Gone are the days of surreal interest rates and astronomical yields associated with crypto lending following the majestic collapse of Celsius.
During the bull market, crypto lending has become a popular way of earning passive income with idle crypto by giving loans to users through both centralized and decentralized platforms. However, the market went through a mandatory rite of passage when the TerraUSD (UST) depeg triggered a hemorrhage across lending platforms, forcing them to adopt more sustainable rates to stay in the competition.
After suffering the “crypto winter” in 2022, crypto lending platforms are back on stage —this time with realistic annual percentage yields (APY), more security measures and an overall better user experience. With Celsius being gone, the multibillion-dollar crypto lending market is shared by both CeFi and DeFi players who survived the 2022 onslaught.
This article focuses on the main features, supported assets, interest rates and the security and privacy aspects of two of the prominent centralized crypto lending platforms, Nexo and Ledn.
Main Features
Crypto lending platforms function similarly to how traditional loans work: They bring lenders and borrowers on board, giving yield for lenders who deposit their crypto funds to the platform and providing loans to borrowers in exchange for collateral.
Nexo, a Swiss-based crypto lending platform, differentiates itself by offering a vast selection of crypto assets through its lending and borrowing services. Nexo’s diverse range of services -all accessible through a user-friendly mobile app- enables users to instantly buy or exchange crypto, earn interest with deposited assets, or even request a physical card for crypto-friendly everyday payment thanks to a partnership with MasterCard.
With its tiered loyalty system tied to the NEXO token, the platform helps users get better interest rates the more they use its services. Nexo was founded in 2018, making it one of the oldest crypto lending platforms still operational. Boasting over 6 million users worldwide, Nexo operates in 200 jurisdictions worldwide, with 60+ cryptocurrencies available on the platform. It has strategic partnerships with a number of companies from the crypto and Web3 landscape, including Bakkt, Ledger, Paxos, Fireblocks and Circle.
Canada-based Ledn, also founded in 2018, makes its mark in the crypto lending game by primarily focusing on major cryptocurrencies and stablecoins. The platform is mainly known for Bitcoin-backed loans, where users can get USD by depositing BTC. It also offers interest for a limited number of crypto and stablecoins. The platform is backed by prominent investors, including 10T Holdings, Coinbase and Kingsway.
Account Types
Ledn features two different types of accounts for users. Ledn Growth account offers interest with up to 8.5% APY. Assets held in Growth accounts are ringfenced, meaning it’s financially separated from Ledn operations and only exposed to counterparties that generate the interest.
Ledn also offers a Transaction account, which is more focused on adding and withdrawing assets for other Ledn products, including Loans, Trade and transfers. It doesn’t bear any interest, and the assets are primarily held in cold storage. Ledn users can switch funds between Growth and Transaction accounts at any time.
Nexo lets users manage their funds with Nexo Wallet, a Web3 wallet with all the basic functionality of noncustodial digital asset storage. Aside from sending, receiving and managing crypto funds, Nexo Wallet also operates as the Web3 identity of a user for other blockchain-based dApps.
Along with the Nexo Wallet, there’s also the Nexo app, where the actual lending and interest features become available. It’s an all-in-one solution for users to lend and earn interest with automatic daily compound. A wide range of crypto assets is available on the Nexo app, with tiered interest rates going up to 16%.
Supported Assets
Nexo takes a win home when it comes to the diversity of supported assets. Both lenders and borrowers can use tens of crypto and fiat assets on the platform. Among 37 supported assets are the major cryptocurrencies, including Bitcoin, Ether, XRP, BNB and the platform’s own Nexo token. Users can also pick from major stablecoins such as USDT, USDC and BUSD, as well as fiat currencies, including USD, GBP and EUR, to generate interest.
Ledn takes a minimalistic approach in terms of supported assets by supporting Bitcoin, USDC and USDT. The platform only recently introduced an Ether Growth account in late September, raising the number of supported crypto assets to four.
Interest Rates
When it comes to crypto lending, interest rates make or break a platform. A harsh example was Celsius, which collapsed after promising unrealistic annual percentage yields.
As of December 4th, 2023, Ledn Growth accounts get 1% APY for Bitcoin and 2% APY for Ether, according to the official website. The crypto lending platform recently started offering 8.5% APY for the supported stablecoins —USDT and USDC.
Nexo presents more diverse options for users, starting with FLEX terms, where assets are unlocked for trading, selling or withdrawing anytime. If users lock their assets on the platform, agreeing on “fixed terms” of Nexo, they earn additional interest.
For stablecoins, the Base tier interest rates on Nexo start from 8-9%, with USDT holders getting up to 12%, and USDC terms enable a maximum interest of 10%. Bitcoin generates 3% (4% on fixed terms), and Ether offers 4% (5% on fixed terms).
The platform has a tiered list, going up to 16% for most assets on the Platinum tier. A full breakdown of Nexo interest rates can be found on the official page.
Security and Privacy
Crypto lending involves a lot of trust, especially after the Celsius crash, to operate effectively. Nexo outperforms the majority of the competition by upholding rigorous security and privacy standards, as implied by the platform’s SOC 2 Type 2 Compliance certification.
The audit, which focuses on addressing risks related to data handling and access, was carried out by major compliance and security partner A-LIGN, earning Nexo an American Institute of Certified Public Accountants (AICPA) Certificate. In simpler terms, the certificate means that Nexo is doing top work when it comes to protecting the sensitive information of users.
Custodial assets on Nexo are insured by Ledger Vault and the US-based fintech Bakkt. Aside from insurance, the platform ensures the safety of users by over-collateralization of assets, top-notch risk management and a comprehensive portfolio of licenses for maximum regulatory compliance.
Ledn’s main premise of security comes from supporting only four main types of cryptocurrencies, minimizing the “attack vector” in a sense. The platform works with institutional partners to check each borrower’s financial position. The official website says that Ledn doesn’t store client data on local servers, storing them in private networks instead.
While both platforms release periodical Proof-of-Reserve attestations, Nexo goes one step ahead with real-time PoR attestations in partnership with global accountant Moore.
Conclusion
Both Nexo and Ledn went through the ups and downs of the crypto lending market, and it’s clear that they speak for different audiences. Ledn offers a minimalistic user experience with only four supported crypto assets and a basic set of interest offerings.
Nexo, on the other hand, features the full range of crypto and fiat currencies and goes to great lengths to ensure an airtight infrastructure to keep users’ assets and personal information safe and secure. It also offers more utilities with the Exchange function and the Nexo Card, opening up the possibilities of using cryptocurrencies in everyday payments.
As competition brews between CeFi and DeFi lending in the crypto ecosystem, centralized platforms like Nexo and Ledn play the compliance game, winning back the users’ trust with their security measures and simplistic user experience.
