Blockchain-based private lending is an arrangement that uses blockchain technology to facilitate lending processes for web3 purposes. This setting employs blockchain technology through processes like smart contracts, security measures, transparency, tokenization, and decentralization to actualize this feat.
Compared to traditional lending processes, Blockchain-based private loans can provide various benefits such as increased efficiency, reduced costs, transparency, and improved security.
Over the years, there have been ups and downs in how much went out from this sector to firms which the bull and bear of the market influenced. Though there was not a readily available conclusion as to how much was transacted in some years as the sector was still in its very nursery stage, some like DeFi, have seen rapid growth in their TVL (Total Value Locked).
Blockchain-powered private loans jump by over 55% to $581m in 2023
According to data from RWA.xyz, the Blockchain-powered private sector has seen a whopping 55% surge in loans despite the high-interest-rate environment, reaching approx 581.6m by December 18, 2023.
While this figure is below the peak of nearly $1.5 billion in June 2022, it represents a noteworthy shift as the total loan value surpassed the $4.5 billion mark. Notably, these figures are dwarfed by the traditional lending sector with a value of over $1.6 trillion already.
Above, there are nine RWA protocols with active loans. Centrifuge leads in active value, boasting over $255 million in active loans and a total loan value exceeding $492 million, according to RWA.xyz data.
Big names in the crypto are getting involved in blockchain-based private lending too. For example, Coinbase Asset Management has introduced something called Project Diamond. This new offering uses Ethereum’s Base, which helps make things faster, and it includes services from Coinbase Prime and a crypto wallet from web3, along with Circle’s USDC stablecoin.
Right now, Project Diamond is only available to institutional users outside the U.S. Its launch comes at a time when there’s a big race to bring traditional financial stuff, like bonds and credit, into blockchain systems. This process, called tokenization, is thought to make things quicker, cheaper, and clearer when dealing with real-world assets.
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