With blockchain uses going beyond just trading cryptocurrency, it didn’t take long for somebody to see the potential in creating a lending platform.
Ethlend is quickly becoming a major player in the peer to peer lending arena.
With a free market, decentralised ethos to lending, Ethlend is quickly garnering a lot of attention for the possibilities it presents.
In their attempt to teardown institutionalised lending, they are beginning to make waves within the industry.
If you are only just learning about what is possible with Ethlend, then this article will help you understand how Ethlend works, what are some possible case uses and give you enough information to decide for yourself if Ethlend is right for you.
Buy ETHLend (LEND)
There is currently no way to buy LEND directly. So the only way to buy LEND is to purchase BTC to use on an exchange, and then switch it to LEND.
Step 1: Choose Your Trading Platform
Firstly you will need to decide on your cryptocurrency trading platform and create an account there. The choice of platform isn’t very important as a beginner, what really matters is a trading platform that you are comfortable using..
Choose one of these platforms and complete the follow steps to get started:
Go to Binance and create a new account if you do not already have one.
Once your account has been confirmed, log in to your Binance account and click on funds at the top right, then “Deposits Withdrawal”.
Look in the “Bitcoin” list and click the Bitcoin deposit button. Then a series of numbers appears in the “BTC Deposit Address:” field. You must copy this series for the next step. This is your bitcoin wallet address.
STEP 2: BUY BTC
The second step is to get your Bitcoin, you can do that at a broker such as BTCdirect .
If you’re buying BTC for the first time from these brokers, you will be asked to confirm your bank account.
Upon payment you will be asked to enter a bitcoin address. You must fill in the address that you have copied at Binance.
STEP 3: WAIT UNTIL YOUR BTC HAS ARRIVED
Once you have purchased Bitcoin and entered the correct BTC deposit address with the payment, you have to wait until the BTC arrives in your wallet.
This process can take up to ½ hour, so don’t worry if it’s not immediately visible on the exchange.
STEP 4: BUY LEND
Once your Bitcoin has arrived at your trading platform, it’s time to buy some LEND.
Go to the Binance trading exchange (click the top left on exchange and choose Basic) and use the search function within BTC Markets to find the LEND/BTC trade.
Once on the LEND/BTC trade page you can look in the left box marked with Buy LEND. Here you can decide how much LEND you want to buy using your Bitcoin.
If you then press Buy LEND your order will be placed. When the order is filled you will see your number of LEND on the right-hand box or on your balance page.
Congratulations you’re now the proud owner of LEND.
What is Ethlend?
Simply put, Ethlend is a new, decentralised peer to peer lending platform on the Ethereum blockchain. The founders, Stani Kulechov and Jordan Lazaro Gustave, have arrived at this project after years in the fintech industry.
Fintech is an abbreviation of the term “Financial Technology”. This is new technology and innovations that aim to compete with traditional financial methods in the delivery of financial services.
Before we continue, we need to be clear about what Ethlend is not. Ethlend is not a lending institution. They merely facilitate lending between users of the decentralised application. Ethlend allows for secured, trustless loans by way of smart contracts on the blockchain.
The founders of Ethlend are convinced that the future of blockchain technology will enable a more democratic way for people to borrow money, and for ordinary people to become their own lending institution.
Lending on Ethlend is done between ordinary people who act as their own lending institutions.
This opens the possibility of a truly global lending market.
How Does Ethlend Work?
By using Ethereum’s blockchain, a smart contract can be made between a lender and borrower. The interest rates, premium and terms of the loan are decided on by the two parties.
Why use the Ethereum blockchain?
The Ethereum blockchain deals with more complex transactions than merely sending and receiving value. There is also the possibility to add, store data and perform complex requests and calls. This makes it an ideal solution for storing smart contracts.
Since it is completely decentralised, the loan process is trustless, transparent and immediate. Once a loan is transacted, the funds are available within minutes.
The borrowers are pledging Ethereum-based ERC-20 compatible digital tokens (ERC-20 Tokens) or Ethereum Name Service domains (ENS domains). This is the collateral for the loan and gives the lender security that the loan will be repaid.
Once the loan terms are agreed upon by the participants, a smart contract is placed on the blockchain. Once this transaction is on the chain, it cannot be changed by anybody including Ethland. To reiterate: Ethlend is completely decentralised and cannot dictate to the users how they should proceed, or change the terms already agreed upon.
All transactions, therefore are open to review by anybody. This access seriously levels the playing field in terms of lending and creates a global marketplace.
Since there is no central institution, a borrower in Ghana can request a loan and somebody from Argentina can supply it. There is no inflation to consider, no exaggerated interest rates determined by a government agency and no liquidity issues caused by cross border lending.
