The world’s first decentralized peer-to-peer borrowing and lending for cryptocurrency was created by ETHLend.
The app is helpful for lenders as it tries to resolve the issue of loan defaults and also for cryptocurrency holders who want to unlock the value of their digital assets without selling them.
But how can they set themselves apart from many other lending registry platforms? In this ETHLend review, I will examine the project in great detail and analyze the LEND token and its likelihood of being adopted over time. Furthermore, I will provide you with key insights to consider when using ETHLend.
How ETHLend Works
ETHLend is an Ethereum-based lending platform that enables secure borrowing utilizing a simple peer-to-peer lending structure. Borrowers develop an Ethereum Smart Contract for each loan request, which is signed and recorded on the blockchain.
The borrower creates a Smart Contract using data input such as the loan amount, requested interest rate, and loan duration. The borrower also inserts the address for his or her cryptocurrency and the amount to be used as collateral into the contract.
Once that happens, When creating a Smart Contract is completed, the cryptocurrency put transferred into it becomes available to lenders to fund. Borrowers can browse through lending offers, and potential lenders can look at browsing through loan requests t choose the ones that look most attractive to them.
If the borrower cannot repay their loan on time, then that particular collateral is transferred to the original lender as compensation. The lender can keep or sell these tokens in an open market.
Since everything is handled via Smart Contracts on the Ethereum blockchain, it’s all quite safe. ETHLend won’t be able to access the tokens held as collateral in the Smart Contract, which makes this process even more secure. Everyone wins because of blockchain technology.
How does ETHLend establish trust?
Using the CRE token as a unit of trust, reputation-based lending fosters confidence between borrowers and lenders. In addition, this decentralized credit rating (DCR) attempts to build the borrower’s credit profile by using other blockchains and making the data available to other chains. Other off-blockchain ways to access information and construct the borrower’s credit history are also available.
What are some other ways ETHLend can use to gather data?
Some of the ETHLend community’s most interesting solutions have included establishing oracles. In Ethereum terms, real-world data from sources outside the blockchain are fed in and linked to entities on the blockchain. This purpose is to credit check prospective borrowers, among other things. Social media can also profile potential borrowers and verify their identity; centralized data that includes a borrower’s address can also help enforce a debt. But it’s not all bad news for borrowers–this process can get them better lending rates!
How Does Proof Verify First-Time Borrowers?
ETHLend plans to integrate with uPort, an identity verification system that utilizes the Ethereum blockchain. By doing so, ETHLend users can create a decentralized identity linked to their entity on the ETHLend blockchain. This way, even borrowers who do not have collateral can get unsecured funding. The risk of default can be lessened by capping the amount of Ethereum a borrower can take out as a loan. Plus, once a borrower repays their loan in full and on time, they will earn reputation tokens which signify good standing and could give them access to larger loans in the future.
Lending and Collateral at ETHLEND
ETHLend offers the ability to borrow ETH, LEND, DAI, TUSD, and several fiat currencies pegged to ETH. The system does not currently support borrowing straight fiat currency; however, this is a planned feature for the future.
Users can put down ETH, BTC, LEND, and over 180 other ERC-20 tokens as collateral for loans with an LTV of 50%. If they use LEND tokens, the required LTV is 55%, meaning most loans are backed by 200% of collateral. The ETHLend team has done this to reduce the risk for lenders as much as possible.
The first issue is that not all loans on the Ethereum network require collateral. ETHLend is also looking into using Ethereum Domain Names as collateral for loans. The reasoning is that domain names have value in addition to Ether, which has been put down as security.
Use Cases for ETHLend
Aside from its obvious application of allowing investors to profit from their cryptocurrency holdings and providing borrowers with liquidity, ETHLend might also offer value in various ways. The platform may be utilized to raise funds for ICO investing.
ETHLend reduces volatility for lenders by pegging their loans to the USD or other fiat currencies. In addition, anything could potentially be used as collateral for a loan from ETHLend in the future once all types of physical assets have had tokens created to digitize them.
The addition of decentralized insurance is an interesting proposition for ETHLand. In this system, insurance companies would analyze the risk profile of ETHLand users and provide them with rates based on their risks.
The ETHLend Team
The Fintech firm Aave owns and operates ETHLend, which is incorporated in Estonia. Despite being established in this country, most of the team is based in Helsinki, Finland. Stani Kulechov founded ETHLend, and Jordan Lazaro Gustave serves as the company’s COO.
