In the year 2008, the destructive bankruptcy of the world’s banking institution extremely reassuring governmental bodies ignited a torment for roughly billions of people all over the world.

After the financial crisis, trust began to fall apart and individuals were seeking for an alternative monetary system not regulated by a central authority. With the innovation of the digital assets and the distributed technology behind it, the path of a new decentralised financial ecosystem was established.

It is a well-established fact that digital assets can resolve issues relating to liquidity for diverse monetary industries. However, as the establishment continues growing rapidly and advancing, lots of people wonder if it can potentially replace the credit and loan market.

The cost-sharing approach from centralized credit services are hidden by costs

incurred by non-interest-earning elements (data processing, credit review, credit bureau) and non-repayment of loans (bad debt) by charging successful borrowers with collateral assets, who can actually pay back their loans.

Today, borrowers have less knowledge about the application process, requirements, creditworthiness, and that several intermediaries are involved in the decision and valuation of the loan application. In countries where the credit database system is underdeveloped, the size of loans available to borrowers is affected by the documents provided.

However, collateralized lending with digital assets actually looks like the perfect replacement. This is because tokenized assets have some advantages;

They are secured by smart contracts that are accessible by anyone

It makes use of a universal price consensus

The market is 24/7 accessible

It is not directly governed by a single institution

Transactions are immutable and transparent

Lower fees and maintenance cost

No need for a bank account

While the concept of lending has been predominantly achieved by banks and other financial institutions, the growth of tokenized-backed loans is growing prominently for Individuals.

Individuals are now capable of grasping digital assets and utilize them as a form of collateral to get loans. With the amount financial institutions are generating from loans, crypto-collateral backed loans should be considered as a viable option of the future.

Will Crypto-backed loans restore honest lending?

Individuals who have experienced the process of collecting loans from the bank or other monetary institutions can concur to the clear fact that the procedure is stressful and not simple in any way.

One of the problems plaguing loan seekers is the issue of getting approved collateral that will be utilized for granting the loan that is being requested. The individuals who borrow loans differ in the type of loans they want to acquire.

This is because while one bank may obtain certain collateral, another bank may reject that same collateral. Joint to the collateral issue is a heavy load of paperwork that needs to be filled and submitted. There is also a condition to have a very good and near perfect credit score.

Attached to all these issues the timing is as well a problem. Lenders actually request for loans to resolve quick or time constraint issues. The process of applying and finally getting the desired approval for loans is time-consuming and has the prospect of defeating the sole reason for acquiring a loan in the first place.

And then comes cryptocurrency to save the day.

A crypto-backed loan is basically a loan that a borrower accepts with the condition to collateralize his digital asset in case of default.

This particular loan is protected by a smart contract on the blockchain. It can essentially be changed in accordance with what the borrower wants. These contracts are built for either days, months, and some can be years.

When all necessary negotiations are done with the diverse specifications requirements of the loan being approved by all the parties involved, documentation is immediately processed swiftly on the blockchain system. The loan is successfully transferred to the individual who needs it.

There is no issue of;

Checking the credit store

Filling loads of paperwork

Stressful identification process, etc.

To Wrap It Up

We are aiming is to resolve these issues, to manage and users risks and to create a stable lending platform where digital assets are a means of collateral eliminate the long processes of acquiring a loan.

Our platform is built to facilitate access to loan while creating a new credit market backed by collateral digital assets, secured by smart contracts and transparent on the blockchain.

These assets are built for various use cases. Additionally, they are already approved globally as a means of exchange.

See you with the next articles and updates.

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