From Nasdaq: 2024-05-06 17:40:43

Cryptocurrency is now widely used, with 220 million global users paying for everything from travel to sports tickets with digital assets. Some are even buying homes using crypto. However, understanding how this works and potential pitfalls is crucial. The use of crypto is becoming mainstream and ubiquitous.

Crypto loans, offered by platforms like Milo, allow users to leverage their crypto assets for real estate investments without selling them. These loans cater to those who believe in long-term asset appreciation or wish to avoid triggering taxable events. The evolving industry offers quick, efficient, and flexible borrowing options, with durations ranging from seconds to perpetuity.

Different types of crypto loan providers fall into two categories: centralized finance (CeFi) and decentralized finance (DeFi). CeFi platforms charge service fees, while DeFi platforms rely on smart contracts to administer loans. Options like Nexo, Aave, and Compound are popular among users with different preferences for long-term loans.

However, drawbacks include operating outside the traditional banking regulatory framework, lacking protections like FDIC insurance. Recent events have underscored the risk borrowers face in situations like bankruptcies, where collateral losses may occur. Decentralized finance carries risks due to automated smart contract execution, requiring caution when using borrow-lend products on-chain.

Read more at NASDAQ.: Can You Use Crypto To Buy a Home?