Even though there was little outward advertising from the ETHLend team, several members were concerned with marketing and media relations. There are also several legal, financial, and technological consultants on the project. What I’m looking for are actual developers and coders.
The main appeal of ETHLend is that it is a trustless lending platform. This prevents anybody from altering or manipulating loans and loan data, which is crucial for maintaining transparency. You have complete insight into the borrowers and lenders, which will promote fairness and democracy in the lending business. Because ETHLend is a worldwide network, it allows millions worldwide to participate.
Leveraging Digital Assets
The ETHLend service’s major advantage is receiving cash for your digital assets and then spending that money while your bitcoins or ether appreciate. It’s much better than selling your cryptocurrency and losing out on gains. You may use ETHLend to get required funds for other ventures, start a business, or even deal with an emergency such as sickness or accident.
Some countries may charge taxes on your cryptocurrency, but many are still unclear concerning regulations. Some aren’t even sure how to classify this new species of the asset. In the United States, if you sell your cryptocurrency, you must pay a capital gains tax on the rise in value, usually known as profit. You may postpone paying capital gains taxes until later if you take a loan against your crypto.
You should only do this if you genuinely need the loan; otherwise, you’re just deferring taxes. Also, don’t forget that you’ll still have to pay interest on any loans.
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ETHLend’s Threats and Pitfalls
However, there are a few factors that may jeopardize your ETHLend loan. Most of the time, this is due to information gaps regarding the lending process.
Lack of Disclaimers and Process
The ETHLend website does a pretty poor job of explaining how the whole process works. Instead, it throws you right into the borrowing or lending process without clearly explaining how the platform works, the fees and responsibilities, and many other aspects of the loan process. There needs to be clarity added and more explanations before tossing people into the borrowing process.
Decentralization can deal with various loan industry problems, but what about disagreements? If two people disagree over anything, there will still need to be a third party who can hear the dispute and decide which party is right.
With more people using ETHLend, the need for a central authority will become apparent. This could be either ETHLend employees or a group of independent arbitrators. The sooner this issue is addressed, the better.
How Do You Use ETHLend?
The EthereumLend dApp has already been published. ETHLend is working on a mobile interface for the dApp, allowing it to run inside the Status.im mobile browser. The user interface is simplified to provide a better experience for the users. The lending procedure will be shorter and easier because
The LEND Token
The LEND token is used for various purposes within the ETHLend system, such as increasing the LTV percentage from 50 to 55 for borrowers. I will discuss it later, it can also be utilized in microstaking on the platform. In addition, those holding the LEND token can take advantage of having their loans featured prominently on the site. Lastly, paying fees on ETHLend can also be done with this currency.
ETHLend conducted its ICO in November 2017, raising $16.2 million from investors by selling 990 million tokens for $0.0176 each. The token’s price rose quickly amid the crypto-fever of December 2017 and January 2018, reaching an all-time high of $0.442615 on January 7, 2018.
The token’s price has steadily declined since its ICO, reaching an all-time low of 0.006225 on December 7, 2018. The price has rebounded slightly but is still more than 50% below its ICO price as of April 29, 2019.
You will need BTC or ETH to trade for LEND at any of the listed exchanges, which include BiteBTC, ABCC, and Binance. You cannot buy LEND with fiat currency.
Although there seems to be a sufficient amount of LEND tokens being traded on these exchanges, more than half the volume is coming from BiteBTC–which isn’t as popular. Prices from this exchange aren’t even included in the calculation of LEND prices on CoinMarketCap.
If you want to keep your LEND tokens safe, store them off-exchange in a wallet that is ERC20 compatible. However, if you want to take advantage of the benefits of holding these tokens, put them in the ETHLend-provided wallet.
If you’re looking to get into micro-staking, ETHLend is a great option.
ETHLend has introduced the concept of micro-staking LEND to make holding it more appealing for investors. Micro-staking creates a Smart Contract on ETHLend’s platform where a small amount of ETH is sent with each transaction and converted into LEND, which is then held as a Global Staking Deposit.
A small percentage of LEND tokens are released to users regularly as a reward for staking Smart Contracts. The amount of LEND tokens received is based on the amount of ETH sent to the Global Staking Deposit. In other words, using the platform more frequently leads to greater rewards.
