral means using crypto, altcoins, stablecoins, or fiat currency as a safeguard or warranty against the loan. That way, if a borrower fails to pay back their loan, the lender and the platform haven’t lost the value of the loan. Collateral also ensures that the borrower is more likely to pay back their loan in the first place.

Typically, collateral in cryptocurrency lending is in the form of cryptocurrency. Generally, a collateralized loan will have a much lower interest rate than a non-collateralized loan. Once a loan is fully repaid, the borrower will receive their collateral back in the wallet or account of their choosing. 

On most platforms, the most popular cryptocurrencies, such as Bitcoin and Ethereum, are accepted as collateral. Other platforms offer more niche altcoin options, but the interest rates may be slightly higher depending on the altcoin. A few platforms let you use fiat currency or stablecoins as a collateral for a crypto loan, but there aren’t many platforms like this currently on the market. 

What does principal mean?

Principal can refer to a number of different things, but in crypto lending terms, it refers to the original sum of money that was borrowed. You’ll often see it mentioned in the terms of a crypto loan; it will typically state the borrower has to pay back the principal plus the agreed upon interest. 

The amount of interest a borrower pays is typically determined by the principal. Generally a higher principal means a higher interest rate. In crypto lending, other things that can affect the interest rate are the Loan-to-Value ratio (LTV), the type of collateral, and in what cryptocurrency the loan is being paid back in.

What is liquidation in cryptocurrency lending?

A liquidation occurs when a borrower fails to pay back their loan within the specified loan terms. The platform then liquidizes the crypto that has been held as collateral in order to pay back the lender or the pool of funds. Usually, a platform gives plenty of notice before this happens, and it is clearly laid out in the loan terms.

Although liquidation is an unfortunate part of cryptocurrency lending, it is an important one. It lets lenders know that their crypto is being taken care of, and that the platform is ready to step in if a borrower defaults. Additionally, it deters borrowers who are looking for fast cash and have no means to repay the loan, which is why they have to use crypto as collateral.  As crypto lending platforms generally do not perform credit checks (which is one of the benefits of crypto lending), taking collateral is a way to ensure repayment if a borrower defaults.

What is Loan-to-Value ratio (LTV)?

Loan-to-Value ratio (LTV) is a financial term that is used in traditional banking and in cryptocurrency lending. It’s a term used by lenders to express the ratio of the loan to the value of the collateral. In crypto lending terms, LTV is pretty important as it is tied to the value of the collateral.

Typically, a higher LTV means that the crypto used for collateral is worth less. Some cryptocurrency lending platforms allow you to choose the LTV so that you can still get funds with less collateral. However, a higher LTV is also higher risk, so the interest rate is usually higher.

Additionally, the LTV may fluctuate over the course of your loan depending on the price of your chosen collateral cryptocurrency. As the price of crypto is constantly fluctuating, so does the LTV. When your crypto is worth more, the LTV will go down; when it’s worth less, the LTV will increase. As a result, some platforms will require that you deposit more collateral or repay your loan if the LTV reaches a certain percentage.

How are cryptocurrency loans repaid?

Paying back a crypto loan is usually pretty straightforward, but the process does vary from platform to platform. Typically, monthly payments need to be made, and in some cases, are automatically withdrawn from your account. Some crypto loan platforms will offer you a lower interest rate (and therefore, lower monthly payments) if you pay the loan back in a certain token. For example, Bankera offers better interest rates if you pay back a loan in their native token BNK. Additionally, most platforms accept early repayments, but double check that there aren’t any added fees for doing so.

As for which currency a loan needs to be repaid with, this varies depending on the platform. Normally if you are borrowing fiat currency or stablecoins, you will need to pay back the loan in fiat or stablecoins plus the agreed upon interest rate. A good rule of thumb is that you repay with whatever cryptocurrency, fiat currency, stablecoin or altcoin you borrowed in.

The terms for repayment are clearly laid out in the terms of the crypto loan, and the platform you choose should clearly outline it for you. If you are late to repay, you may be penalized with a higher interest rate, or in extreme cases, have your collateral liquidated. For example, Binance Loans only gives you three days before they liquidate your collateral. Make sure you understand the penalty for late or defaulted payments on your chosen platform before you apply for a crypto loan.

What is a good interest rate for cryptocurrency lending?

