Cryptocurrency has opened up a new world in the financial sector that was primarily owned by banks, namely the borrowing and lending of capital.
While peer-to-peer borrowing and lending has developed in recent years in the fiat currency space, it is only recently that companies have been finding methods of replicating these ideas in the cryptocurrency space. What follows is a short evaluation of several available options.
SALT is a lending platform for blockchain-backed loans. No credit check is required: Users purchase ERC20 SALT tokens to become a member and then put up bitcoin or other blockchain-backed assets as collateral. They can then borrow money from the platform’s network of lenders. Once the loan is paid back, borrowers get their crypto back: There are no prepayment penalties.
SALT makes no guarantee that a sufficient pool of liquidity is available to fulfill every loan request right away, however, even for approved borrowers. If the pool of money provided by the lenders is all lent out, then prospective borrowers will have to wait for more lenders to enter the system or for funds to be paid back into it.
The cost of one SALT token is set at $25. Tokens are currently sold within the SALT system; however, the token is also available on several exchanges where it is currently trading at about $4. SALT is used to pay for your membership in the SALT system; it is a tiered annual fee that varies based on the size of the loan. At the bottom is 1 SALT that covers up to $10,000 and at the top it is 100 SALT to borrow over $1,000,000 with various tiers in between.
Interest rates on the loans themselves will vary between 10 percent and 15 percent, depending on the terms of the individual loans. When borrowers apply for a loan, the available options are then presented and they can choose among them.
All of the member lenders at SALT are Accredited Investors under Regulation D of 17 CFR § 230.501 et seq., who have passed the SALT Lending Suitability Test. The loans are not transferable via blockchain; they are themselves securities that are transferable through existing financial channels.
Unchained Capital is very similar to SALT in that it provides loans against your bitcoin capital. Their details are easier to find on their website than SALT, namely the following:
Interest rate is 10 –14 percent APR inclusive of all interest and fees
Terms are 3 – 24 months with options to renew
Loan to value ratio is 50 percent. Borrow $1 for each $2 you deposit as capital
Borrow up to $1 million without a credit check
Make monthly payments on the interest. Due in full on the final payment
CEO Joe Kelly told Bitcoin Magazine that Unchained Capital is working with accredited investors and small institutions. They are specifically reaching out to partners to work with them and do not have any public call for investors. Interested investors, however, can contact them and see about working with them. Their current lending fund is over $10 million at the time of this writing.
EthLend has more of a full free-market approach as a facilitating platform. Borrowers and lenders can use their system to connect and negotiate everything from interest rate to duration. The platform is entirely based on Ethereum, any other ERC20 tokens are admissible as collateral on the loan. If borrowers fail to abide the terms of the smart contract, then all collateral is forfeit.
This setup is similar to what is currently available with many peer-to-peer fiat lending options. The price of the LEND token is not clear because of various discounts and the highly fluctuating price of ether right now, but the purpose of the token is to provide discounts on the fees charged to use their system.
Othera says they use blockchain technology to facilitate digital loan contracts, manage their risk and tokenize the repayment cashflow. There has been news going around about the company since the middle of 2016, but their website offers no demonstrations and very few details. A recent partnership announced with London-based commercial real estate lending company Lendhaus indicates big things are in the works, but the Lendhaus website itself is very slim on details and their Twitter profile was only recently created and has no tweets. It isn’t clear if the platform is currently available. Bitcoin Magazine reached out to Othera reps for more information but has not yet received a response.
Everex has been in the press for over a year and touts a number of products and services, such as the ability to transfer, borrow and trade in any fiat currency around the world. One aspect is their EVX token which provides a multitude of utility functions in their microfinance and payment program. EVX token ownership is required to access the system and can also be earned as an incentive or reward based on terms the lenders can specify. Those same EVX tokens can then be used as collateral for secured lending. To use their platform you need to either install their mobile wallet or use their Everex web service.
There is a lot of activity in other parts of the financial market with regard to cryptocurrency as well, such as tokenizing real world assets as investment vehicles. What this tells us is that there is a lot of interest and activity in this space that is certainly going to change the face of banking.