When obtaining a loan from any crypto lending platform, the safety of your crypto collateral is an important factor you should consider. The reason is that, at the end of the day, you don’t want to come back only to discover your collateral funds are gone due to the poor security of the crypto lending platform.
CoinRabbit takes the security of collateral funds very seriously so users can be reassured that when they obtain a crypto loan, the moment they’re ready for repayment, they’ll get their crypto asset that was pledged as collateral back without stories.
We’ll start by explaining in simple terms (simple enough for even a 7-year-old to understand) what cryptocurrency collateral is and why the security of your cryptocurrency collateral is very important to ensure you don’t get ripped off while trying to obtain a collateralized crypto loan.
What’s a crypto collateral?
When you walk into any bank and you ask them for a loan and you state the purpose for obtaining the loan (whether for your business or any other purpose), what’s the first thing they’d ask you for? That’s right! – “Where is your collateral?”
The collateral in question can be anything of value (house, car, etc.) and the reason they require collateral is, in case something happens with the loan you obtained, they have the right to take ownership of that asset you pledged as collateral.
The same applies to cryptocurrency loans, but since cryptocurrency is known to be volatile, the loans have to be overcollateralized – meaning the value of your collateral must be higher than that of the loan you want to obtain.
The practice of over-collateralization of crypto loans is to give the lender insurance that if the market experiences a dip, the crypto asset of the borrower can be liquidated to create a balance based on the loan-to-value (LTV) ratio.
CoinRabbit has considered this factor, and to reduce the risk of liquidation, the loan-to-value (LTV) ratio is pegged at 50% so that the liquidation price is low. So if the price of your crypto asset goes as low as even 25%, it’s still on the safe side.
Why is security of collateral so important?
Now that you understand the idea behind crypto collateral, before obtaining your loan, be sure to confirm that your crypto asset would be deposited in good hands.
The security of your cryptocurrency collateral should be your primary focus because you do not want to pledge your asset to a lending platform that’s susceptible to hacking.
Asides from hacking, you do not want a situation whereby after pledging twice the value of the loan you obtained, you’re unable to retrieve your crypto asset because it’s one story after another – a typical sign of a scammy platform.
How does Coin Rabbit secure crypto assets used for collateral?
CoinRabbit is a crypto lending platform that grants you access to instant crypto loans and has your best interest at heart. With CoinRabbit, you can be assured that your crypto collateral is completely secured.
To provide top-level security, our partner ChangeNOW has been put in charge to guarantee the safety of all collateral funds. The risk control system checks the wallets’ balances every second and the private keys for all the wallets are renewed every month.
And to prevent any form of hack, the private keys are placed in secure storage that can be accessed only by numerous IP addresses and through a VPN connection.
With this, you wouldn’t have to worry about whether or not you’d get your crypto assets back. As long as you have the required amount needed for repayment of the loan, your crypto collateral would be released.
Now that you understand the role the security of your crypto collateral plays and you’ve discovered how fast and secure it is to obtain a crypto loan from CoinRabbit, it’s time to get your loan and enjoy the benefits your crypto assets have to offer.