Crypto lending and borrowing is a new concept in the digital money market. However, the noble idea comes with its unique challenge; how to handle crypto lending and crypto loan defaulters. There are many borrowers that have jumped into the Decentralized Finance (DeFi) with a defaulting mindset and intentions.
Crypto lending is different from fiat lending where there is a credit rating system. As much as crypto offers the freedom to choose a lending platform online, defaulting is not possible since everything is smart contract protected. What’s more; you have a reputation to guard.
Crypto Lending and Crypto Loan Protection
Given the diversity of reasons why you might need to borrow or lend; both parties involved are protected. As a borrower you need to have some form of collateral which can be liquidated in the event you default. Collateral gives the lender on the platform enough assurance that their funds are safe.
When you look at the risks involved, if you are the lender your risks are minimal. The beauty of blockchain is the use of smart contracts to automate the entire process of lending and borrowing. In fact some platforms like Bloom token are working on a decentralized mechanism which will usher in a crypto credit scoring ecosystem.
Crypto Lending and Crypto Loan Here to Stay
Though crypto lending and crypto loan is new, it has come with mixed reactions. However, the whole concept is here to stay and comes at a time when the gap between those with bank accounts and those without keeps widening. DeFi has given the entire digital money market a new lease of life and freedom to borrow and lend.
The growth of smartphones and increased internet penetration to the remote parts of the world is set to spur crypto adoption. Defaulting on crypto loans is not possible thanks to smart contracts. The only problem the unbanked are facing is to own their first crypto assets. The good news is that there are many entry level coins and tokens in the market that you can earn or buy to start building your DeFi portfolio.
