Blockchain technology is disrupting the FinTech industry. Blockchain is poised to enhance the way assets or information will be shared, exchanged or accessed across the digital network. The potential of blockchain cannot be overlooked as it is proving its worth in every industry.
One of the industries to benefit from the blockchain technology is P2P (peer-to-peer) lending. P2P crypto lending exchange is a digital marketplace where borrowers and lenders connect for borrowing and lending. Since P2P crypto lending involves digital currencies and leads to automated and more transparent transactions, it is more quick, easy and secure than the traditional lending process that involves banks as the lenders.
The integration of blockchain in P2P lending platforms plays a major role in realizing the benefits of both technology platforms.
Blockchain and P2P lending platform are natural allies
A P2P crypto lending exchange platform works on the mechanism of allowing borrowing and lending of funds directly between the borrowers and lenders, without the intermediation of any third party. The basic mechanism of blockchain technology also allows transactions between two parties in a secure and tamper-proof manner. It observes that funds are not merely copied but are efficiently transferred and recorded into the system to reduce the chances of double-spending. In the conventional method, intermediaries are required to maintain and record funds but the newer version drives transactions through smart contracts.
Attributes of blockchain technology that are promising the future of P2P lending
Let’s consider the principal characteristics of blockchain technology that are making a significant impact on the P2P crypto lending exchange platforms. The considerable features of blockchain are minimizing the risks in the P2P lending platforms that can be described as below:
Consolidation of blockchain and a P2P crypto lending exchange platform reduces the risks factors such as lending risks, cyber attack, money laundering, and many others as it allows transactions to take place directly between the participants in the network.
Improves Transaction Settlements
Blockchain technology eliminates risks and enhances the transaction settlement process. It is mainly due to the smart contracts which make real-time settlement possible with certainty.
Collateral on blockchain
The blockchain technology makes effective and fast processing of capital. Further, we will consider how blockchain technology is suitable for enforcing terms of the contract to make the execution of loans productive.
In a blockchain-based P2P crypto lending exchange platform, security of loans is considered an important factor. Therefore cryptocurrencies are used as a form of collateral. This particular mechanism is mostly used by individuals who have crypto assets and wish to hold them for a longer period but also need immediate cash and they are not willing to sell their crypto assets. So P2P crypto lending platforms consider the interest of hodlers and fulfill their demand for cash by providing them credit on their cryptocurrencies. The lenders earn interest on credit that they lend and the borrowers can get their collateral back after repaying the loan amount in full.
Blockchain-based P2P lending platforms have the potential to disrupt the entire ecosystem and address the risks of the conventional lending system.
If you are planning to build a P2P crypto lending exchange platform, we can help. We offer a highly-secure white label lending solution that can expedite deployment and reduce your development cost. Our white label solution is fortified with market-leading features like FinTech KPIs, smart contract-based Escrow, LVR calculation, flexible interest calculation, hot wallet integration, auto-renewal of loans and more.
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