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Lending/borrowing BTC is only really useful for explicitly shorting BTC as in margin trading. It is otherwise too risky to borrow BTC, your loan could end up costing way more than a loan denominated in a less volatile asset. For example, imagine borrowing 1 BTC in March 2020 and expecting to pay back the loan by the end of the year... you'd receive $4000 in value at the time of the loan and by the end of the year have to pay back over $50,000 in value. Not a very good deal for the borrower.
Loans collateralized by BTC give borrowers the ability to unlock the value of their BTC without having to sell. Because the loans are over-collateralized, they can have lower interest rates than unsecured credit. It does of course require the borrower to already have assets in the form of BTC, so would not be appropriate for people who have very little in savings. But for people who hold BTC and want to access some of that value without having to sell, and are willing to maintain a sufficient collateral ratio to avoid liquidation, I think it is a good option.
There is a platform called Sovryn that offers both options, borrowing BTC, and borrowing using BTC as collateral: https://alpha.sovryn.app
You can look there and see the terms and interest rates and see what makes sense for your situation.
It's also a term in the social sciences that has about 150 years of prior art; or perhaps 2500 years, depending on how you look at it.