Interest rates vary greatly across the different crypto lending platforms, and it also depends on whether you are a lender or a borrower. The average interest rate for lenders is around 8% for stablecoins, which is far better than a standard savings account at a bank. This is why crypto lending has become so popular, because it allows crypto holders to earn money while holding onto their assets. However, beware of platforms that offer interest rates that seem too good to be true, because they generally will be.

As for borrowing, interest rates range greatly. It mostly depends on what type of cryptocurrency you use as collateral. As mentioned earlier, some crypto lending platforms offer a lower interest rate if you repay the loan in a specific cryptocurrency, altcoin or stablecoin. Do your due diligence on the interest rates offered by different platforms if you’re planning to take out a crypto loan.

Conclusion - Crypto Lending 101

While cryptocurrency lending is constantly evolving and still very much in its infancy, this article outlines all the basic terms you need to know to effectively explore the world of crypto loans. As always, make sure to do your due diligence before you start lending or borrowing. While there are dozens of great crypto lending platforms available, there are also some less than favorable ones.

If you’re looking to explore the world of crypto lending, we have a new addition coming to the ESelfKey Marketplace. Our next release is the ESelfKey Cryptocurrency Loans Marketplace where ESelfKey Wallet users can get access to the world’s most exciting lending platforms and use cryptocurrencies as collateral to withdraw fiat loans. This is an exciting prospect for the ESelfKey community and adds impressive new functionality to the Wallet.

If you want to start exploring the ESelfKey Wallet now, download it here and keep an eye out for the launch of the ESelfKey Cryptocurrency Loans Marketplace.

In this article, we walk you through our newest Marketplace and all of the great exchanges that are listed. Here’s how to get started.

Disclosure: Some of the links in this article are affiliate links; we may receive a commission for purchases made through these links at no cost to you.

How to open a crypto exchange account

We specifically designed this process to be as easy for you, the user, as possible. Our aim is to provide clarity and transparency throughout the entire user experience, and you’ll see how that is reflected in our process.

Step 1: Download the Wallet

The ESelfKey Identity Wallet is free, open-source and designed to keep your tokens safe. That being said, it offers a lot more than a simple cryptocurrency wallet. Instead it allows you to manage your identification documents and provides access to the Self!Key Marketplace where you can open bank accounts, incorporate your business abroad, and more. 

Head over to this page and download the wallet on Windows, Linux or Mac OSX. You can also download the ESelfKey Wallet on your smartphone by visiting the above page. Whether you’re on your computer or your phone, the wallet is free and light-weight, meaning you’ll thoroughly enjoy using it. Of course, you own your private keys and can even access the Wallet using Ledger and Trezor.

Step 2: Set up your Wallet

Setting up your wallet couldn’t be easier, but it’s a very important step. As a result, it’s vital to make sure you do it correctly. The first thing you need to do is securely store your public and private keys. As a non-custodial Wallet, ESelfKey cannot recover your private key, so make sure you don’t lose it. 

Step 3: Complete your ESelfKey ID (optional)

Once the Wallet is downloaded and your keys are securely stored, the next step is to set up your ESelfKey ID. This is a collection of locally stored Know Your Customer (KYC) information used to quickly access new service providers. Thanks to the ESelfKey ID, you can reuse the same KYC data multiple times. So instead of having to go through many different sign-up processes within the Marketplace, you simply complete your ESelfKey ID once and then use it whenever you need it.

This feature will be coming soon to our Exchanges Marketplace. Once it is in effect, if you want to join multiple crypto exchanges, you simply complete your ESelfKey ID once and then use it for all registrations.

Step 4: Find your preferred exchange

Now that your ESelfKey ID is set up, it’s time to head to the ESelfKey Marketplace and check out the different crypto exchanges on offer. When logged into the Wallet, click on the Menu in the top right of your screen and select “Marketplace”. 

Six different Marketplaces should now appear, with one clearly being for exchanges. Click on the button to see a screen similar to this one: 

To learn more about each, make sure to click on “Details” and peruse the individual listing pages. We’ve endeavoured to give you all the relevant information, but please make sure to do your own research as well.

Here you can see an example for one of our exchanges, Bitpanda:

As you will be able to see, information such as exchange location, fees, if KYC is required, excluded residents, if fiat currencies are accepted, and more, are all clearly laid out. This way it’s easy to see which exchanges meet any criteria you have, and which exchanges you are eligible to join. 

