Collateralization of Cryptocurrency: The Dawn Of A New Era In Financing

Collateralization of Cryptocurrency: The Dawn Of A New Era In Financing

Debt. What a soul sucking, bottomless pit it is. One can try to fill in the gap with all that they have but with interest rates, collateral differences,alas, one can hardly bring about its end. An ever-present entity on our heads, a person under debt watches over his shoulders before any expenditure.

Why live with this fear everyday of our lives when with the cryptocurrency that you have on your wallet can generate for you liquid cash? That too with the minimum amount of tax. Unknown to many, in the ever changing world of fintech, decentralized cryptocurrency too can be used as a collateral!

Old Wine In A Decentralized Bottle

Traditionally, money lenders opted for high credit scores.(credit worthiness of an individual)  This was primarily due to the issues they encountered while dealing with cost of transferring, liquidating assets, and then storing said assets. This cumbersome process was made further difficult due to unprecedented interest rate.

With the advent of Blockchain Technology, decentralization lenders and borrowers alike, finally have ahead of them an easy path.

The entire collateralization of cryptocurrency assets may seem imbalanced due to its fluctuating market values. Many claim that they must benefit lenders similar to what happens in a centralized financial transaction ie Banks. In fact, here, it’s the other way round. Lenders earn a tidy sum as liquid cash by simply providing the option of  storing their crypto assets on a wallet of which they shall continue to be rightful owners. There would be no need to outright sell them in return of liquid cash.

See Also: Bitcoin Mining Hardware: A Glance

Primarily, Bitcoin and Ether are the cryptocurrencies of choice for borrowers and lenders alike for using as a collateral for personal loans.

Let’s take a look at the trailblazers of this sector.

1. Salt Lending:

salt lending

The pioneers in the field of decentralized collateralization, ‘Salt Lending’ assures right off the bat, that it won’t ask you to sell your cryptocurrencies in return of liquid cash. It has in place multiple number of protocols so that none suffer any loss due to the volatile nature of this medium. The SALT Lending operates all its smart contracts on the Ethereum Blockchain. The collateral is recorded and stored on its native Blockchain. It uses Secured Automated Lending Technology (a lending platform for Blockchain backed loans.) Working on an ERC-20 Smart Contract ( a uniform contract which holds all the terms of the agreement that is the same for all) Salt Lending also ensures that the loan terms are agreed to at the time of loan origination.

By consolidating the bank account and the decentralized wallet it gives one the freedom of utilizing their cryptos in return for liquid cash. The key features of this SALT Oracle Wallet are:

  • Keeping track of the loan origination and all settlements that are made by the borrower towards the lender. This ensures that no payment is missed and/or overlooked.
  • Overseeing the market value of the crypto asset that has been held as collateral.
  • Holding the collateral as safeguard until the loan terms have been fulfilled
  • Sending out alerts to both the parties involved in the off chance, that the value of the crypto asset has dropped. This happens only when the value drops below an agreed upon value.
  • Settling the loan and the crypto asset once a liquidation amount has been set.

With Salt Lending, the borrower continues to own the asset and has the option of selling it at anytime. Once the decision of selling is made by the borrower, ( due to factors ranging from personal or simply because the value of the currency has reached an all time high) the outstanding unpaid loan principal, the interest created and the fees generated due to the processing, shall be deducted from the value of the crypto asset. Only then, once the lender has been repaid his dues, the sale proceeds become available to the borrower.

Used by long term investors, day traders and business enterprises such as exchanges, remittance services, miners and those who are wishful of dealing in ICOs.

2. Nebeus:

nebus

“We are building bridges between crypto and fiat finance” That’s how the Nebeus site has chosen to define themselves on their site. Focussed on becoming the most sought after client oriented service, Nebeus provides its users with low costs and multiple business processes. Zeroed in on meeting the demands and challenges that arise in the ever fluctuating cryptocurrency market. Based on the Ethereum platform, this organisation offers its token holders to 20% share of the platform fees on a monthly basis. How is that for a start? But wait, there’s more. Freeing the user from centralized fiat currency, is Nebeus Mastercard. Given free when one purchases 50 NBTK (Nebeus) tokens, this card can be used upto the value of 1500 GB Pounds. As it is linked directly to the users crypto wallet, it has unlimited transaction be it for online use or point of sale.

