Meet Ethlend -The World's First Crypto Lending Marketplace
Introduction
There is no doubt that one of the most difficult decisions to make as a cryptocurrency investor and a long-term hodler is to sell your crypto assets during a cash crunch period. Sometimes as humans with flesh and blood, financial responsibilities run at us fast and not all investors have unlimited cash flow. Hence, meeting immediate cash needs for such investors becomes difficult without compromising on the long-term projection of their investments.
People might argue that such investors have an option of obtaining loans from banks or any other centralized body set up for the same purpose in the real world. As much as this represents a viable option, the problem associated with them are quite numerous and those that have obtained or attempted to obtain loans from banks before now can bear me witness. These problems range from documentation, verification, authentication and counter-authentication to credit score checks and time required to do other paperwork. In Ethlend lies the solutions to virtually all of these problems.
But wait! What is Ethlend?
Ethlend is a decentralized, peer to peer cryptocurrency lending and borrowing platform built on the Etherum blockchain. Instead of depleting their crypto portfolios and jeopardizing their market positions in order to meet immediate financial needs, investors can now secure loan with their cryptocurrency in transactions bounded by the ethereum smart contracts. Apart from the fact that the platform allows investors to meet their nagging financial obligations without losing their investment, the problems associated with the traditional methods of securing loans are excluded. Investors can secure or lend out loans within minutes and do so at their own terms of reference.
Ethlend primarily supports a variety of cryptos including ETH, LEND and over a hundred and eighty liquid ERC20 tokens. The LEND token is the Ethlend ecosystem tokens whose use comes with some concessions. Even though Ethlend is built on the Ethereum blockchain, in a recent press release, Aave which happens to be the mother company announced the launching of Bitcoin on the platform, making Ethlend be not just the first decentralized cryptocurrency lending marketplace, but the first platform to integrate blockchain interoperability. According to the founder, Stani Kulechov;
Bitcoin lending represents a huge step since for the first time in the crypto backed lending market, through Ethlend borrowers can propose their own interest rates for Bitcoin loans in a peer-to-peer marketplace. source
How does the Ethlend platform operate?
The operation of the platform can be viewed from two different points - either from the lenders' view or from the borrowers' view. Whatever the case may be, users will first of all sign up on the section of the platform designed specifically for that purpose. The sign-up process is easy, simple and only take just a few seconds. Thereafter, users can choose to be a borrower or a lender.
As a borrower on Ethlend, a user is required to fund his/her in-app wallet with one of the acceptable cryptocurrencies from the list above. The funds will be used as collateral against the loan the user wants to secure. Thereafter, the user can choose to borrow with a single click from the list of available loan offers if any of them fits his/her required terms and conditions.
On the other hand, a borrower can choose to create new loan request in the marketplace with personalized terms and conditions. A lender on the platform would also need to fund the in-app wallet first and then choose to fill one (or more) of the available loan requests in the marketplace or create a fresh one with personalized terms and conditions if the available ones do not meet his requirement.
In order to cater for the volatility of the cryptocurrency market and protect the interest of lenders, there exist an over-collaterilization of loans. A borrower would need collateral that is worth twice the amount of loan he/she wants to secure to create a 50% LTV ratio. For example, a user that needs to borrow 50 ETH would need to have up to at least a 100 ETH worth of cryptocurrency as collateral. Collaterals are released back to borrowers once they finish their loan payment or to the lenders in cases of loan defaulting by borrowers.
In cases where there is movement of crypto prices and the value of borrower's collateral drops below the 50% LTV ratio, the borrower would be contacted to add more assets to the smart contract in order to maintain the 50% LTV ratio. However, there is an option for pegged loans in which users can borrow or lend using cryptocurrencies but with a value pegged to one of the available FIAT currencies on the platform. With the pegged loan, users do not need to worry about the volatility of the cryptocurrency market.
As we all know that nothing good comes free, Ethlend charges fees ranging from 2% origination fee in the first installment on the borrower's side to 20% of the interest of each installment payment amount from the lender's side and 5% of the worth of the collateral in cases of collateral call or loan default. However, these fees can be reduced to almost zero when the LEND token is utilized as collateral and funds on the platform.
Disclaimer: This is not a piece of financial advice. Please do your own research before investing in cryptocurrencies or any digital asset. This blog post is done for entertainment and knowledge purpose only.
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General information about Ethlend
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