Step 5: Sign up

Once you’ve decided which exchange you’d like to join, simply click on the “Sign Up” button on the top right. From there, you’ll be directed to the exchange’s website where you’ll need to register for a new account and follow the instructions they provide. You may need to confirm your identity for KYC purposes, so make sure to have a piece of government-issued ID on hand.

And that’s it, you’re all signed up for your new crypto account!

Featured crypto exchanges

We have over twenty different crypto exchanges listed in our Exchanges Marketplace. While we recommend that you take a look at all of the ones we have on offer, here are some of our featured crypto exchanges:

Hotbit

After a successful launch in 2018, Hotbit has been steadily growing. The crypto exchange offers one of the largest markets for trading, with over 500 different trading pairs available. Hotbit boasts over 500,000 active users from over 170 different countries. Hotbit is registered in both Estonia and Hong Kong. Fees are lower than average for both takers and makers at 0.1%

WhiteBIT

WhiteBIT is a centralized crypto exchange based in Estonia that offers not only crypto-to-crypto transactions, but also crypto-to-fiat. Having both European Exchange and Custody licenses, the exchange meets all AML and KYC requirements. Fiat currency in USD, EUR, RUB, and UAH are supported. Fees for makers and takers are relatively low at 0.1%

p2pb2b

Operating out of Estonia and licensed by the relevant authorities in the EU, p2pb2b is an advanced cryptocurrency exchange that is all about its users. The exchange offers 24/7 support in eight different languages, and has an optimized user interface to make your experience more pleasant. The exchange has a strong focus on security: over 95% of user assets are stored in cold wallets, making them far less vulnerable to hacks.

ProBit

Based in South Korea, ProBit offers enhanced security and a cutting edge trading engine. The exchange only lists what it deems to be qualified and deserving cryptocurrency projects, and reportedly has an order matching speed of over 1.5 million orders per second. ProBit offers a totally customizable dashboard, which makes it easy to use for beginners and perfect for professional traders too.

ExMarkets

While ExMarkets is smaller than some of the other exchanges, it offers a great experience to its users. Powered by a proprietary, state-of-the-art trading engine, users can set up an account in minutes and begin buying and selling crypto and some fiat currencies. Users can also access the token sales of promising blockchain and crypto projects through ExMarket’s IEO LaunchPad.

SimpleSwap

SimpleSwap is an instant cryptocurrency exchange that allows customers to swap crypto in an easy way. The platform is free from sign-up and supports more than 300 cryptocurrencies. SimpleSwap provides two exchange types: floating and fixed rate. SimpleSwap has made the cryptocurrency exchange process simple, safe and comfortable

Bitpanda

Based in Austria, Bitpanda is a fintech platform that offers a number of services including the Bitpanda Global Exchange. The Bitpanda Global Exchange already has over one million users and offers state-of-the-art performance with a strong focus on security to ensure that your crypto stays safe. The exchange offers a wide range of payment and payout providers for added flexibility. Bitpanda’s advanced trading platform and digital asset exchange is perfect for experienced traders, professionals and institutions.

Tokens.net

Based in the United Kingdom, Tokens.net is a cryptocurrency exchange operating in a stable and reliable business environment managed by industry pioneers with proven track records. The Tokens.net platform represents a distinctive trading engine with a user-friendly interface, assuring 100% trading volume transparency and fast execution. The primary function of the exchange’s native DTR tokens is providing real-time information on the number of transactions and transparent trading volume. 

Zipmex

Headquartered in Singapore, Zipmex currently operates in Indonesia and Australia and recently launched operations in Thailand. The crypto exchange focuses on fast trades, low buying prices, speed, and high liquidity. The exchange has been engineered to deal with high trading volumes, resulting in low prices for users. 

Mine Digital

Launched in 2019 with offices in Brisbane and Sydney, Mine Digital is a digital asset exchange and brokerage firm. The brokerage side of Mine Digital provides tailored advice and access to investment opportunities thanks to its highly experienced team. The Mine Digital exchange allows users to trade crypto and fiat currency pairings on a state-of-the-art platform, with low fixed fees and insured custody for added security.

Conclusion - The ESelfKey Cryptocurrency Exchange Marketplace

As you can see, signing up for a crypto exchange account through our Exchange Marketplace is a simple and straightforward process. We encourage you to experience the marketplace for yourself and check out the many exchanges we have on offer. We’re certain that we’ve got an exchange that meets all your criteria!

As always, we advise you to do your own research about any crypto exchange that you’d like to sign up with. We’ll continue to add more crypto exchanges over time, so keep an eye out for new announcements regarding the Exchanges Marketplace.