The Nebeus Wallet currently provides its users the following :

  • It enables the user to send in express requests for funds via email or even by using  QR-code scanner. This ensures fast input of payment details with which transaction can be undertaken faster.
  • An open ecosystem, that is secure, transparent, and convenient. One that allows the use and helps in starting financial services.
  • Products that are based on Blockchain and Smart Contract are further secured and encrypted for heightened security.

In all, Nebeus provides its customers all the benefits of a centralized bank while giving them the freedom of decentralization.

3. Block Fi:

blockfi

The new kid on the block, is BlockFi. Working towards putting a strong foothold within the decentralized FinTech industry, BlockFi has a long path ahead of them. Dealing with both, Bitcoin and Ethereum, BlockFi works as a decentralized bank that creates transaction for cryptocurrency assets. They offer the users the very best rates in the market and are also flexible as far as the framework is concerned. They also assure the users the maximum level of security that can be available in this Blockchain based lending ecosystem.

Working within the regulatory guidelines that are at par with the the federal and state level of the United States government, BlockFi is backed by top tier investors. It is a secured lender with holdings of their clients’ crypto assets are managed in a separate storage address that is  maintained by licensed digital asset custodian Gemini Trust Company, LLC.

It works on the simple logic of storing crypto assets in an address and then sending the loan money to the borrower’s bank account. Then the borrower simply has to make  interest only monthly payments on the loan amount.

Working on a long term, BlockFi aims to offer its customers the option of custody solutions. Synced with integration straight into custody platforms they allow the borrowers to receive their loan from BlockFi without moving their crypto funds out of storage. We are really looking forward to all that BlockFi has in store for its customers!

4. Unchained Capital:

unchained capital

Unchained Capital is similar to that friendly neighbourhood rich man who knows you, your family and has seen you grow. Now, when you need a currency loan, he not only offers you low interest rates but also ensures that the 2 year plan does not become a burden on you. Also, that car of yours that you wanted to offer as collateral. Well, keep it son!

Keeping in mind this image, it becomes quite easy to know that they are rooting for their users, the underdogs who invested in decentralized cryptocurrency and need centralized liquid cash. Who doesn’t love the underdogs? For that matter, who doesn’t love that one jolly mentor who always egged the underdog towards success and glory?

Unchained Capital offers its users, its customers and future borrowers of liquid cash value for their cryptocurrencies, without making them sell  or handing over their crypto assets in return. Accepting both Bitcoin and Ethereum, this company is offering its users to use its platform to go beyond loans and even use them to purchase property!

They use a unique  P2SH addresses (Pay to script hash) for every customer and loan signature. Every collateral wallet is decentralized and is held in vaults that are geographically separated. They are the ones that store the offline or cold wallets apart from the private keys of the offline or cold wallets. Security of this is well tested and follows all the protocols of the industry standards. As an open source software, they have additional audits of their  transactions via a third party.

See Also: Hashgraph: The Future Of Decentralized Technology

One thing that needs to be kept in mind is that, in the Unchained Capital ecosystem, all transactions will require intervention and coordination of multiple executives and authorized signing staff.

Verdict:

If we are to believe, which we do, that decentralization is here to stay then we suggest that investors of crypto assets think decentralization all the way and not just confined to buying and hodling crypto assets. Inorder to do so, the above mentioned agencies are the perfect way to go. They each have something unique to offer their users. Though our choice will always be the one which has low interest rate. May be that is the centralized debtor in me speaking.

A traveler who has eaten with Bedouins, gotten lost in mist, and walked a kilometer to get net connection. When not writing, Nisha reads tech magazines to shampoo bottle labels

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