Lenders are a conservative bunch, and their traditionalism isn’t conducive to experimentation. This has proven true with respect to blockchain technology.
Blockchain is only seeing limited use in the lending industry. But that could change with greater investment and industry-wide reevaluation.
It’s not that blockchain lacks potential use cases in lending. Experts point to the decentralized ledger technology (DLT) as a boon for customers and lenders alike. But right now, decentralized ledgers aren’t being used widely in the industry.
Lenders have proven more willing to grant fiat loans backed by a customer’s cryptocurrency portfolio. This is a prevalent practice that’s provided young companies with critical cash flow. And it’s changed the way that blockchain-powered companies fundraise.
But crypto-backed loans only scratch the surface of what blockchain can do for lending. Experts look for more consequential use cases to emerge as lenders become aware of how blockchain can help their bottom lines.
1. Antoni Trenchev, Co-founder of Nexo
“The proliferation of blockchain technology has allowed companies to issue loans against an entire asset classes that have previously been non-existent.
The beauty of the technology is the distributed ledger, and the notion that every transaction is immutable for the whole world to see, which puts clients at ease.
Right now, some transactions, such as those involving fiat currencies, are inherently off-chain. But that will change going forward, and the whole process will be on the blockchain sooner rather than later.”
2. Blake Cohen, Co-founder of SALT Lending
“Blockchain lending is still in its infancy. While there are many players in the space, some are “pretenders” and some are “contenders”. The next year will separate them.
As blockchain in the lending industry continues to evolve along with customer expectations, the delineation between the companies that can meet or exceed these expectations will become more clear.
The advent of blockchain tech to the financial services sector has already reshaped the way the world thinks about finance — it has enabled us to envision and pursue a future where the transfer of funds is rapid, frictionless, and secure.
Over the course of the next year, we'll be able to see which players truly believe in this vision and have the ability to drive it forward.”
3. Alex Faliushin, CEO and Co-founder of CoinLoan
“Blockchain technology is perfect for the lending market since it enables us to track and store all the transactions between a lender and a borrower. And the most important thing — it opens the door for new sort of credits backed with digital assets. Nowadays this new market is measured in hundreds of billions of dollars and available to lenders and borrowers all over the world! And we believe the market will be at least twice in 2 years!”
4. Steve Swain, CEO and Founder of Lendingblock
“Blockchain technology is disrupting financial markets around the world and is transforming the way lending works by providing more transparency, security, cost efficiencies, and faster transaction times than what an individual or institution would experience in traditional lending markets.
The value of what the blockchain can deliver for borrowers and lenders is clear, and we are beginning to see more and more commercial adoption.”
5. Anil Awasthi, VP, Global Head of Retail Banking, Virtusa
“As a technology, blockchain is still at the experimental stage. The same is also true when it comes to the lending business. While traditional players are trying out blockchain internally, new competition in the lending business is emerging from crypto companies such as SALT and ETHLend who are providing access to credit in return for blockchain assets (bitcoins, ETHER, RIPPLE etc.) that are used as collaterals. As the valuation of blockchain assets varies on a continuous basis, borrowers can benefit by the upward trend in valuation to pay off debt or add additional collaterals without losing ownership to those assets.. Only in case of a default, the borrower may lose ownership.”
6. Darshan Bathija, CEO and Founder of Bank of Hodlers
“There’s a popular opinion out there that banks are threatened by blockchain technology. This opinion can be substantiated by the numerous banks around the world trying to leverage blockchain technology into their processes, with the Bank of America having filed for the most number of blockchain patents and JP Morgan developing its own ‘cryptocurrency’. However, the bulk of financial services using cryptocurrency are mainly provided by blockchain companies and not banks.”
7. Joe Kelly, CEO and Co-founder of Unchained Capital, Inc
“The most predominant combination of lending and blockchains today is the use of blockchain-based assets as collateral for loans.”
8. Vitaly Bahachuk, Co-founder of Bloqboard
“Exponential growth has occurred since inception (Dec 17′) with blockchains (Ethereum) facilitating new debt markets. It is still too early to tell which decentralized lending protocols and applications will capture the most market share.”
9. Anzhelika Osmanova, CEO of Lendonomy
“Blockchain is so natural to lending that it makes me constantly wonder why it isn't the first thing that people think of when looking for business ideas in blockchain.
I see that peer-to-peer lending solutions that use cryptocurrency as a lending collateral for peer-to-peer lending are gaining popularity today. While such solutions don't need to be blockchain-based themselves, they, however, utilise the power of crypto currencies to protect their own businesses and their lenders. Other examples of utilising blockchain for lending involve direct lending of crypto assets, using blockchain for cross-border lending, and letting borrowers build a verifiable credit history.”
10. Ed Handschuh, Co-Founder and CEO, 1Konto
“I feel blockchain is currently underutilized in lending. The majority of blockchain-based lending is focused around lending coin from one user to another, or using a cryptocurrency as the collateral for a fiat loan.
These are good initial steps, but the potential value of having an immutable ledger is immense.”
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