Blockchain-based lending has been experiencing a resurgence in momentum throughout 2023, witnessing a substantial surge in the value of active tokenized private credit. The current value stands at an impressive $582 million, marking an extraordinary 128% increase compared to the figures from a year ago.
While this rebound is still a fair distance from its peak of $1.5 billion noted in June 2022, the resurgence suggests that individuals seeking loans are turning towards traditional finance in light of recent loan growth. This insight comes from RWA.xyz, a real-world asset lending tracker that offers a blockchain-based alternative for home interest rates.
According to a report from NerdWallet dated December 1, blockchain-based credit protocols are currently offering an average interest rate of 9.64%. This stands in contrast to small business bank loan rates, which range from 5.75% to 11.91%, showcasing the competitive yet distinct interest rate landscape.
The size of loans being sought is noteworthy, with RWA.xyz tracking $4.5 billion in blockchain-based loans across 1,804 transactions. This equates to an average loan size of approximately $2.5 million.
Notably, UK asset manager Fasanara Capital secured a $38.3 million loan from Clearpool at an annual yield (APY) of less than 7%, demonstrating one of the most significant recent loan endeavors. Among the active lending market, Ethereum-based Centrifuge holds over 43% market share at $255 million, experiencing a 203% surge from $84 million at the beginning of 2023.
Goldfinch and Maple are the second and third largest blockchain credit protocols, showcasing $143 million and $103 million in active loans, respectively. Tether, USDC, and Dai, which are USD-pegged stablecoins, are the primary cryptocurrencies used to facilitate these loans.
The data reveals that the top seekers of blockchain-based loans come from various industries, including consumer ($197.7 million), automotive ($186.8 million), fintech, real estate, carbon credits, and cryptocurrency trading. Despite the recent upsurge, the $506 million active loan market represents merely about 0.3% of the traditional private credit market's size, which stands at $1.6 trillion.
However, seeking a loan from a blockchain-based protocol carries inherent risks that borrowers need to consider carefully. Risks encompass factors such as bankruptcy, mortgage, smart contract vulnerabilities, and other security-related concerns that should be thoroughly evaluated before opting for such loans.
