ETHLend is a decentralized marketplace for the lending and borrowing of cryptocurrency. The platform seeks to solve the problem of borrowers not paying back the capital of a loan agreement and lenders running at a loss. The marketplace is built on ERC-20 compatible tokens that run on the Ethereum blockchain.
How Does ETHLend Work?
The semi-anonymity of the Ethereum network makes it hard to determine if a borrower has a good payment history. By using a mechanism of reputation ETHLend removes this uncertainty. Each Ethereum address will have a reputation score attached to it so that lenders are reassured. The reputation system runs on the Credit Token (CRE) which is a token only used on the ETHLend internal blockchain.
ETHLend is a secured lending service as the borrower has to put up some form of collateral. This would be in the form of either Ethereum ERC-20 tokens or any Ethereum Name Service (ENS) domains that they own: ENS domains are short domains with the .eth domain extension that are used by an Ethereum wallet instead of the long and difficult wallet address.
Ethereum smart contracts are robust enough to store these credentials.
How Does ETHLend Create Trust?
Reputation Based Lending is used to create trust between borrowers and lenders using the CRE token as a unit of trust. In addition, this Decentralized Credit Rating (DCR) aims to build a credit profile of the borrower using other blockchains and will also make the data accessible to other blockchains. There are also other off-blockchain methods to access data and build a credit profile of the borrower.
What Other Ways Can ETHLend Use To Gather Data?
The ETHLend community has suggested some interesting solutions. One of them is the establishment of oracles. In Ethereum terms this means that real world data is fed in from outside the blockchain and is linked to entities on the blockchain. The function of this will be to do credit checks on prospective borrowers. Social media can also be used to profile the borrower and to verify their identity. Centralized data can be used to enforce a debt by getting a person’s address. This also has benefits for the borrower who can get better lending rates.
How Does First Time Borrowers Get Verified?
ETHLend will integrate with an identity verification system built on the Ethereum blockchain called uPort. Users can claim their decentralized identity and link it to their entity on the ETHLend blockchain. Even borrowers who do not have collateral can get access to unsecured lending. The risk can be mitigated by limiting the amount of Ethereum that a borrower can lend. The borrower then gains a good reputation when they pay back this loan and earn reputation tokens which gives them access to bigger loan amounts.
What Are The Benefits of ETHLend?
The ETHLend platform is trustless. This means that no one can manipulate or prevent the loan once it has been approved. The open nature of the Ethereum blockchain means that there is transparency as anyone can inspect the list of transactions in the public ledger. The ETHLend platform opens up lending access by bringing democracy to the financial industry. The pool of lenders is global so the opportunities are much bigger with greater access to finance. It is estimated that there are at least 2.5 billion unbanked people in the world. This also gives them the opportunity to access finance.
How Do You Use ETHLend?
The ETHLend dApp has already been launched. ETHLend is working on a mobile interface so that the dApp can be used inside the Status.im mobile browser. The developers crafting a better experience by simplifying the user interface. The lending process will be much shorter and easier to use. Instead of having to deal with sending Ethereum manually from a wallet the platform will collect and send the funds automatically when the lender approves the loan.
What are the LEND and CRE Tokens?
Both are ERC-20 Ethereum compatible tokens. The LEND token is used to get a 25% discount on services for early adopters who purchased the coin in the ICO token sale. They can pay with Ethereum as well but this creates incentive to get hold of the LEND token. Active lenders and borrowers will also be rewarded with LEND coins through an airdrop. This is to ensure that more users adopt the token and to create more value for the project through active and engaged users. In cryptospeak this means they will get free tokens. Special functions such as featured listings will also be available to LEND holders. Lenders and borrowers can also earn LEND if they refer someone to the platform. Although the primary purpose of the LEND token is to pay transaction fees it can also be traded on exchanges as any other cryptocurrency.
Why Does the CRE Token Only Function on ETHLend?
The only purpose of the CRE token is to track a user’s reputation on ETHLend and cannot be traded or sent to anyone. With each repayment of the loan a borrower will earn CRE, for example – on a 1 ETH loan they will earn 0.1 CRE.
How Can You Buy LEND?
You are not able to purchase LEND with “Fiat” currency so you will need to first purchase another currency – the easiest to buy are Bitcoin or Ethereum which you can do at Coinbase using a bank transfer or debit / credit card purchase and then trade that for LEND at an exchange such as Binance.
Register at Coinbase
For first time buyers of crypto currency, we recommend that you use Coinbase to make your first purchase – its easy to use, fully regulated by the US government so you know it is one of the safest and most reputable places to purchase cryptocurrency from. Coinbase offers the ability to purchase Bitcoin, Litecoin and Ethereum with a credit or debit card or by sending a bank transfer. The fees are higher for cards but you will receive your currency instantly.
You will have to carry out some identity verification when signing up as they have to adhere to strict financial guidelines.
Make sure you use our link to signup you will be credited with $10 in free bitcoin when you make your first purchase of $100.
To get started, click the “Sign up” button where you will be taken to a registration form where you will need to enter your name, email and choose a password.
Purchase Ethereum
In Coinbase, visit the “Buy / Sell” tab at the top, select “Ethereum”, choose your payment method and enter the amount you wish to purchase – you can either enter a US Dollar amount or a number of Ether.
You will then be asked to confirm your transaction, if paying with a card you might have to complete a verification with your card provider. Once that’s complete, your Ethererum will be added to your account.
Purchase LEND at Binance
You can now send your Ether over to Binance to make your purchase of LEND, take a look at our review of Binance here to see how to signup and purchase on their exchange.
What Are Some Applications for ETHLend?
The platform can be used in the crypto-economy for fundraising to invest in ICOs or other tokens. It also has use in the traditional fiat-based economy. It can be pegged to the USD and reduce volatility in lending transactions. Also, tokenization of things means that any real asset can be traded as a ERC-20 token on the blockchain. Literally anything can be put up as collateral on a loan transaction.
What is The Roadmap?
ETHLend will introduce lender side offers or on-demand lending. This is where lenders place offers on the amount they are willing to lend out as well as what their interest rate would be. They can also indicate which tokens they accept as collateral or which credit rating must be met. Another innovation is crowdlending where lenders can create a loan with multiple lenders which spreads the risk. They are also planning to introduce bitcoin and altcoin lending. The platform will also be extensible via API. This will give developers the chance to build lending bots.
What Other Features Are Planned For The dApp?
ETHLend is also working on bidding functionality. This will allow lenders to place offers on auction. This is a reverse auction where bidders compete to provide the best interest rate for borrowers. They also plan to extend the decentralized lending and DCR rating system beyond the Ethereum blockchain. A very interesting idea is the decentralized insurance policy. This will allow insurers to access the risk profiles of prospective clients and to offer them policies based on this.
Conclusion
ETHLend provides a comprehensive solution to the decentralized lending problem. The safeguards and systems that are in place ensure that risk is minimized. There are numerous benefits for borrowers and lenders using the platform. This innovation breaks down traditional barriers and opens up a whole new market for prospective clients in the financial services industry.
