For this chapter in the series where we cover the best performing token of last week, as reported in our Weekly Recap of last Saturday, we will be talking about ETHLend, the first platform to propose a system of cryptocurrency loans backed by the lender’s holding of certain supported tokens.
An Unfulfilled Need
In an environment as volatile and unpredictable as cryptocurrency, enthusiasts and potential users are often driven away by the lack of certainty in how long the assets they buy will hold their value. This is what stablishes the need for users to have a way to have almost instant access to relatively small amounts of currencies, without having to go through all the steps necessary to properly purchase the tokens.
Enter ETHLend, a project that started in early 2017 by the Aave team that matches lenders and potential loaners in a completely decentralized manner, via Ethereum Smart Contracts, for the formers to have quick access to crypto loans backed by guarantees in Ethereum, Bitcoin and LEND. They are often referred to as the ones that ventured first into the grounds of DeFi (decentralized finance), and that reputation has got them far.
Right now, their system works in a very similar way to regular loans: the lender and borrower agree to the terms of the loan, the borrower receives the funds while placing a collateral, which is a cryptocurrency. The participants are connected through the platform, and all of the agreements reached by both parties are coded in a smart contract in the Ethereum network, where it will be protected against forging and tampering.
One of the most important terms in the contract is the interest rate, which the borrower has to pay. What makes this iteration interesting is that both parties can agree on a floating rate that varies depending on various factors like market situations and quality of the currency selected as collateral. Moreover, the volatility we mentioned before can also be included as a condition in the contract, where the borrower can include a clause for claiming the loan back in case of a very sharp drop in the collateral’s value.
Digitizing the World
To follow the wave of modernization and virtualization of real-world market dynamics and options is to embrace evolution but driving said processes forward is what really makest the difference among tens of similar projects. The existence and reputation of platforms like ETHLend brings greater attention from the masses that are looking for alternatives, and said attention works greatly for projects like theirs, and even better in such times like these.
ETHLend, and its parent Aave, seemed to fare quite nicely against the crypto winter of 2018, as people were looking for options to gather initial funds and loans seemed to be their best choice. We are not in a situation remotely similar to what happened last year, but bearish trends on the rise might have reignited the interest of potential users into loan services like ETHLend.