Decentralized lending platform and its uses

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Decentralized lending platform and its uses
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• The blockchain technology that fuels
  cryptocurrencies such as Bitcoin and peer-to-peer
  lending are a natural fit that may help overcome
  some of the inherent challenges with many
  peer-to-peer lending platforms today. Many
  experts believe that this innovative technology
  will prove itself as a groundbreaking solution
  leading to a new economic system, often called
  the blockchain economy. In this new financial
  system, rules defined by smart contracts will
  make sure that agreed-upon transactions are
  enforced autonomously. Thats why peer-to-peer
  lending in many ways seems like the perfect use
  case for blockchain technology as it can
  potentially allow lending platforms to establish
  a much less dependent trust relationship between
  lenders and borrowers. This use case is what we
  know of as decentralized lending platforms.

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• Decentralized lending platforms allow users to
  deposit and lock their funds into smart contracts
  from where other users can borrow and pay
  interest on them. Decentralized lending platforms
  are available to anyone, anywhere, and most
  require only an Ethereum wallet to use. One
  example of a decentralized lending platform is
  JENCO. JENCO offers an API toolkit that connects
  to all major lending platforms such as Poloniex,
  DDEX, Aave, Argent, Compound and InstaDapp, to
  make sure participants will accurately lend out
  their crypto asset and receive in time without
  compromising security.

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LENDING

• Crypto holders can lend on decentralized
  lending platforms so that they can earn passive
  income on their holdings through the interest
  fees paid by borrowers. This is an attractive
  opportunity for crypto holders as lending can
  help them earn relatively low-risk interest on
  their existing holdings without the need of
  giving away their private keys to a centralized
  third party service. 

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BORROWING

• The most popular use case for borrowing crypto
  is margin trading. Borrowing from decentralized
  lending platforms allows traders to get leverage
  which multiplies gains and losses while trading.
  It also gets leverage from short selling, which
  is a trading strategy which makes money when the
  price of an asset goes down. 

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Collateralized Borrowing

• At the moment, the most popular decentralized
  lending platforms use a form of borrowing called
  collateralized borrowing. Collateralized
  borrowing means that users who are looking at
  borrowing crypto must lock up collateral of
  greater value than the value of what theyre
  borrowing. The collateral serves as an insurance
  that lenders will be repaid even if the borrower
  never repays the loan. For example, a trader
  wants to borrow 100 worth of LTC. The trader
  needs to lock up more than 100 worth of
  collateral in another asset.

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Conclusion

• In the past years, we have seen the emergence
  of decentralized lending platforms. It has
  provided different opportunities to crypto
  holders and traders. The ability to borrow and
  lend on a completely open platform is a
  fundamental advancement in financial markets and
  is already gaining a lot of traction.