Crypto Collateral: Blockchain Peer to Peer (P2P) Lending

Crypto enthusiasts are raking in profits via Peer to peer (P2P) lending and it is growing despite the current year-long bear market. Such lending platform work by connecting borrowers to a network of lenders registered on a platform. To borrow an amount, the borrower needs to first deposit his/her cryptocurrency assets on the platform as collateral. The lender can lend the amount to a borrower and earn interest over it. Once, the borrower repays the loan with interest, he/she gets back his/her crypto assets from the crypto lending platform.

Lending to other users is clearly an opportunity for lenders to earn some interest. Borrowers can get cash and are able to avoid the pressure to sell their cryptos at loss/at all when they need money. Money could be used to pay any needed expenses or even to further invest short term.

There is a rising number of cryptocurrency lending applications representing an alternative to traditional loans/lending. Banks have long been the ultimate source for lending capital and borrowing to the public but that may be changing with the development of Blockchain enabled peer to peer (P2P) lending applications across the world.

Research suggests that the market has massive opportunities: peer to peer lending platforms opt to be worth over $490 billion USD before 2020, and worth $897.85 billion USD by 2024. 

P2P Lending vs Bank based lending

Technology is emerging exponentially over any other development in human history. With the internet opportunities to connect and interact and decentralize are exploiting new business models, and disrupt legacy systems.

Currently, banks require a number of documents from borrowers such as a good credit score, previous bank statements, verification and some form of collateral to receive the loan. Even after producing all these forms of documentation, borrowers still need to wait for 30-45 days to receive the money in their accounts accepting heavy processing fees. Lenders also struggle through the current banking systems with very low rates and possible negative interest rates across the globe.

An depiction of How peer to peer lending works

How does Peer to Peer lending (P2P) work?

Blockchain technology allows borrowers and lenders to exchange funds without the need of an intermediary. Users "crowdsource" funds/ loans. A smart contract records the agreement on the blockchain. Borrowers are then able to receive the funds within 2 hours to max 7 days pending verification with very low transaction fees once they fulfill the conditions to execute the contract.

How to get a loan through P2P blockchain lending?

Users have to collateralize their digital assets on the lending platform. Besides, you are required to provide the necessary KYC/AML identification, income verification, and some personal references. Still less stringent than dealing with any bank. Once verified, select your favorite type of loan with options on duration, lending rates and the amount you require. The lending and borrowing service is available for anyone with an internet connection across the world!

Some examples of peer to peer cryptocurrency and digital assets lending applications:

Examples of crypto credit and lending for p2p lending


Advantages of Blockchain P2P loans?

  • They are faster than conventional methods of getting a loan
  • The peer to peer loans offer better rates than traditional loans
  • Some of the P2P lending platforms offer a flexible market for loans where borrowers and lenders negotiate the interest rates and timespan for repayments

Disadvantages of Blockchain P2P loans?

  • Blockchain and cryptocurrency being still in its infancy, the market for P2P lending through digital assets heavily depends on adoption
  • The volatile nature of cryptocurrencies is a barrier to entry to the field of peer to peer lending

Some Examples of Crypto P2P Lending Platforms

  • ETHLend (LEND) is a decentralized P2P lending platform that allows people all over the world to get a loan or become a lender. As a decentralized platform, using the Blockchain technology we enable you to get or fund a loan within minutes in a secure way.
  • Maker (MKR) is comprised of a decentralized stablecoin, collateral loans, and community governance.
  • Salt Lending (SALT) is the original blockchain-based loan, collateralizing your blockchain assets, keeping you invested while providing cash.
  • Dharma is a platform for building globally-accessible lending products using programmable, tokenized debt.
  • Unchained Capital is a blockchain financial services company offering cash loans to long-term cryptocurrency holders in a secure, fast, and transparent manner.

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About The Author:

Danny Christ is the CEO & Co-Founder of Moonwhale Blockchain Ventures Inc.

Based in Kuala Lumpur, Danny has over 20 years of IT, Operations and Supply Chain experience across Germany (home), US, Singapore, Indonesia, Thailand, Malaysia, Vietnam, and the Philippines. He managed IT projects (ERP, CRM, POS, BI) and regional expansion (franchise, M&A) for various SMEs in the Consumer Industry. His career rose to Vice President of a 3500 employees organization.