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 The Crypto Lending Industry Has Learned from the Mistakes of the Past and Is Now Nearly 100% Collateralized, Paving the Way for Rapid Growth

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The Crypto Lending Industry Has Learned from the Mistakes of the Past and Is Now Nearly 100% Collateralized, Paving the Way for Rapid Growth  Vide
PostSubject: The Crypto Lending Industry Has Learned from the Mistakes of the Past and Is Now Nearly 100% Collateralized, Paving the Way for Rapid Growth    The Crypto Lending Industry Has Learned from the Mistakes of the Past and Is Now Nearly 100% Collateralized, Paving the Way for Rapid Growth  Icon_minitimeSun Oct 20, 2019 12:32 am

Uncollateralized Loans And Market Volatility Turned Early Crypto Lending Into A Disaster

The Crypto Lending Industry Has Learned from the Mistakes of the Past and Is Now Nearly 100% Collateralized, Paving the Way for Rapid Growth  Bitcoin-money-exchange-690x362

The early days of the crypto lending industry were for the most part disastrous. Borrowers and lenders interacted on peer to peer platforms like BTCJam and BitLendingClub. Borrowers would apply for a loan by explaining what they needed the loan for and by linking to their identity and various data that proved their reputation. If a borrower consistently repaid loans they would gain reputation and gain the ability to take out bigger loans.

Unfortunately, numerous scammers plagued these peer to peer lending sites. A common scam was to payback consistently and build credit, and then default when taking out the biggest loan possible. Lenders tried to track down the loan scammers and bring them to justice, but usually to no avail. Further, the laws in most of the world do not allow loan defaults to be treated as a criminal case. Instead, it is a civil case, meaning the lender would have to hire a lawyer and go to court, and even if the lender wins they could still get nothing if the borrower has no money or assets.

BTCJam and BitLendingClub ultimately shut down due to regulatory pressure, since their model was creating a dangerous environment for lenders and leading to big losses.

The most obvious reason that these early crypto lending platforms failed is due to offering uncollateralized loans. Loans were given out based on trust and credit, making it too easy for scammers to take loans and not payback. Further, the volatility of cryptocurrency made these loans risky. If the price of Bitcoin (BTC) fluctuated wildly, like it often does, then either the borrower or the lender could lose big. For example, if a borrower took out a 1 Bitcoin (BTC) loan, cashed it out, and then the price of Bitcoin (BTC) rises 100%, the borrower may have no choice but to default on the loan.

The Crypto Lending Industry Has Learned From Past Mistakes And Has Adopted Collateralized Loans

https://cryptoiq.co/the-crypto-lending-industry-has-learned-from-the-mistakes-of-the-past-and-is-now-nearly-100-collateralized-paving-the-way-for-rapid-growth/
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The Crypto Lending Industry Has Learned from the Mistakes of the Past and Is Now Nearly 100% Collateralized, Paving the Way for Rapid Growth

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