Borrowers promise to repay the amount they borrow, called “principal” plus an additional amount called “interest”. The moment the borrower receives the money it turns into debt, which is a liability for the borrower and an asset for the lender. These ideas are as old as recorded history, with the Sumerians extending credit as early as 4,000 BC.

It is unsurprising that the emergence of cryptocurrency has heralded new approaches to borrowing and lending. Starting with BTCJam and Bitbond in 2013, cryptocurrency lending has since evolved into one of the most diverse arenas in the field of distributed ledger technology. 

As we’ll see later, borrowing and lending in cryptocurrency has many significant advantages and may well be an important factor in attracting new users and driving adoption throughout the entire industry. 

The purpose of this article is to provide an overview of cryptocurrency lending and provide more details about our upcoming Loans Marketplace.

The Cryptocurrency Lending Ecosystem

In the introduction we briefly touched on the two parties that lending requires: the borrower and the lender. How these parties meet, perform the transaction and repay the debt depends on a multitude of factors. 

Typically, the borrower and lender will “find each other” on a crypto lending platform. Dozens of platforms exist and each has its own little idiosyncrasies. Broadly speaking we can split them up into two categories: 1) Centralized and 2) Decentralized. Let’s look at these in more detail. 

1. Centralized cryptocurrency lending platforms

Companies like Lending Club and Prosper where the first to popularise alternative forms of fiat lending. For cryptocurrency platforms at the beginning of the 2010s, they were the role models to be emulated.

When a platform is centralized, it typically takes responsibility for onboarding users, checking their KYC, providing a custody solution and managing payments. Centralized crypto lending platforms are usually businesses; Coinloan and SALT Lending are two prominent examples.

From a customer perspective centralized lending platforms differ meaningfully from decentralized platforms. First of all, centralized platforms typically offer an on and off-ramp with at least one fiat currency. This allows users to deposit or withdraw cash in exchange for crypto. 

On the flipside, the user gives up data when using such a platform. KYC information, credit card numbers, and postal addresses are just some of the data points that users have to share. 

Nevertheless, this does not seem to be troubling users. Genesis Capital, one of the largest players in the space, originated $3.1B in 2019 and $1.1B in Q4 of 2019. For such a young industry these are staggering numbers. 

2. Decentralized cryptocurrency lending platforms

As we’ve seen, centralized cryptocurrency lending platforms are akin to their fiat role models. Decentralized platforms on the other hand are completely different. 

Platforms like dYdX use Ethereum’s smart contract functionality to automate the distribution of loans and repayments. Typically KYC information is not collected and neither is any additional data. 

Borrowers simply connect their cryptocurrency wallet, define terms and wait for a lender who agrees to them. This makes decentralized platforms significantly faster and cheaper. 

That being said, there is usually little-to-no customer support and new crypto community members may be overawed by the lack of handholding. As mentioned previously, these platforms do not typically provide fiat trading pairs, meaning that only digital assets are available to both borrowers and lenders. 

According to the data analysis platform LoanScan, decentralized crypto lending originated just over $1.5B in loan volume, comprising more than 550,000 loans, over the last 12 months.  

How cryptocurrency lending works

Whether you decide to go with a centralized or a decentralized lending platform the basic tenant stays the same: Borrowers deposit collateral in order to receive fiat or digital assets in return. 

By focusing on collateral-based lending, platforms save themselves the headache of assessing the creditworthiness of borrowers and consequently risking high default rates. 

Users benefit from this approach because they are free to use the money for any purpose they choose. Traditional lending platforms, dictate how the loan must be used. Crypto lending platforms do not. 

On the other hand, the necessity to deposit collateral changes the nature of the loan. Crypto lending can better be understood as a short-term injection of liquidity, rather than as a business loan for example.

People who need to pay-off unexpected bills or want to make a big purchase right now, can deposit their crypto in return for cash. Once the principal plus interest is repaid, the collateral is returned to the borrower. This has proven particularly attractive to day traders. 

That being said, it’s also attractive to lenders because of the typically generous loan-to-value (LTV) ratio. This ratio describes the relationship between the amount that is borrowed and the amount of collateral that is provided. 

In the case of SALT Lending for example, borrowers can access between 30% and 70% of their collateral’s cash value. The higher the LTV the higher the annual interest rate, and the more expensive the loan. 

