Crypto 101ExchangesNews

Can I borrow BTokens on Binance?

Urgent home renovation or taking advantage of a sudden market opportunity are different matters, but they have something in common – both will require more funds. If you have cryptocurrencies that you don’t want to sell in the downturn, though, the solution comes to mind. Meet Binance Loans.

Two words about Binance Loans

Binance Loans allows users to get the funds they need by pledging cryptocurrencies. All you need is to own crypto and be a user of the exchange, and no one will ask for anything else. A credit score or a certificate from your workplace won’t be needed, it only takes a few clicks to get what you want.

Binance loans are shorter than traditional loans, you can borrow funds for 7, 14, 30, 90 and 180 days. The shorter the loan, the lower the interest rate, but the differences are not huge.

The interest rate depends on the currency you choose and the term, but is not exorbitantly high. For example, the annual interest rate on borrowed USDT fluctuates around 4%, BTC 3.5%, and ETH 3%. Less popular currencies will be more expensive – 5% for ALGO or 9% for BAND.

You can borrow funds up to 65% of the value (LTV 65%) of the collateral deposited, so roughly speaking, for every $100 in one currency, you need to lock in about 150 in another. If, due to market changes, the LTV rises to 75%, Binance will ask you to top up your collateral so that the LTV returns to its initial value. If you don’t – your loan will be liquidated when the LTV reaches 83%. You don’t owe Binance anything, but you have just lost your collateral.

If you want to see what the Loan panel looks like, click here.

What is BETH and other BTokens?

All right, but what is the relationship between BTokens and loans, and what are they actually? We will consider this matter using the example of BETH.

As you know, tokens of one ecosystem can be used in another if they are previously “wrapped”. This process usually means issuing a new token on the target blockchain, while securing its value by depositing a “real” coin on the original chain. This is how WBTC works, for example, allowing Bitcoin to be used on DeFi in Ethereum. But what if we wanted to use ETH itself in this way?

The answer is precisely BETH, which is a tokenized version of ETH on the Binance blockchain. The immediate reason for the creation of this token was the introduction of the Ethereum 2.0 network and the associated transition from Proof of Work to Proof of Stake consensus. This caused, on the one hand, a high demand for ETH, necessary to make money from securing the network, and on the other hand, the desire of many investors to participate in this process. Binance decided to enter this segment and give smaller investors a chance to profit as well.

Binance ETH is thus equivalent to ETH and is subject to 1:1 exchange when the next ETH 2.0 update implements sharding. Until then, it can be traded freely. The simplest solution is to leave BETH in a spot wallet and collect the interest due every day, but there are many more options.

Of course, BETH is not the only representative of the BToken family. Others are BBTC, BDOT, BFIL or BWRX, recorded as ERC-20. This allow their wide use on DeFi platforms in the Ethereum ecosystem.

Taking a loan on Binance

The process is trivially easy.

  1. On the Binance platform, we click Finance->Crypto Loans.
  2. We choose the cryptocurrency to borrow and the type of collateral. To be safe, it is worth ensuring that at least one of them is stablecoin, otherwise the exchange rate risk increases significantly.
  3. We specify the term for which we want to take out a loan and click the “Start borrowing now” button.
  4. We are shown a window with the details of the offer. Let’s have a look at the provisions of the loan agreement (rest assured, there is nothing about pledging a kidney) 😉 and we click Confirm.

And that’s it – the requested currency is already in our Spot account. Unfortunately, the value of our collateral disappeared from it – but that was to be expected.

The loan will be repaid automatically and will release our collateral. However, we can repay it early at any time by clicking on the Repay button on the loan page. Note – if we mistakenly repay less than 100% of the loan, even if we have some pennies left, the system will leave a few dollars blocked, which will come back to us when the loan term expires.

Simple, right? Nevertheless, if you still have any questions, take a look at the FAQ.

A brief summary

As you can see, getting a loan on Binance is very easy. However, is it worth the hassle? When can we use these funds more effectively than the crypto we already own? Several scenarios come to mind.

  • We use the potential of BETH. We can use them for staking, on the Binance Launchpool, in the Venus protocol or on PancakeSwap, and each of these possibilities gives us the opportunity to make money. All we need to do is spend some time and use a calculator.
  • We hodl BTC, earn interest. Selling BTC today is not necessarily the best idea. However, instead of keeping it idle in the wallet, we can take a loan against it and then stake it to the platform (USDT gives only 5%, but DOT 20% and NEAR 30% per year).
  • We solve life’s problems. In this view, Binance replaces our bank. We borrow stablecoins, sell for USD, transfer the cash to a bank account. Now we can start, for example, renovation after flooding the apartment, and we will pay back the loan when they pay out the insurance.

A good habit, do not borrow said my grandmother. She was quite right, however, not all loans are equal. Sure, a loan for a vacation or a new car that you can’t afford to keep is a bad idea. However, borrowing for investment purposes or in a state of dire need is another matter entirely.

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