There are a number of reasons why using blockchain for borrowing and lending makes sense, especially when it comes reducing fees, cutting out middlemen, and operating in a trustless and transparent environment.
The article below dives deep into the benefits (and drawbacks) of blockchain lending, and thinks about how banks will respond.
It also lists a few of the best projects focussing on this, including SALT, EthLend and Ripio Cedit Network.
Lending and borrowing on the blockchain — should banks be scared?
What do you think about it - would you take or provide a loan on the blockchain?
That’s a good write up. Everyone should be careful here though. I think many of the current so called lenders and platforms are probably scams. It’s hard to tell which ones are legit vs Ponzis. Your link helps with that. Good info. Hope you don’t mind me quoting a section.
I would not currently loan money to others on a platform or,blockchain at this point. Remember banks and lenders are very good at assessing risk and repossessing assets on defaulted loans. Send someone your bitcoin, and you have to hope you get paid back.
“
So it all sounds great so far, but don’t lose sight of the fact that this lending model is in its infancy.
There are various hurdles to widespread adoption, especially in relation to know-your-customer (KYC) rules, establishing and verifying identities, onboarding new customers and determining creditworthiness.
A real challenge is presented in collecting loans made on a blockchain — it will certainly test the legality of smart contracts, and would require a global regulatory framework for true peer-to-peer lending across borders. Just because it is legal one country, does not make so in the next. Currently, it is very difficult to get courts to recognise smart contracts as a valid way to do business.
So while a distributed ledger records that a transaction has taken place, the evaluation and management of risk, as well as enforcement, is still a grey area. At this stage, blockchain is still relatively young and doesn’t have many user-friendly tools required for complex operations. On the other hand, that doesn’t stop determined entrepreneurs from setting out to fix this, and some of projects detailed below have the potential to evolve into or inspire the lending giants of the future…”
