For years and years the finance industry has made the rules. They held the money, they set the interest rates for the money, and they even controlled the amount of money you were allowed to have via your credit score. That magical number based on so many sometimes even trivial things that can make or break a staggering number of situations in your life like owning a home or a car or even getting a job!

Cryptocurrency has slowly but strongly thrown its hat into the ring to take on these behemoths in ways nobody would have ever thought possible. What started as disbelief from many has turned into fascination and pondering, leaving many starting to believe that maybe we don't need them. Pushing that narrative one step further in the crypto world are projects like Nexo, a lending platform on the blockchain.

You may say, wait a minute! Loans are bad right? Why would you want some Frankenstein debt-monster from the dark ages intruding upon your life? While when it gets out of hand debt can be scary, it's also important to note that it is also a tool. One that for most of its life only large institutions could wield with any certainty, but now that leverage can be shifted toward smaller players to tip the scales a little more fairly. The only question now is in our new blockchain world how would smaller investors like myself or even you utilize these new tools to our financial advantage?

Tax Deferrment

This is a big one, and when I realized exactly how big this was I was sold on crypto loan services. For this reason alone these will be huge in the next 10 years. Imagine that you are Joe Crypto-Trader. You've made some awesome trades, and you're feeling quite proud of yourself. Your bag is large enough to buy you a nice house outright, and it only took you six months! Congratulations, but don't forget to pay your taxes.

Unfortunately, since you've only been hodling for 6 months the chunk that Uncle Sam takes will be much larger thanks to short term capital gains taxes. Instead of a reduced long term gains rate you'll be paying the standard income rate. The highest tier being over 39%. While if you waited for 12 months to cash out you'd be paying a maximum of 20%! (It's even possible to pay 0% on smaller long term capital gain investments if you can afford to wait!)

Nothing puts a damper on your money dance faster than Uncle Sam standing there with his hand out. However, if you were to take out a loan in the same amount that money is not taxed. In addition, you can write off the interest for said loan against your taxable income, and you can still keep your crypto assets for further gains. It's also possible to write off interest paid on loans taken out to further your education or business loans used to start or grow an enterprise or profession should you have one. Imagine what you'd be able to do with that chunk of change you can keep out of the government's pocket for nothing more than being patient. After your 12 months you can either sell the asset to pay off the loan or continue to hold it depending on what works best for you.

Milking Income From Stagnant Assets

The market has been a dead body everyone has been poking with a stick for months now. A cash loan could be an interesting way to get in on some of these rock bottom prices even if all of your money is tied up in other coins that you may have incurred a loss on, but you are still holding. If our good buddy Joe takes out a loan against his downtrodden holdings he can still hold them through the bloodbath, but then also have some cash to pick up some other really great altcoins that have been beaten down to pennies on the dollar.

When the market recovers he can pay off his loan on his original holding, and he'll have some new holdings that could potentially make him a lot of money! This could be particularly useful if you used this method to purchase something like a Proof Of Stake asset or a masternode. The income from these could then pay back the loan you used while leaving your original asset in tact and providing you with a new one as well.

Emergency funding/personal loans

While taking a personal loan won't get you an awesome interest deduction it can still help you get some cash for emergencies or for buying something large like a new vehicle. (Your vehicle interest is tax deductible if you use it for a business, but I'm not sure they're going to go for you writing off a lambo, sorry.)

Okay, let's face it. The credit system is a steaming pile of crap, and I hate it. Imagine if nobody had to bother with it ever again. Instead of some crappy score that three centralized institution decide for you based on their own ridiculous factors you give them the boot and your "credit" is established based on your assets instead. You're free to use your assets and money how you please to further grow your wealth and livelihood into new ventures like a business, property investment, ect without the headache of credit scores or massive amounts of paperwork.

While currently, the only assets involved in projects like Nexo are crypto ones I think in the future even more items could be included with the use of smart contracts! Let's say you own a website or some other type of digital property such as a music catalog or maybe a high value Steemit account even? I think in the future platforms like this will develop more and more to easily allow you to take loans out on income producing assets. Let's say Joe Crypto-Trader is also a blogger. His blog makes around $1,000 per month, and he'd really like to be able to take out a loan to start up a new business, but credit is for dinosaurs so he goes to "insert new blockchain tech I hope somebody makes" to get a loan using his income producing asset as collateral. Joe successfully used his asset and a loan as a tool to create a new asset for himself. This is how I see the future, and Nexo is bringing us one step closer.

In five years, your lender will not be banks or "too big to fail" businesses. They will be decentralized blockchain solutions or maybe even your neighbors via p2p smart contracts. Cryptocurrency has been threatening to shake up the banking industry for years, and while many in the finance field have laughed at this idea. I don't think they're laughing anymore. It's happening. It's not something that can be stopped. Crypto is a hurricane that's slowly making its way across an industry, fueled by the outrage of millions of people it has mistreated over the years. Your bank is dead, and cryptocurrency is holding the knife. Long live the king.

https://nexo.io/
https://twitter.com/NexoFinance

This was my submission for the original works sponsored writing contest.

nexo2018