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P2P crypto lending facility is based on the blockchain technology, thanks to its two features – trust evoking ability and decentralized nature. These characteristics have become an integral part of P2P crypto lending.
To create an ecosystem of P2P crypto lending, you need to build trust and decentralize the system to allow the users to participate in the governance of the network. You have to facilitate a consensus mechanism that eliminates the need for a trusted third party, enabling two peers to complete the deal.
Let us determine how these characteristics are introduced in a P2P crypto lending exchange.
Blockchain transactions are immutable and transparent. None of the participants can alter the details of a transaction, once it is sanctioned by the miners. All of the details of the transaction are available to the parties involved – in this case, the borrowers and lenders interacting for a P2P deal – thereby bringing transparency in the system.
When someone releases funds for another participant, it is broadcasted on the network. Once the miners approve the transaction, it is entered in the blocks irreversibly. No single entity controls the system. Lenders and borrowers can finish a deal between themselves.
As P2P lending is based on blockchain technology, all participants are sure about the integrity of data, which is secured via direct interaction through public-key cryptography and peer verification of transactions. In line with the predefined rules, users can establish the precision of broadcasted transactions.
This is another element for building trust in crypto lending platforms. Transactions are added to a block through a consensus mechanism involving proof-of-work. Miners have to resolve a computational puzzle that also has to be approved by other participants in the network.
A key advantage of blockchain is its ability to facilitate the creation of automated smart contracts that power crypto P2P lending. Thanks to smart contracts, transactions agreed upon by the parties get executed instantly. All aspects of the intended transactions are discussed beforehand and translated into a smart contract programmatically based on relevant parameters.
In the case of P2P crypto lending, the smart contract includes details like initial loan amount, repayment terms, penalties if payments get late or missed, provision of partial payment, and more. The smart contract automatically executes all relevant functions such as making payment requests, receiving the payments, adjusting the due amount, etc, without human intervention. Such a contract can also provide functions like converting to a higher yield currency, adjustment of credit ratings, or deducting percentages for early loan payment.
P2P crypto lending denotes two key features of underlying blockchain technology – complete mutual trust and decentralized nature. All aspects of the system are transparent and transaction blocks are immutable. In a P2P crypto lending exchange, users can also be sure about data integrity. Smart contracts lie at the core of the function.
Antier Solutions offers business-oriented solutions for P2P crypto lending exchange development. We provide a white label lending platform underpinned by market-leading features, such as multi-currency wallet integration, LVR calculation, escrow system, auto-renewal of loans, bank-grade admin panel, and more. At the same time, we specialize in building custom lending platforms from the ground up.
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