Inlock earns interest through its institutional partners and the lending services within the platform. We serve a role of intermediary between clients and partners, and since the value of assets under management is close to $100 million, we are able to negotiate high-interest deals.

The crypto market is typically volatile and has a high turnover. Services running on the crypto market need liquidity, either for leveraged trades or to set up day-to-day operations, so they have the possibility to withdraw capital from Inlock in exchange for depositing their other crypto assets.

They need different kinds of liquidity in different situations, despite the fact that they already have collateral. For example, in a scenario where they hold Ethereum on their deposit account but they need bitcoin, they can deposit their Ethereum to Inlock and then use it as collateral to borrow bitcoin from us.

In all cases, the loans are over-secured and short-term (this ensures that Inlock can remain liquid to its clients), and as institutional players need liquidity for day-to-day operations, they also pay higher interest rates.

If the partner is unable to repay the loan, Inlock has the right to sell the collateral, for which the technical conditions are well established.

How does Inlock invest its clients’ funds?

Inlock’s main objective is loan intermediation, therefore acts as an intermediary for clients who deposit their crypto assets and institutional players with high liquidity demand. In all cases, Inlock stores and manages the crypto funds in the form in which they are provided by the client. Deposits are not invested in other products, companies, real estate or property.

How can Inlock produce higher interest rates than banks?

Completely different business processes are behind Inlock’s business model and banks’ interest rates that are financed by deposit-taking operations. The main purpose of commercial banks’ deposit-taking is to increase liquidity, which is necessary to increase the lending volume. However, it is important to note that commercial banks do not allocate deposits as loans. The interest rate policy of commercial banks is mainly determined by their own business model and the central bank base rate via the monetary policy of the central bank.

The Inlock platform exclusively deals with cryptocurrencies and their liquidity intermediation. The liquidity is used by institutional players who need it to achieve higher market profits, so of course it is worth them paying higher market interest rates.

Why do they borrow from Inlock when they could get a much cheaper loan from banks?

Inlock’s clients are directly involved in the cryptoasset business and they require cryptocurrencies to operate. They could, of course, take out cheap loans from the banking system and use them to buy cryptocurrencies to run their business, but in this case they would be exposed to significant exchange rate risks, as the loan would be obtained and repaid in a national currency. The other important reason is that the banking system is not yet explicitly open to using Bitcoin and other cryptocurrencies as collateral, and industry players have plenty of that, so it’s simply more convenient for them to borrow cryptocurrency that they are short of, backed by cryptocurrency that they have. For all these reasons, these players are also willing to pay higher interest rates, this still takes a smaller risk than if they had to raise funds from the traditional banking system.

Why do the interest rates on various cryptocurrencies differ and what is the criteria for deciding what percentage can be earned on each asset?

This depends entirely on market supply and demand. At the moment, the biggest demand is for stablecoins and Bitcoin, as these are the most traded currencies on the exchanges. The interest rate we offer reflects market demand in all cases.

How can Inlock provide stable interest rates when crypto assets are so volatile?

It is very important for us to provide predictable and measurable returns to our clients. We aim to ensure that a significant proportion of the client assets we manage are constantly invested. Although the return on allocations always heavily depends on the current supply and demand, we are able to maintain average returns on a consistent basis in line with the assets under management.

Our lending team never, under any circumstances, speculates on future market movements, we do not calculate the prices of future rises or falls, which is why we reserve the right to adjust interest rates slightly from week to week, reflecting the increase or decrease in the profit realised on external allocations.