This year, blockchain-based lending is experiencing a significant revival, with the value of active tokenized private credit reaching $582 million. This represents a remarkable 128% increase from the previous year.
Although this figure is still below the peak of $1.5 billion seen in June 2022, as reported by RWA.xyz, a tracker of real-world asset loans, the rebound suggests a growing interest in blockchain alternatives to traditional financing, especially in light of recent hikes in interest rates.
As of now, the average percentage rate for blockchain-based credit protocols stands at 9.64%, in comparison to small business bank loan interest rates ranging from 5.75% to 11.91%, as per a December 1 report by NerdWallet.
The scale of loans in the blockchain sector is considerable. RWA.xyz has recorded $4.5 billion in blockchain-based loans across 1,804 transactions, averaging around $2.5 million per loan.
A notable borrower is Fasanara Capital, a UK-based asset management firm, which secured a $38.3 million loan from Clearpool at a base APY below 7%.
Divibank, a Brazilian bank, is also participating in this market. Centrifuge, an Ethereum-based platform, currently dominates over 43% of the active loans market with $255 million, a 203% increase from $84 million at the beginning of 2023.
Goldfinch and Maple follow as the second and third largest blockchain credit protocols, with active loans of $143 million and $103 million, respectively.
The primary cryptocurrencies facilitating these loans are the US dollar-pegged stablecoins Tether (USDT), USD Coin (USDC), and Dai (DAI). The largest sectors seeking blockchain-based loans are consumer ($197.7 million) and automotive ($186.8 million), followed by fintech, real estate, carbon credit, and cryptocurrency trading.
Despite its growth, the active loan market in blockchain, valued at $506 million, is still only about 0.3% the size of the traditional private credit market, which is worth $1.6 trillion.
However, borrowers considering blockchain-based protocols should be aware of the risks involved, including potential insolvency, issues with collateralization, smart contract vulnerabilities, and other security concerns.
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