Decentralized as the name implies is opposite of centralized, so decentralized means anything which is not centralised. So before understanding decentralized finance, we should have knowledge about centralised finance. So I'll briefly mention about centralized financial system.
Centralized finance refers to our traditional financial system where in transactions are executed through banks that act as central authorities who possess absolute control over your assets. These central institution hold our all sensetive details like adress proof , id proof , contact details, signature, pincode erc. These details are provided by we people voluntarily, in complaince to the know your customer (KYC) policy of the banks.
Decentralized finance (DeFi) system that's totally opposite to the above-mentioned centralised system is a blockchain based peer to peer financial system that utilizes smart contracts. DeFi offers all the services that are being provided by centralized system without involvement of middleman and is therefore more efficient, more rapid and smooth in functioning, trustless,
Immutable and transparent . So the point to understand here is, who runs the system that is so efficient. The DeFi system is being run by code/protocol on blockchain. So it is a pre-programmed financial system . Being programmed chances of human error are mitigated.
Defi is a permissionless system to which anyone with internet connection and crypto wallet has access. Here you are boss of your assets. You have no bank manager/assistant required to initiate transactions.
The project that i find interesting to write about is SALT. It is a lending platform which offers service by the name of SALT LENDING.
SALT ( Secured Automated Lending Technology) is a platform which offers loans to cryptocurrency holders in leverage to their crytpos . In traditional financial system, when we take loans from banks, we are asked to keep some asset as mortgage against which loans are paid. These are kept as a means of security to payback loans in case we fail to payback loans as per terms and conditions of banks. On SALT cryptos are kept as mortgage or leverage. SALT was launched in 2016 by a group of bitcoin enthusiasts to provide new level of versatility to crypto holders . Salt token is built on Etherum blockhain but collaterals are recorded on salt platform itself.
Loan starts from $5000 at an very low interest rates (< 6%). it is paid in the form of USD and Stablecoins. In CeFi such low interest rates are unimaginable. So it represents the beautiy of DeFi. Lending period may vary from 3 to 12 months depending upon your own convienence. LTV (loan to value) ratio of salt rangs from 30 to 70 % which means that 30 to 70% value of the collaterals that we deposit as a leverage can be granted as a loan. Suppose if you deposit thousand dollar worth Etherium in Salt and you want to take loans, you will get loans valuing 300 -700 dollars, depending upon different terms and conditions of salt.
Documents required at SALT
At Salt, on a single email address, 7 accounts can be created. Of these, only one can be personnel and six have to be business accounts. Documents required for verification can be any valid photo id like passport, driving licence or any other government issued document. If you have some documents which doesn't contain photo, salt want us to hold that documents in hand and take a photo and upload. In case document doesn't meet the salt requirements, same is conveyed via email etc.
Price Change of Leveraged assets.
As we're dealing with cryptocurrency and we are aware of the fluctuation in the prices of cryptocurrencies. So when loans are granted by SALT on the basis of leveraged cryptos, then there must be some rules laid down by SALT pertaining to price change in cryptos.
The question arises, what if the crypto leveraged increase or decrease in price?.
In case the leveraged asset increase in price, than burrower can seek to add the increase value equivalent of the collateral to the principal of the loan or can continue paying what he has accepted at the time of taking loan.
If the leveraged crypto decreases in price, depending upon the agreed terms at the time of taking loan and to stablise the collateral account, SALT gives you option to either add more collateral or make an additional principal payment.
Security on SALT.
As we know that blockchain is game of keys. As long as you own keys, you own your assets. Once keys are compromised, assets are compromised by default. SALT claims that keys are never exposed to network. And the keys are generated and stored offline. To further emphasise its security, transactions are signed offline. These are some measures taken by SALT in addition to, cold storage, multi signature process (2FA) and burrower's confirmation before moving funds. Salt also claims to recruit 3rd parry to review security.
Is SALT customer friendly?
Salt offers multiple communication channels like loan support helpline number, email, live chat with customer care executives to aid customers in availing SALT services.
References
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Thanks for being a part of my class and for participating in this week's assignment. I hope you learned from the class as the aim of the school is to teach and allow people to learn alongside
Lending on the blockchain is one financial aspect that will disrupt the banking system.
Rating 6.5
edited
You should try to reduce your spacing while writing. You can simply change the format at which you make your posts and if you are copying from a writing assistant page, it is advisable to first paste on Microsoft word before copy-pasting on the editor's page.
It is not only lending than. It is whole cryptos.
I would have loved to know the areas where improvement was needed than to have randomly labelled .
Hello sir, checking through your post, you gave extensive information about Salt but then you need to improve on your writing organization. Eg, your posting has a lot of spacing between words which often happens as a result of directly copy pasting on the editing page.
I hope you can see that the text is justified and spacing between words in text jistifocatiom is automatically determined. Hope you know that. It has nothing ro do with copy pasting.
Compare Spacing in justified and unjustified text.
https://twitter.com/Qamran7007/status/1374718061203267588?s=20