Blockchain lending platforms are offering an average annual percentage rate (APR) of 9.65% on loans, which is lower than the 11.5% average APR for traditional personal loans. After declining in 2022, tokenized lending on the blockchain has regained strength, with $582 million in active loans outstanding as of 2023 – a 128% yearly increase. Though below its mid-2022 peak of $1.5 billion, this rebound signals borrowers may be turning to decentralized finance as interest rates rise within mainstream banking.
At nearly 10%, average blockchain loan APRs seem attractive next to the 5.75% to 11.91% APRs for small business bank loans. Also, blockchain loans are large, averaging around $2.5 million across over 1,800 deals totaling $4.5 billion. For example, UK firm Fasanara Capital recently took out a $38.3 million blockchain loan below 7% APR from Clearpool.
Ethereum’s Centrifuge leads protocols with a 43% market share and $255 million in loans, up 203% since early 2023. Stablecoins often facilitate cross-sector blockchain loans in areas like consumer goods, cars, fintech, and real estate. However, at $506 million total, decentralized lending remains just 0.3% of the $1.6 trillion private credit market. And despite rapid growth, it still poses risks like bankruptcy and security issues that borrowers should weigh.
