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Lending, an important form of finance from the beginning of recorded time, enters a new era thanks to cryptocurrency. Borrowers can now get a loan in “real” or fiat currency based on crypto assets, but at the same time maintain ownership of those assets.
Being used as collateral, cryptocurrency can be as valuable as real estate and even more valuable than a car, which loses its value with time. By using cryptocurrency as loan collateral, a crypto asset can become more valuable over time, especially as cryptocurrencies continue to rise in value.
In essence, cryptocurrency is bringing a revolution in lending.
Innovation Emerges In Lending
While traditional financial institutions are only beginning to explore blockchain technology and cryptocurrencies, startups have emerged that are bridging the gap between traditional financial assets and cryptocurrencies.
These startups herald a new era of improved access to capital for consumers and businesses alike, as crypto asset based loans are now a reality.
While most private creditors do not currently accept digital assets as collateral, innovative players have seized the opportunity to allow borrowers to obtain fiat money against a cryptocurrency through financial institutions.
Unique Opportunities For Borrowers
eCoinomic.net, based in Estonia, will assume the role of guarantor for financial institutions, and in essence, bridging the gap between crypto and traditional financial assets. The platform’s smart contracts will regulate the procedures of blocking, returning or liquidating collateral assets.
Being a versatile platform, eCoinomic will deliver improved access to capital to people in many countries holding a variety of cryptocurrencies. The platform will accept the top 10 cryptocurrencies as collateral and issue loans in USD, EUR, GBP, JPY, CHF and CNY.
Nor will the process be laborious for borrowers, as a built-in payment agent will enable lending fiat funds in a few minutes.
Borrowers can also rest assured of receiving optimum value for their cryptocurrencies thanks to a price monitoring system that checks collateral value every minute based on data from various cryptocurrency exchanges.
Smart Contracts Enable Innovation
“The second generation of cryptos, starting from Ethereum, allows us to set up the so-called smart contracts,” said Maksim Akulshin, the co-founder and CTO of eCoinomic. “In fact, this is the development of certain conditions, the fulfillment of which is fixed by the whole system, regardless of will and desire of participants having signed this contract.”
For example, the conditions of transferring property rights after the payment is received can also be registered by a smart contract.
A tool of this kind can completely replace intermediate institutions, such as banks.
“One who takes a loan can be sure that we will not use his bitcoin, we will not sell it secretly, we will not be able to speculate with it,” explained Aleksei Smolianov, the CEO and co-founder of eCoinomic and the owner of Sauber Bank. “And when he returns the money he borrowed, he will receive his pledge back.”
Borrowers will reap numerous benefits from their crypto assets. These include using fiat money for business expansion, hedging exchange rate risks, reducing exposure to market volatility, and taking full advantage of crypto asset potential.
“We’ve been active in the microcredit market and we understand well both the market and the mechanism of its work: how the money should be paid from the technical point of view, how to interact with the clients,” said Smolianov.
Long term, eCoinomic will evolve to provide full scale banking services, such as investing, hedging, a cryptocurrency exchange and crypto payments. The eCoinomic platform development will be supported through service fees paid with its CNC tokens.
Funds raised during the eCoinomic.net token sale will be divided into two parts: $6 million will be spent on the launch, development of the platform, legal, technical audit and marketing, while the rest of the funds are to form a reserve fund, estimated at $100 million. The reserve is required as a precaution against abrupt changes in currency volatility.
The platform will be available by the fourth quarter of 2018.