Crypto enthusiasts are always interested in “HODL” (Hold on for dear life) their digital assets in their digital wallet. These digital wallets keep the assets safe with them until the price of the selected currency increases. Keeping your money idle in your bank account with low-interest rates can make you feel uncomfortable. Similarly, a common phenomenon in the digital market is “How does one get their digital currency to grow? “So, this is where crypto lending comes in. A Crypto loan platform is a marketplace that allows borrowing and lending money directly from individuals or the liquidity pools. The Crypto Loan Platform doesn’t rely on traditional banking systems or any third-party intermediary. Crypto loan platforms have attracted major liquidity since Decentralized Finance (DeFi).
How can blockchain improve the P2P loan platform?
A peer-to-peer (P2P) loan is a common practice of getting finances directly from individuals through digital services. The platform connects the lenders with the borrowers through the application’s interface. It has numerous advantages for both sides participating in the digital trade, and it offers better interest rates for the lender and lower return rates for the borrowers. Despite numerous advantages, p2p loans are termed less secure as they lack enough transparency and tracking. The introduction of the blockchain to the current p2p model may help resolve the following issues.
Automation: Most of the p2p loan services is centralized, and the platform handles the application management and the whole loan transfer process. In a blockchain, the p2p loan, the main action will be performed by the smart contract avoiding the involvement of a middleman and leading to higher automation.
Immutability: Blockchain technology ensures the versatility and immutability of data. The prime advantage of this feature is that it cannot be changed or deleted once data is stored, increasing the level of security for p2p lending users.
Transparency: The distributed ledger technology used in the data store can create transparency and decentralization. Adding blockchain technology to your p2p lending service will make the data easier to track with a high level of transparency.
Smart Contract Development
The development of smart contracts is one of the key components in adding peer-to-peer lending to the blockchain network. When building a smart contract for the p2p lending platform, the main goal is to establish which data to be stored in the on-chain and which data to store in the off-chain. Since all the data is stored in the on-chain and is easily validated, collecting debts by collectors becomes easier. The biggest challenge is to configure the process with KYC to avoid leakage of personal and discreet client data as blockchain, in most cases, provides public access to all on-chain information.
DeFi crypto loan platform
DeFi crypto loan platforms concentrate on crypto-to-crypto loans, where stable coins are preferable. Another distinctive feature of the DeFi loan platform is the necessity to develop collateral in other cryptocurrencies offered against any loan. Often ETH or Bitcoin is used as a secure form of collateral. Most loans in a DeFi establish a very high loan to value ratio. The features of decentralization, anonymity and the possibility of getting a loan quickly are DeFi lending pools’ exclusivity. The growth of DeFi has attracted an impressive amount of liquidity, buy stuff on amazon with bitcoin helping some protocols gain outright market priority.
Developing a Crypto Loan Platform requires data encryption, and it protects users’ credentials and sensitive data stored in the database. To develop a secure Crypto Loan Platform, security solutions such as SSL implementation and integrating 2-factor authentication helps with login security and encrypted user access. The crypto loan platform receives a great reception from investors and enterprises for its transparent and secure system. Businesses and entrepreneurs are eager to get their DeFi dApps developed for peer-to-peer lending and borrowing of crypto loans. You can now get your dApps designed and developed by a leading software company specializing in launching crypto loan platforms. With the DeFi crypto loan platfo rm, you can initiate trustless and permissionless trading of crypto loans.