Estimated reading time: 2 minutes, 4 seconds
Need a loan but sick of dealing with banks? Well then you may want to check out ETHLend. Welcome back to Blockchain Token: What is it? Today we’re covering ETHLend, a project that is bringing microloans to the cryptocurrency space!
ETHLend provides secure peer-to-peer lending via smart contracts. They aren’t the first to enter the cryptocurrency loan market, but they are the first that lets both parties determine the conditions set in the smart contract. Essentially you are able to set your own terms for a loan you are providing or receiving.
Lending is the model of centralization. You would have to go through these huge institutions in the form of banks, which acted as middlemen, and in turn, take their cut. The main problem is that banks have previously been the only place to secure a loan. These institutions have too much power and influence over who actually gets a loan.
ETHLend has made it clear that they believe the lending process is fundamentally broken. About half the world doesn’t have access to banking services. They don’t even have the option to get a loan. ETHLend is looking to help provide banking services to parts of the world where they are not established. By using decentralized peer-to-peer technology paired with a cryptocurrency, local availability of lending doesn’t even matter. You can have a loan agreement with anyone around the world simply by putting up your tokens as collateral.
And that last bit is an important point. Lending comes with risks and some recipients are going to default. Repayment rates are never 100%. To solve that problem, ETHLend tokens will have to be staked and put in an escrow account. If the loan recipient fails to pay, the escrow tokens will go to the lender.
Since it is all built upon the Ethereum blockchain, every transaction is recorded publicly, providing significantly more transparency than the current loan system. It’s an ERC-20 token and they provide an incentive in the form of 25% less fees if paid in ETHLend.
If you enjoyed this video, please give us a “Like.” Check out some of our other Blockchain Token episodes, and learn more about different blockchain projects! And don’t forget to subscribe to our channel so you don’t miss out on any of the blockchain buzz