Many individuals face the problem of “opportunity cost” for holding money, which is the trade-off between money held in the hands today and investing this money depending on the market opportunities. If you are holding fiat currency or cryptocurrency in your hands then you are facing a certain amount of implied loss. To combat this situation you should invest your money in some profitable opportunities. Some invest in stocks, real estate or some indulge in the practice of lending.
In this article, we will discover the various aspects of borrowing and lending and how the integration of blockchain is redefining the overall ecosystem.
Have you ever found yourself in a situation where you have to go through a long borrowing process even for a smaller amount of loan? Do you wish to have a hassle-free process without the intermediation of financial institutions? If yes, then a P2P lending platform comes with the right framework and provides a platform for borrowers and lenders to intersect with each other. This is a cost-efficient method as there is no physical infrastructure in between. Though traditional P2P lending platforms are there for a while, a P2P crypto lending platform is also creating its vigor in the marketplace.
What is peer-to-peer lending?
Peer-to-peer lending involves connecting borrowers and lenders on a common marketplace to fulfill their borrowing and lending needs. A peer-to-peer lending process is executed without the intermediation of any third party and thus it functions at low administrative fees. In this, the borrower puts his borrow order which is then matched against the best lend order by the matching engine. Once the orders are matched, borrowers get the desired loan amount and lenders earn set interest on the amount that they lent. Generally, repayment of loans happens in 6 to 12 months and the average interest rate is maintained between 2% and 4%.
How does a P2P crypto lending platform work?
In a P2P crypto lending platform, a borrower puts a certain amount of cryptocurrency as collateral. His collateral is locked in the platform until the total loan amount is repaid by the borrower to the lender. On the other hand, the lender lends the money corresponding to the collateral amount deposited by the borrower.
The emergence of blockchain technology in peer-to-peer lending platforms
Blockchain technology has revolutionized the lending market and has reached an unimaginable position in a short time. The global blockchain technology is estimated to reach $20 million by the year 2024. With a blockchain-driven P2P crypto lending platform, the global P2P lending market is sooner prospected to reach $1 trillion.
But, where are we heading now? Have we reached a marketplace to open up a new segment of blockchain-based P2P lending platforms? Let us further comprehend our current financial market situation.
Current marketplace situation
The current finance market is full of flaws and practical issues. It is very time-consuming and expensive to diversify your global lending domain. The system of capitalism is quite prevalent and banks are accumulating a pool of dead debt in their portfolio. Subprime debts are getting mixed with prime debts which are making the overall system go worse. Banks are mostly unaware of what they are buying and selling and end up creating huge profit opportunities for the originators and loss for the society.
With blockchain, the overall system will be redefined and a greater sense of transparency will be infused into the system. As a P2P crypto lending platform works on a decentralized mechanism, there would be no intermediary and transactions would be processed at much greater speed. Thus with this framework, delays would be minimized and transactions would be processed in a cost-efficient manner.
Where are we heading
With blockchain technology coming to P2P lending, the market is becoming much more organized. Crypto based P2P lending is gaining major traction as they allow transactions at low cost and offer greater opportunities to diversify the investment portfolio across global regions. It also opens up a door for all those who remain unbanked by the traditional lending method.
Blockchain technology is efficiently moving from the growth stage to the maturity stage and is disrupting the overall ecosystem.
If you are considering leveraging on the potential of the P2P crypto lending platform, Antier Solutions can help. We offer business-oriented solutions to build a custom P2P lending platform based on your business needs, and at the same time, we offer a white label P2P lending platform underpinned by market-leading features. Schedule a free demo of our white label P2P lending platform or get in touch with our subject matter experts to share your needs for a custom lending platform.