After digital currency and smart contracts, crypto lending is the new revolution on Blockchain. In a world dominated by a few, the Blockchain technology aims to decentralise, where it is now aiming to decentralise the traditional banking system. “The traditional banking institutions will be challenged by agile companies with faster, cheaper and more secure services.” SALT, WeTrust and ETHLend are the three platforms where different banking activities can be carried out on the blockchain. These activities include buying insurance, starting savings, peer to peer lending and borrowing, etc.
These blockchain platforms basically provide a single, global platform where lenders, borrowers and savers from all parts of the world can directly participate without the need of a third party. By making banking direct and decentralised, they aim to create a world where banking is more transparent, inclusive and accessible to all strata of society.
SALT (Secured Automated Lending Technology) is a membership-based lending and borrowing platform, which provides loans in national currencies by collateralising blockchain assets (Bitcoin, Ether, etc). One of SALT’s biggest advantages is its provision of cash security while ensuring hold over digital currencies. For instance, let’s take a case where Person A really needs money and sells his Bitcoin to obtain cash. But two months later, the value of Bitcoin shoots up massively. In this case, he, unfortunately, had to incur losses due to his urgent cash requirement. But by using SALT now, he can borrow cash for his crypto coins instead of selling them, and repay the amount later. This way, he gets the money as well as earns profit from his Bitcoins.
However, it is an issue that SALT’s token value is unlikely to rise in the future. Even if it does, the rise would not be as dramatic that it encourages investors to invest in it for profits. Even SALT’s creators discourage very high prices because it would discourage membership. There are 120 million SALT tokens in the market, many of which are unmined. High token prices would increase membership price, preventing potential customers from entering. However, the whole point of lending on the blockchain, instead of selling tokens is to ensure that users can secure their future profits in case of rising future prices. In this scenario, a stable/slow-rising value of SALT token provides no incentive to either lender or borrower to use this platform, as chances of profit are less.
WeTrust is another blockchain banking platform, which is an inclusive platform for savings and insurance. It aims to create a decentralised platform for financial services which is more equitable, less expensive and accessible to all sections of society. ROSCA is the first service provided by WeTrust. It consists of a group of people who agree to pool a fixed amount of money at fixed times. Each time, the person who pays less than the agreed amount gets the pool because he is in the direst need for money.
ROSCA is an interesting initiative to encourage low-income people to save. But unfortunately, ROSCA is currently the only banking service provided by WeTrust. Though the company plans to expand it to lending and borrowing, through projects such Credit Identities, Loan Portal and mutual insurance, however, these projects are not in the platform’s Roadmap currently.
Hence, for the most efficient lending and borrowing services on the blockchain, users prefer ETHLend. ETHLend uses Smart Contracts on Ethereum and ERC20 token for peer-to-peer lending and borrowing. Just like SALT, it uses digital currency as a financial asset and collateral to obtain cash.
The working of ETHLend is very simple and user-friendly. In EthLend, the borrowing and lending activity occurs via smart contract. In the first step, the borrower issues a loan request, creating a smart contract in which data on loan amount, interest rate, time, etc are fed. Then the borrower inserts Digital Tokens address and a number of coins used for collateral. These tokens are sent to the smart contract. Lastly, the borrower receives his agreed funds and repays them timely. However, if he fails to repay the money on time, Smart Contract automatically transfers the tokens to lender’s Ethereum address.
Therefore, usage of smart contracts ensures security for lenders, as it uses automation and AI, allowing the contract to be directly enforced in case of a breach. To improve security further, ETHLend uses Ethereum Name Service Domains (.eth) alternatively as a collateral. For ENS domain, loans can be backed up by hundred percent. Like WeTrust, Ethlend also provides lending by a pool of lenders to the borrower for sharing and reducing the risk of lending among each lender. It can be boon for bigger macro lending. It also provides an opportunity for tokenisation of land records and other physical assets which can be used as a collateral to borrow the loans.
ETHLend’s key goal is to “bring democracy to lending.” Its creators aim to provide financial access to people who have less access to banks. Or have no access to banks at all. It is a decentralised platform where lending and borrowing occur peer-to-peer. All activities occur via Ethereum Smart Contracts and no assets are held by ETHLend. Hence, anyone can transact with anyone directly, without any third party or institution. In this sense, the financial activities occur “address to address” where there is no middle-men and loans are sent within minutes and seconds. This makes banking quick too. ETHLend also provides open APIs to banks and financial institutions to use this platform as a liquidity provider for borrowers.
ETHLend provides a high level of transparency. Firstly, every transaction on this platform is open and visible to every block-explorer. This makes it easy to know and follows what is happening with your loan. Secondly, EthLend provides security to lenders by allowing them to choose the borrowers. In the traditional banking system, a borrower deposits money in the institution, which in turn lends it to either reliable or possibly an unreliable borrower. This puts the lender’s money at unknown risk. But in EthLend, the lender decides whom he can trust to return his money on basis of the borrower’s credit history.
Ethlend will also be building cross chain platform solutions through interoperability between different blockchains and aim to provide a benchmark for universal credit ratings through credit tokens.
However, ETHLend also provides sovereignty in form of uPort. uPort provides “self-sovereign identity-based lending” as another alternative for people who want earn higher profits through unsecured loans. Another aspect of EthLend is that it has no interest rate differences between countries. The interest rate is decided by people rather than banks, which encourages sovereignty. In this sense, EthLend is creating a single, borderless and equal global market where people decide for themselves rather than centralised institutions.