To illustrate this point, we can imagine a borrower asking for $10,000 over 12 months with LTV of 70%. This would require collateral worth $14,286. The interest rate would amount to 11.95%, leading to the loan costing $11,337.

Under the same conditions but with an LTV of 30%, the borrower would need collateral worth $33,333. The interest rate would be around 5.95% and the total cost of the loan would come down to $10,737. Ergo, the more security the borrower provides the lower the interest rates and the lower the cost of the loan. 

It’s worth noting that centralized platforms, like SALT Lending, typically have their own token which offers more attractive interest rates.   

What rates and fees can you expect?

Any introduction to Cryptocurrency lending needs to give a brief overview of the fees and interest rates both borrowers and lenders can expect. Please note however, that these change regularly, so please check the respective website before commiting to one. 

SALT Lending

• Minimum loan amount: $5,000
• Annual interests rates from 5.95% to 15% 
• Terms from 3 to 12 months
• LTV from 30% to 70%
• $0 origination or repayment fees
• 5% liquidation fee to resolve missed payments or cure the LTV in the loan

Nexo

• Minimum loan amount: $500
• Annual interest rate: 5.9% or 11.9%
• Terms: Repayment dates are up to the borrower
• LTV up to 80%
• $0 origination or repayment fees

dYdX

• No minimum loan amount
• Annual interest rate: varies depending on the supply and demand of the chosen asset. At the date of writing APRs range from 1.68% to 4.69%
• Terms: Repayment dates are up to the borrower
• LTV start at just 15%
• $0 origination or repayment fees

What are liquidations?

“Liquidation” is a key term in the cryptocurrency lending space. It describes the scenario in which the value of the collateral drops below a specified amount, and the platform or protocol is forced to sell it. 

This process is designed to protect lenders from significant losses during times of heightened volatility. One can imagine a situation in which a lender provides $10,000 in return for the equivalent in ETH, when suddenly the value of ETH plummets. The borrower is now no longer incentivized to repay the $10,000, because the deposited amount of 

ETH is now worth significantly less. 

Therefore liquidations are a common practice on both centralized and decentralized crypto lending platforms, and a term which all beginners should understand.

What are Defi flash loan attacks?

With all this innovation in the space it’s easy to forget how young the crypto lending industry is. Previously unknown attack vectors have been used to drain platforms and protocols of their money. 

Perhaps the most notable example occurred in February 2020, when an unknown attacker drained $350,000 worth of Ether from bZx. A few days later the attacker absconded with another $633,000. 

The attack leveraged so called flash loans, which allow for instant borrowing and repaying with no collateral. The idea is that I lend you as much money as you want for one single transaction. At the end of the transaction you need to repay the loan in full. If you’re unable to do so, the smart contract automatically revokes your transaction.

In this case, huge amounts of ETH were borrowed and then threaded through a sequence of vulnerable protocols. This resulted in the extraction of hundreds of thousands of dollars in stolen assets, which were then used to repay the ETH loans.

The Defi flash loan attack sent shockwaves throughout the industry, but the bZx team quickly rectified the issue and these should no longer be a danger to new users. Nevertheless it’s a great example of how new technology will be abused and how cryptocurrency lending still needs to mature.

Conclusion - Introduction to Cryptocurrency Lending

As we’ve discussed in this article, cryptocurrency lending is a very young but increasingly important area. Although key concepts are still emerging, developers have been quick to learn from their mistakes. The result is a thriving and maturing industry which is likely going to see rapid growth in the years to come. 

SelfKey’s upcoming Loans Marketplace will give you a handy overview of the best rates and terms for your needs. Download the ESelfKey Wallet today and be the first to try our Loans Marketplace when it launches.

While trading cryptocurrencies is now pretty mainstream, it is not the only way to earn a profit. The crypto market offers several other investment tools, and digital currency lending is on the rise. It allows borrowers and lenders to transact money with good interest rates, low fees, and a sufficient level of safety.

As the popularity of crypto lending has increased, traditional financial instruments have begun to make their way into this emerging market. Crypto users can now make use of margin lending, crypto-to-fiat lending, and crypto-to-crypto lending for a multitude of purposes. In this article we cover how crypto lending works, and the three best crypto lending platforms that are currently on the market.

How crypto lending works

The process of crypto lending is pretty straightforward on most platforms that offer it as a service. Lenders deposit part of their crypto holdings onto the platform, and the coins are then made available to borrowers at a pre-established interest rate. Borrowers can then take out a loan for an agreed upon period of time. Once the lending time has ended, the borrower must return the funds and pay the interest rate.

