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Even though only 11% of investors in the US have crypto, the sector is growing at a rapid rate. From Bitcoin ATMs to IRS scrutiny, cryptocurrency is pushing into the mainstream.
Even with the current volatility, many crypto investors are taking the long view. They are looking for a safe place to park most or all of their cryptocurrency and ride out the volatile cycles. That's where centralized finance platforms come into play.
Many new crypto savings account platforms are opening up to fill that need. Let's look at the benefits of a crypto savings account and compare two popular options, Hodlnaut vs. CoinLoan.
Benefits of Cryptocurrency Savings Accounts
Cryptocurrency represents a store of value in the marketplace even though it is still evolving. It makes sense that crypto investors are interested in opportunities to optimize their investment. Just like cash under a mattress, crypto sitting in a hardware wallet doesn't earn interest.
Crypto savings accounts are one answer. Crypto savings accounts pay interest either in US dollars interest rates or crypto-based interest rates.
These accounts provide a higher rate of return compared to traditional banks dealing only in US dollar currency. Of course, the FDIC does not cover cryptocurrency savings accounts, so investors should weigh the risk.
Not only can crypto investors earn interest, but there can also be some tax advantages. When you sell your crypto or exchange it for another cryptocurrency, those actions create a taxable event. You can borrow money against your cryptocurrency savings account and not create a taxable event.
Although online platforms do have some exposure to hacking risks, putting your crypto in a savings account may be safer than keeping it in a physical cold storage wallet. If you lose your wallet, there is no way to recover your crypto investments.
Record keeping is vital in crypto investing. Simplified reporting is one benefit of these platforms. Clients can download spreadsheets of all their crypto transactions on the platforms.
Let's explore the difference between Hodlnaut and CoinLoan, two centralized finance platforms for putting your cryptocurrency to work for you.
What Is Hodlnaut?
Hodlnaut provides financial services to individual cryptocurrency investors. Founded in 2019, Hodlnaut is a venture-backed company based in Singapore with $250 million assets under management (AUM).
Hodlnaut offers interest savings accounts for six different digital assets. Those assets are BTC, DAI, ETH, USDC, USDT, WBTC.
With Hodlnaut, a client begins earning compound interest on cryptocurrency deposits immediately after opening their account. The platform calculates interest daily and credits clients' accounts every Monday.
Hodlnaut pays interest in one of two ways. First, in-kind interest with the cryptocurrency on the existing deposit. Secondly, a "preferred interest" payout allows you to earn interest in another type of crypto or asset class.
Clients receive accrued interest on a weekly basis. Hodlnaut's tiered interest rate schedule offers some of the highest interest rates in the market on initial asset deposits. There are no minimum deposits or lock-in periods to start earning interest.
Fixed Term Loan
Hodlnaut also offers a VIP fixed-term loan to increase stability in passive income on crypto assets. Clients need to deposit an equivalent of 25 BTC and agree to lock in their cryptocurrency for one, three, or six months. The deposit funds may not be used as collateral while they are locked in.
Hodlnaut offers a Token Swap feature where clients on the platform can instantly swap one currency for another.
Rates and Fees
The number of coins deposited determines Hodlnaut's effective annual tiered interest rates. Different assets have different interest rates. Below are the starting APY rates. CoinLoan's rates are added in parentheses for comparison.
BTC 7.46% (CoinLoan 7.2%)
WBTC 7.46% (7.2%)
ETH 7.46% (7.2%)
USDC 12.73% (12.3%)
USDT 12.73% (12.3%)
There are no fees for deposits, and withdrawal fees vary by currency. The platform adjusts withdrawal fees according to Blockchain conditions.
There also are no fees for using the Token Swap feature.
The Singapore Fintech Association has certified Hodlnaut as a Fintech company, an accreditation recognized by the MAS (Monetary Authority of Singapore). Hodlnaut meets the requirements for a digital payment token license. They have also applied for the Singapore standard payment institution license.
Hodlnaut enforces strict capital requirements for borrowing funds. In case of default, the company states it will reimburse clients from their equity funds. In January 2021, Crowe Singapore conducted a financial attestation confirming US 106 million AUM.
Hodlnaut's platform uses secure Amazon Web Services (AWS) infrastructure with SSL encrypted encryption. Security safeguards include algorithms for password hashing, two-factor authentication (2FA) for account transactions.
Clients must verify through a mandatory Know Your Customer (KYC) customer process to access their accounts.
What Is CoinLoan?
CoinLoan was founded in 2017 as a licensed crypto learning platform based in Estonia. As a full-featured platform, clients can invest, borrow and trade from among 24 digital assets. You can open an interest account, borrow against your crypto with an instant loan, and buy, sell or swap coins on the crypto exchange.
CoinLoan offers interest savings accounts that allow clients to earn compound interest with a minimum deposit. The interest is accrued daily and deposited on the first day of every month into the account. There are no restrictions on the timing of withdrawals and no lock-ups. There is a withdrawal limit of $500,000 per 24 hours.
CoinLoan is also a crypto lending platform. Clients may use their crypto as collateral to get instant loans. No credit checks or paperwork are required, and clients can borrow up to 70% of the value of their collateral. The length of loans varies from seven days to three years, with a monthly repayment schedule. The system will liquidate part of the collateral to cover any shortfalls.
Another way CoinLoan is different from Hodlnaut is they feature a crypto exchange where members can buy, sell or swap any of the coins featured on the platform. CoinLoan also excepts deposits with Visa and MasterCard, and clients can easily buy BTC, XRP, USDT.
CoinLoan's savings rates range from 3% - 12.7%, depending upon the type of asset. Rates include a 2% staking reward.
There are no deposit fees for cryptocurrency or fiat currency. Liquidation fees are equal to 7% of the liquidated loan collateral. There are no fees for withdrawals on interest account operations.
CoinLoan charges loan origination fees. Clients can pay the borrowing fees with loan currency or the CLT (CoinLoan token), which gives them a 50% discount. Borrowing fees are 1% of the overall loan principal amount.
CoinLoan is licensed as a regulated financial institution under the Estonia financial authority. Their anti-money laundering procedure and KYC comply with European and international standards. Two-factor authorization is required for account actions like resetting passwords and making withdrawals.
Crypto assets are stored in cold multi-signature wallets. Keys are encrypted and geographically distributed in the different bank's safe deposit boxes to provide redundancy. BitGo serves as a qualified custodian for customer assets, with a Lloyd's $100 million insurance policy.
The CoinLoan website details ten security layers they monitor for their CoinLoan platform. One innovative feature is their partnership with white hat hackers to collaborate and analyze their infrastructure for possible vulnerabilities.
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Hodlnaut vs CoinLoan - Which Is Best For You?
Savings account platforms like Hodlnaut and CoinLoan offers some bank-like features for investors who value convenience and transparency. Mainstream interest in cryptocurrency will grow as significant players from traditional finance begin to embrace crypto. In the meantime, a crypto savings account can be a valuable part of the forward-thinking investor's portfolio.
Choosing the right platform for your needs is essential to your peace of mind in the future. This comparison of Hodlnaut vs CoinLoan can get you started. Still have questions? Be sure to check out the rest of our extensive comparisons to help you decide.