Crypto Lending Will Do More Good Than Traditional One

Unless you have been living under the rock, you will know crypto lending is thriving more than any other segment of the cryptosphere.

Of course, there are apparent reasons for it because lending and borrowing is a direct consumer business.

But, honestly, I am too surprised by its growth where companies like BlockFi, Celsius, YouHodler have issued loans worth billions of dollars.

At first sight of crypto lending products in 2018, I was quite skeptical whether this industry-vertical will take-off or not. This thought was mainly because crypto lending is fully collateralized, and the fiat world where we live in there is less off collateral at stakes.

Especially when you have interest rates as low as zero or negative, which means money is free, and anyone can have it without sufficient collateral.

In such kind of scenario, who would want to take loans by keeping their cryptocurrencies like Bitcoin or Ethereum as collateral?

Plus, to get such kinds of loans, one should have these cryptocurrencies in the first place to keep as collateral.

But well, the data and uptrend of the whole industry shows, I was wrong.

As I shared, vast sums of loans have been approved that, too, without rigorous KYCs the way one undergoes in the traditional finance world.

This proves one thing that many people are interested in crypto loans, and many are actually holding cryptocurrencies.

Of course, this makes sense because crypto lending and borrowing is good for the lender and borrower both. The lenders can monetize their extra lying cryptocurrencies for a fixed interest rate, and the borrower can easily borrow by keeping minimal collateral.

In case something goes wrong, or in wild volatility swings, one can rest assured because loans are 100% and sometimes over collateralized.

For the uninitiated:

Collateralized crypto loans are a kind of loan where you can keep your BTC or ETH or any other supported currencies as collateral to get loans in cash like USD, EUR, GBP, etc.

Many crypto lending companies are emerging with a similar business model with various new currencies, collateral supports, and a variety of interest rate benefits.

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But having worked in the mortgage industry for some time, let me tell you, it is not an easy business to run.

Not all crypto lending companies are created equal.

TheMoneyMongers, a crypto education endeavor, believes that crypto lending is going to become one of the biggest usecases of DeFi implementation in 2020.

In doing so, players like YouHodler who are enabling crypto loans for LTV upto 90% and paying interest rates upto 12% are going to win in the long run.

Apart from that, any crypto lending company which understands and prepares well to cater to developing and under-developed countries will grow exponentially.

Out of 7 Billion folks on earth, close to 2.5 Billion have no access to essential banking services and so forget about lending/borrowing to them.

But cryptocurrencies bridges this gap and makes them potential customers to be included in the world economy. These unbanked people just by having their phones and holding their crypto can be catered to higher levels of financial services, which were previously only accessible to developed countries.

Furthermore, developed countries don’t need this.

Their USD or EUR isn’t inflating at a crazy rate. They have access to basic banking services as well as loans such as HELOC loans etc.

But now, it is the time of C-LOC loans if I may put it like this, i.e. Crypto credit lines (C-LOC).

These Billion lives who have been otherwise written off and deemed unprofitable by traditional bank systems have started seeing the other side of the greener grass.

Let’s pause for a moment:

Ten years back, when this whole industry started taking its roots with the advent of Bitcoin, no one imagined that it would come so far.

But the Lindy effect is playing its part and making more people get convinced of its eventual survivability. This way of funding and loaning becomes even more lucrative when you see what is coming from the central bankers of the world.

MMT- Modern Monetary Theory, which is just another name of perpetual running printing presses and the new unheard monetary tools of negative interest combined with their unintended consequences, certainly paints a good picture for collateral-based lending.

James Woods

Tech Geek and avid developer.

Published by
James Woods

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