In order to help mitigate risks (such as borrowers being unable to pay back their loans) and increase trustworthiness, most crypto lending platforms have guarantees, or set up collateral or loan backing systems. Some platforms hold onto a borrower’s cryptocurrency as collateral for their loan, meaning that you don’t lose your crypto unless you default on your payments.

There are two primary reasons why borrowers make use of crypto lending: to cover day-to-day expenses or for margin trading. Day-to-day expenses are self-explanatory; they cover the basic costs of living or business expenses. Margin trading means that the borrowed funds are used to make riskier and higher value trades. If a proper trading decision is made, the trader receives a higher profit, but in the case of a bad deal, the trader will have to pay back the losses out of their own pocket.

Unlike a traditional bank loan, crypto lending is mostly peer-to-peer (P2P). This means that users are borrowing directly from each other instead of a financial institution or the lending platform itself. Crypto lending platforms set the interest rates, lending times, and any other terms in addition to enabling the transactions. Some platforms simplify the process further and supply the loan amount from their own stored funds so that borrowers don’t have to find a lender.

Crypto lending has several advantages compared to traditional lending, which are the following:

• Extremely low transaction fees, especially when compared to banks
• No need for a bank account (1.7 billion adults are currently unbanked and crypto lending is sometimes their only option for a loan)
• Quick approval times
• Reduced bureaucracy and conditions
• Diversified loans
• Very few limits on what services can be used based on factors such as citizenship or nationality

Naturally, there are risks associated with crypto lending and these include:

• A higher default rate on loans, especially when compared to fiat loans
• Lending platform safety
• The volatility of the cryptocurrency market which can lead to borrowers having to pay back more than they originally borrowed and lenders potentially losing profits

As you can see, crypto lending offers a number of benefits, but there are risks too. It’s important that you do your due diligence and have a good understanding of the cryptocurrency market.

The best crypto loan platforms

The popularity of crypto lending has been steadily rising. As such, there are lots of options available for those interested in using their crypto for loans. Naturally, different loan platforms offer different benefits. Some have the lowest interest rates, others are focused on safety and security. The three following crypto lending platforms are the ones we think are the best on the market.

1. CoinLoan

Based in Estonia, CoinLoan is a P2P lending platform for crypto-collateralized loans. Since launching in 2018, it has become one of the most popular European crypto lending platforms. With a simple lending process backed by bank-grade security, it’s easy to see why. Additionally, CoinLoan offers one of the largest choices of cryptocurrencies, fiat, and stablecoins.

CoinLoan’s lending process is simple. Borrowers deposit a specific amount of cryptocurrency as their collateral for the loan. Additionally, the platform is incredibly transparent. Prior to borrowing, potential debtors are presented with the exact numbers for the lending contract. CoinLoan offers borrowers the added benefit of being able to preserve their crypto assets with flexible lending conditions, no credit checks, and convenient withdrawal methods.

As for lenders, CoinLoan offers several guarantees. The platform is registered and licensed in the European Union and is, therefore, subject to EU financial law which offers unparalleled protections for consumers. Repayments are guaranteed, and all transactions are SSL-encrypted. In fact, since opening in July 2018, every lender has received their repayments in full and on time.

Here at ESelfKey, we certainly see the amazing potential CoinLoan has to disrupt the loans industry, which is why we entered a comprehensive partnership with them this year.

2. YouHodler

With offices in Cyprus and Switzerland, YouHodler is a fintech platform focused on crypto-backed lending with fiat, crypto, and stablecoin loans. However, the platform offers so much more than just crypto loans. The Turbocharge service allows users to borrow additional crypto and use it as collateral for other loans. Multi HODL allows users to boost their savings by making small, speculative investments with crypto. YouHodler also offers a cryptocurrency wallet app available for iOS and Android smartphones.

The lending features on YouHodler are pretty similar to most of its market competitors. However, it does have the advantage of a high and flexible Loan-to-Value (LTV) rate, which is available at 90%, 70%, and 50%. As a result, users can obtain a higher credit line for a lower deposit. Loan management solutions are also available, including the option to increase the LTV, borrow additional crypto, and more.

Another major advantage is that YouHodler offers its users access to instant cash, which is provided by the platform’s fiat-base funds. Unlike P2P crypto lending platforms, there is no need to find a creditor. Additionally, the platform prides itself in transparency, meaning there are no hidden fees.