There also is no credit agency involved to assess how risky a borrower may be. This may seem like a red flag, but since collateral in the form of tokens has to be presented by the borrower to secure the loan, there is less risk of a default.
What happens if a borrower doesn’t repay the loan?
The tokens used as collateral will be given to the the lender if the loan is not repaid. The borrower also has a 0 rating and will not likely see more loans in the future as lenders will deem him to be too risky.
Of course, even with the collateral, a lender must do his due diligence.
How To Use Ethlend
To lend and borrow on Ethlend, the first thing you will need is some LEND, the tokens used to send the loans.
To do this, you will need to use Ether to buy some LEND.
Using Ethlend requires Google Chrome. If you are not already using Chrome, you should download it and get it set up.
Next, you need to install a Chrome Extension called MetaMask. This plug in will facilitate setting up your smart contract on the blockchain.
As a borrower, before you submit a loan request, you will need to assess the value of your tokens and collateral. To do this you need to take the price of the ERC-20 from the exchange. Once you know the price of the ERC-20 you can then deduce what a lender would be willing to lend to ensure they are repaid.
Now, you simply need to go to MetaMask, the decentralised app, or dapp, that you added to Chrome and fill in all the criteria pertaining to your request. For instance, how long the terms will be, what the collateral is, the price of the ERC-20 token, etc.
At this point you will need to wait for a lender to find your request and the rest of the terms agreed upon.
As a lender, you will also need to have LEND tokens as that is what will be transferred to the borrower.
Next, search through the loan requests and try to find a suitable one for you. Both in terms of how much you are being asked to lend and as to whether you like the looks of the collateral.
Once you have found a suitable loan request, click on it and confirm when the MetaMask asks for the confirmation. Once confirmed, a ledger with all of the loan information is set up in a smart contract on the Ethereum blockchain.
This all sounds very simple, and the execution of it is. However, it must really be stressed at this point that knowing how lending and borrowing works will ensure your success as either a lender or borrower. The process might not be complex, but, finance certainly can be.
Possible Use Cases of Ethlend
Below are some of the possibilities when using Ethlend to either borrow or lend funds.
Participate in different ICOs
When dealing in crypto, liquidity is a very common issue. To get around this, many borrowers are seeking out solutions like using Ethlend to finance their purchase of tokens and altcoins.
Since you may not wish to cash in your currency, be it fiat or crypto, you can take out a loan that pays you in minutes to exploit a volatile market where time is of the essence.
As more and more people are tiring of the mega banks, they seek to add more control into their lives. Using a peer to peer lending platform effectively cuts out the middleman.
With crypto wallets keeping your savings, and using decentralised blockchain technology for loans, you are able to save money and time. All the while, keeping your data safe from hacking and changes to government monetary policy.
Long Term Holding
If you are in the crypto world and thinking long term, then being a lender can pad your wallet even in the short term. Without needing to risk trading your favorite currency, you can still be making some money by interest generated by lending.
Of course, for time immemorial, people have been taking out loans from financial institutions for personal and business reasons. Ethlend is no different.
If you are having cash flow problems and want to expand your business, then taking a loan without needing to sell off precious crypto has obvious benefits.
Other Uses For LEND
In addition to funding your loans or putting up collateral, there are other reasons to use LEND.
- Receive 25% price reduction on platform fees (Loan request fee and Loan funding fee) compared to paying with ETH.
- Rewarding active lenders and borrowers with airdrops. ETHLend will use 20% of the decentralised application fees (loan request fee and funding fee) to purchase LEND from the market and airdrop the LEND for all the lenders and borrowers on ETHLend.
- Rewarding Introducers with LEND, basically EThlend’s affiliate or referral program. Send a friend to Ethlend and receive some benefits in the form of LEND tokens.
- Featured functions that are accessible only with LEND tokens. With LEND, you will be able to get your loan request higher in the rankings for better visibility, pay for credit assessment bots and enter into email marketing campaigns for new listings.
Ethlend believes Capitalism works best when the barriers by large institutions are removed, and more control is put into the hands of regular people.
Creating a global lending market can help grow local economies all over the world which benefits everybody.
Take a borrower in India, for example, that previously might have needed upwards of 12% to secure a loan to expand his business. With lower interest rates and an immediate payout, he can keep his investment in crypto and still set himself up for success in his business.
Taking inflation out of the equation has obvious benefits, as well. In this scenario, everybody is equal. As long as a borrower has the collateral, then they can get a loan and negotiate the terms themselves instead of being at the whim of a bank.
Trustless, secure and decentralised lending between peers may be the way of the future. Time, of course will tell, but for now many people are benefiting from a more democratic system of finance thanks to Ethlend.