Blockchain Based Lending Surges for Bitcoin and Ethereum Holders

The prominence of the blockchain has given rise to new options in lending across the globe. Traditionally, lending has been largely dominated by bank and other non-bank institutions.

With the blockchain, the avenues to explore lending just got broadened a bit further. If you are a holder of Bitcoin and Ethereum, you will have at least two options you can use on the blockchain-based lending scene apart from the growing number of new entrants.

How Blockchain-Based Lending Works

The options in lending on the blockchain vary from platform to platform. The difference lies in the algorithm used by platform in question as this also determines the applicable terms and conditions.

Major Crypto-Backed Lending Platforms

SALT is regarded as the first crypto-assets backed decentralized lending platform. A borrower can access loans on the platform by providing a crypto that is 200 percent of the expected loan. The provided crypto therefore serves as the collateral.

The interest rate charged by SALT varies from 12 to 20 percent. The choice of crypto accepted here has to be Bitcoin or Ethereum.

Another important distinction is the fact that you need to buy SALT tokens to be able to use the platform. This gives you access to the features available depending on your subscription of choice.

When a lender on the platform agrees to your terms, SALT initiates a smart contract for the transaction. The requested amount will be sent to your bank account. Depending on the terms of the loan, after complete payment by installments or once-off, you will regain access to your deposited coins or tokens.

The major point to note is that when your deposited crypto surges in value, you can return to the platform to access more loans corresponding to the crypto price surge differential. If the crypto asset value crashes, the borrower has to account for the Loan to Value Threshold. This means that additional collateral must be brought or the loan will be liquidated at this stage to prevent any loss to the lender.

The limitation on the SALT platform is that it favors US residents more and a global coverage is yet in the works.

Here is the CoinMarkeCap summary of  recent trading statistics for SALT:

Ethereum-Based Lending

The earliest lending option on the blockchain was built around the smart-contract capability of the Ethereum blockchain.  ETHLEND got renowned as the first Ethereum-backed decentralized lending platform.

This blockchain lending platform is truly global in outlook and is fully built to thrive on ERC20 tokens. A borrower will need to provide ERC20 tokens as a collateral so that access to liquidity can be provided. In return, the lender will provide Ethereum tokens which the borrower can monetize as they desire.

One feature here is that no bank accounts are involved as your Ethereum wallet address is all you need to access the loan on the platform. With regards to the terms and conditions, the lender and the borrower have to agree on this, and the platform will issue a smart contract to consummate this.

In terms of access to the platform, no membership or pre-access fees has to be paid here unlike SALT.  The lender to borrower feature of ETHLEND makes it more prone to risk in case of price drops. If a borrower’s collateral loses market value, it could mean a loss to the lender. However, since, most lenders could be people with no immediate need for liquidity; they might have the patience to wait for a new cycle of price surge to arise.

Here is the CoinMarkeCap summary of the recent trading statistics for ETHLend:

As the crypto market deepens, there is a chance that a clear idea of trusted assets will emerge globally. At present, most people prefer to stick to the Top 20 listed coins and tokens by market value as probable sure bets. Certainty in the market will allow for the admission of more crypto options as acceptable collateral.