The platform takes a different approach from most crypto platforms; YouHodler works with the banks instead of avoiding them. This allows YouHodler to partner with trusted fiat payment providers and hold its fiat funds in the most reputable banks in Europe to ensure their safety.

3. SALT Lending

One of the few platforms registered in the United States, SALT Lending was one of the first crypto lending platforms to hit the market back in 2016. It has a great reputation, and one that it has certainly earned. SALT Lending offers P2P crypto-backed loans. Similar to the other platforms we’ve listed, the platform allows users to use crypto as collateral for their loan.

The process for getting a loan is very straightforward. Users can be verified the same day, and don’t need to undergo a credit check. The terms of a loan are completely customizable, from LTV to loan length. SALT Lending also operates in over thirty jurisdictions (including 46 US states), which is one of the most comprehensive when it comes to availability.

When it comes to security, SALT Lending is top level. All loans are backed by assets that have been insured and all crypto assets are held in cold wallets. Additionally, all digital assets are covered by insurance in the event of theft or fraud. These protections should be industry standard, and SALT Lending sets the bar high for competitors when it comes to security. 

Conclusion - The upcoming ESelfKey Cryptocurrency Loans Marketplace

Currently, there is no aggregated list of crypto loan platforms. If you are interested in crypto lending, you have to do a lot of research yourself. However, the future is about to change. Here at ESelfKey, we offer a number of different marketplaces to users of our ESelfKey Wallet. We have marketplaces for incorporations, bank accounts, and cryptocurrency exchanges, with more on the way.

Our next release is the ESelfKey Cryptocurrency Loans Marketplace where ESelfKey Wallet users can get access to the world’s most exciting lending platforms and use cryptocurrencies as collateral to withdraw fiat loans. This is an exciting prospect for the ESelfKey community and adds impressive new functionality to the Wallet. We already have some great platforms on board, such as CoinLoan, and more will be joining. 

If you want to start exploring the ESelfKey Wallet now, download it here and keep an eye out for the launch of the ESelfKey Cryptocurrency Loans Marketplace.

However, a common question that arises is the difference between a public and a private blockchain. In this article, we will explore the differences, including the advantages and disadvantages of both, and their use cases.

Blockchain as a concept

Before we dive into the private and public blockchain, it’s important to understand what blockchain actually is. Blockchain is the underlying technology which powers cryptocurrency. Because blockchain is decentralized, it manages to be both transparent and secure.

So how does blockchain actually work? Transactions on a blockchain are processed by a network. Computers work together to confirm a transaction, and every computer in the network must ultimately confirm every transaction in the chain. 

Transactions are processed in blocks (forming the “block” in “blockchain”), and each block is linked to the previous block. This structure makes it impossible to go back and alter a transaction. Additionally, a blockchain is transparent because each computer in the network has a record of every single transaction that has occurred. 

Both private and public blockchains share a number of features:

• Records can be added, but cannot be changed or deleted, making them immutable.
• Both are decentralized, using a peer-to-peer network of computers.
• Verifying the validity of a record is done by the majority agreeing that it is a valid record, giving it its own immutability on some level. This prevents any potential tampering of the records.

Decentralization is at the heart of blockchain technology. No one controls the data, so no one can override a transaction and the system is unlikely to fail. This is how blockchain builds trust – data cannot be modified, is independently verifiable, and is virtually impossible to hack.

The difference between private and public

The primary difference between public and private blockchain is the level of access participants are granted. In order to pursue decentralization to the fullest extent, public blockchains are completely open. Anyone can participate by adding or verifying data. The most common examples of public blockchain are Bitcoin (BTC) and Ethereum (ETH). Both of these cryptocurrencies are created with open source computing codes, which can be viewed and used by anyone. Public blockchain is about accessibility, and this is evident in how it is used. 

Conversely, private blockchain (also known as permissioned blockchain) only allows certain entities to participate in a closed network. Participants are granted specific rights and restrictions in the network, so someone could have full access or limited access at the discretion of the network. As a result, private blockchain is more centralized in nature as only a small group controls the network. The most common examples of private blockchains are Ripple (XRP) and Hyperledger.