If a user is active on the platform, their LEND in the staking Smart Contract will continue to grow. They can claim this stake while they are active, but if they withdraw early, a small penalty will be applied, and some of the stakes will be sent back to the Global Staking Deposit. If users want to collect their entire stake, they must wait until they are inactive on the platform and then withdraw during the Withdrawal Timeframe. Stakes not withdrawn during the Withdrawal Timeframe become locked and can only be reactivated by accessing and using the platform again.
How Can You Buy LEND?
While you cannot buy LEND with regular currency, you can purchase Bitcoin or Ethereum at Coinbase using a bank transfer or debit/credit card. Once you have done so, trade that same cryptocurrency for LEND at an exchange such as Binance.
Register at Coinbase
We always recommend that first-time cryptocurrency purchasers use Coinbase. It is easy to maneuver and fully regulated by the United States government, so you can trust that it is safe and reputable. With Coinbase, you can buy Bitcoin, Litecoin, or Ethereum with a credit or debit card or through a bank transfer. The associated fees for using a card are higher than those for bank transfers; however, your currency will arrive instantly if using a card.
As part of their commitment to strict financial guidelines established by authoritative industry figures, new users must complete identity verification upon signup.
To begin, click the “Sign up” button. You will be redirected to a registration form where you will input your name and email and create a password.
On Coinbase, go to the “Buy / Sell” tab at the top. Then select “Ethereum”. After that, choose your payment method and enter how much you want to buy in US Dollars or Ether.
Then, you will be prompted to confirm your purchase; if using a card, you may need to go through an extra verification step with your card provider. Upon completion, your Ethereum coins will show up in your account.
Purchase LEND at Binance
You can now use Binance to purchase LEND with Ether. Look at our review of Binance here to learn how to sign up and make your purchase on their exchange.
What Are Some Use Cases for ETHLend?
The tool may be used in the cryptocurrency economy to finance ideas like ICOs and other cryptocurrencies. It has applications outside of the fiat-based financial system, as well. It can be pegged to the US dollar and reduce lending transaction volatility. Also, tokenizing assets allows anything real to be traded as an ERC-20 token on the blockchain. According to popular belief, anything tangible may serve as collateral for a loan transaction.
What is The Roadmap?
ETHLend plans to enable lender-side offers or on-demand lending. With this, lenders can indicate how much they’re willing to loan out, what the interest rate will be, which tokens are accepted as collateral, and more. ETH22 crowdlending will allow multiple lenders to fund a single loan together to spread the risk around. They also plan on introducing bitcoin and altcoin lending eventually. Lastly, their platform will be extensible via API–allowing developers to build bots specifically for ETHLend’s purposes.
What other features does the dApp include?
ETHLend continues developing its innovative bidding functionality, enabling lenders to place offers on auctions. This unique system is a reverse auction where bidders compete to provide the best interest rate for borrowers. In addition, ETHLend plans to extend its decentralized lending and DCR rating system outside the Ethereum blockchain- making this solution truly Trustless and Decentralized. Another interesting idea in the works is a decentralized insurance policy. This would allow insurers to access risk profiles of prospective clients and generate policies from that data, resulting in more transparency for buyers while also providing them with potentially lower rates.
ETHLend vs. Salt
ETHLend isn’t the only lending platform in town. One of its well-known competitors is Salt.
Salt is a cryptocurrency lending platform that allows you to use your crypto holdings as collateral to borrow regular fiat cash. This means that you can unlock instant liquidity for your crypto holdings.
Furthermore, Salt has a larger track record and a bigger team of experts to tap into. They’ve also built a more useful and easy-to-understand lending platform that thousands of cryptocurrency users use to get loans.
Only accredited investors in the United States, the United Kingdom, and New Zealand can invest in it. This implies they must show at least $1 million in net worth. It is only accessible to residents of certain US states, the United Kingdom, and New Zealand.
This means that people located in other countries are ineligible to use Salt lending. Furthermore, this also suggests the network is more centralized than ETHLend, which, as we all know, carries significant risk to a decentralized blockchain.
ETHLend seeks to become the go-to decentralized lending platform by offering a comprehensive solution that should make borrowing and lending more attractive to users. This would, in turn, provide an alternative for the billions of unbanked people worldwide.
We created this system to reduce the risk for lenders and increase benefits for borrowers, especially those looking to unlock their digital assets’ liquidity. ETHLend provides a way to keep holding cryptocurrencies to take advantage of price appreciation while unlocking the current cash value to invest in other things or grow your business.