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3 KEY Lessons Learnt From The Centralised Lending Platform Crash


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It turns out that the high yields offered by centralised platforms are too good to be true!

During this bear market, we are experiencing an unprecedented number of platforms becoming solvent, or even bankrupt.

Amidst all the chaos, here are some key takeaways as we continue navigating the market:

When you deposit your funds into these platforms, they will usually use these methods to generate a high yield:


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  • Lending out to institutions
  • Depositing into DeFi protocols
  • Using your crypto for staking and mining

However, they are not fully transparent on who they lend to, or what DeFi protocols they use.

As they aim to continue providing high yields, they may start performing riskier moves, which could result in a loss of funds.

One such incident occurred when Celsius’ funds were placed in DeFi protocol BadgerDAO.

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This protocol was hacked, and Celsius reportedly lost $50 million from the hack.

If we had better transparency on where our funds are being loaned out to, it may help us to make more informed decisions on whether we want to deposit our funds in these platforms.

This is because some of the strategies that these platforms use may be much higher than our risk tolerance!

Some companies like Nexo have been rather transparent about where their funds are.

Meanwhile, Finblox has also started to share where its funds are being allocated.

3 KEY Lessons Learnt From The Centralised Lending Platform Crash

With the turmoil caused by these lending platforms, regulators have now stepped in as well.

Hopefully, this will mean greater transparency required by these lending platforms, which gives us more information before we decide to deposit our funds with them.

When we’re comparing 2 different platforms to deposit our funds, one of the ‘dealbreakers’ may be the yield that both platforms offer.

We may tend to deposit our funds with the platform that offers a higher yield!

However, this current crash is a painful lesson where we should be considering the sustainability of the yield that they offer as well.

Celsius has been accused of being a Ponzi scheme, where a class action lawsuit has been filed against them.

The lawsuit alleges that Celsius uses the high yields to attract more users to the platform, so that they are able to use these fresh funds to pay back the initial depositers.

Another example was Anchor Protocol, which promised a 19% yield on UST by just depositing your funds.

While this yield was super attractive, it turned out to be unsustainable the amount that the protocol was earning via interest was not high enough to pay the depositors.

While high yields are always welcome, it can be extremely painful when the entire system collapses!

You can find out more about Terra’s crash in our analysis here.

Placing your funds in centralised platforms will mean that you do not actually own your crypto.

This gives you very little control over your funds, as seen when these platforms have halted withdrawals.

The safest way would be to store your cryptocurrencies in a non-custodial wallet, where you will have access to your private keys.

One such wallet you can consider is our Krystal mobile app, where you can store assets on 10 different blockchains (including Ethereum, Polygon, Solana and Klaytn).

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Cons of a non-custodial wallet

While having full control over your funds is safer, there are still some considerations to keep in mind:

Since your funds are not with a centralised entity, you will have to take full responsibility for the safety of your funds.

An important thing is to ensure that your seed phrase and private key are secure, as these will give anyone access to all of your funds!

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It is extremely important that you do not share this phrase with anyone, as this may result in you losing all of your funds!

Earning passive income

If you would like to earn passive income on your idle crypto assets, there are a variety of ways you can do so:

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It can be quite overwhelming to find the best DeFi lending platforms to lend out your crypto. We’ve simplified the process by integrating with trusted DeFi protocols, and you can access them on the ‘Earn’ tab on our platform:

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This feature is only available for Ethereum, BSC and Polygon, but do stay tuned as we release it on more networks soon!

The bear market has brought lots of turmoil, especially for these centralised lending platforms.

This may result in many firms being either merged or acquired as the crypto industry starts to consolidate.

It also serves as a painful reminder to us that if yields are too good to be true, it may just be the case!

Start your journey NOW on Desktop, iOS or Android


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