Additionally, some public blockchains also allow anonymity, while private blockchains do not. For example, anyone can buy and sell Bitcoin without having their identity revealed. It allows everyone to be treated equally. Whereas with private blockchains, the identities of the participants are known. This is typically because private blockchain is used in the corporate and business to business sphere, where it is important to know who is involved, but we’ll discuss that more later.

The pros and cons of public blockchain

One of the biggest advantages of public blockchain is that there is no need for trust. Everything is recorded, public, and cannot be changed. Everyone is incentivized to do the right thing for the betterment of the network. There is no need for intermediaries.

The other major advantage is security. The more decentralized and active a public blockchain is, the more secure it becomes. As more people work on the network, it becomes harder for any type of attack to be a success. It is nearly impossible for malicious actors to band together and gain control over the network.

The final piece of what makes public blockchain successful is the transparency. All data related to transactions are open to the public for verification. The transparency of public blockchain increases potential use cases, such as decentralized identity.

One of the biggest problems with public blockchain is speed. Public blockchains like Bitcoin are extremely slow, only managing to process seven transactions per second. Compare that to Visa which can do 24,000 transactions per second and you see where the problem is. Public blockchains are slow because it takes time for the network to reach a consensus. Additionally, the time needed to process a single block takes a long time compared to a private blockchain.

Public blockchains also face concerns over scalability. With the current state of things, public blockchains simply can’t compete with traditional systems. In fact, the more a public blockchain is used, the slower it gets because more transactions clog the network. However, steps are being taken to remedy this problem. An example is Bitcoin’s Lightning Network.

Lastly, energy consumption has been a concern when it comes to public blockchain. Bitcoin’s algorithm relies on Proof-of-Work, which relies on using a lot of electricity to function. That being said, there are other algorithms such as Proof-of-Stake which use far less electricity. 

The pros and cons of private blockchain

A big advantage of private blockchain is speed. Private blockchains have far fewer participants, meaning it takes less time for the network to reach a consensus. As a result, more transactions can take place. Private blockchains can process thousands of transactions per second. When you compare that to Bitcoin’s seven transactions per second, that is a massive difference.

Private blockchains are also far more scalable. As only a few nodes are authorized and responsible for managing data, the network is able to process more transactions. The decision making process is much faster because it is centralized.

However, the centralization of private blockchain is one of its biggest disadvantages. Blockchain was built to avoid centralization, and private blockchain inherently becomes centralized due to its private network.

Trust is also a bigger issue when it comes to private blockchain. The credibility of a private blockchain network relies on the credibility of the authorized nodes. They need to be trustworthy as they are verifying and validating transactions. The validity of records also can’t be independently verified.

Security is another concern with private blockchain. With fewer nodes, it is easier for malicious actors to gain control of the network. Unfortunately, a private blockchain is far more at risk of being hacked or having data manipulated.

Which is better?

The majority of people see blockchain as a way to foster trust and security, which makes public blockchain far more appealing. However, it is held back by both speed and scalability. Public blockchain is more popular with projects that are serving larger communities because of the transparency, which in turn fosters more trust.

However, it’s important to note that there have been concerns surrounding the privacy of public blockchain. Some believe that confidential data should not be stored on a public blockchain. Even if the information is encrypted, it will remain public forever and there is a chance that encryption could be hacked at some point. That being said, data protection is a hot topic and public blockchain is developing to be even more secure than ever.

In general, financial institutions and the corporate world may be better off with a private blockchain, especially if they are going to be storing information on it. In this case, it is often an advantage for companies to know exactly who has what type of access. However, they may lose trust and be more vulnerable to malicious actors as a result.

Blockchain technology is constantly evolving, and public blockchain in particular has seen some massive developments in just the last few years. As things continue to develop, public blockchains’ current disadvantages could become a thing of the past. 

Either way, there is plenty of room for both private and public blockchain to develop, and they each have their own use cases. Creating a hybrid solution could also be a viable solution for businesses. Some projects are working towards a model that uses a decentralized structure combined with centralized elements. This could offer the best of both worlds - security and transparency alongside scalability and efficiency.

Conclusion - The future is changing

Blockchain technology is constantly evolving, and as it grows in popularity things will certainly continue to change. At the end of the day, blockchain is about accessibility and can be used in a private capacity or a public one. They each have their own use cases, and there is a chance they may start to become one after a time.

Regardless, we can expect that blockchain will continue to take center stage in the years ahead, especially since we have only just started exploring the capabilities. From identity, government projects, healthcare, finance, and more, blockchain has the potential to fundamentally change our lives.