How blockchain will disrupts banking system — Part 5

Andrea
Andrea
Nov 1 · 2 min read

The worlds of the consumer, the financial institution, and blockchain are slowly converging.

Where banks and lenders underwrite loans based on a system of credit reporting, blockchain technology opens up the possibility of peer-to-peer loans provideng a faster and more secure loan process.

EthLend, a decentralized peer-to-peer lending application based on Ethereum, raised $16.2M via ICO.

When you fill out an application for a bank loan, the bank has to evaluate the risk that you won’t pay them back. They do this by looking at many complex factors and, using this information, banks define fees and interest collected on loans.

Source: ECB

This centralized system is complex and hostile to consumers. Alternative lending using blockchain technology offers a cheaper, efficient and secure way of making personal loans.

So, based on a decentralized registry of historical payments, consumers could apply for loans on a global credit score.

EthLend

EthLend, a decentralized peer-to-peer lending application based on Ethereum, raised $16.2M via ICO.

How it works? when a customer issues a loan request, a smart contract is created with the loan amount, interest rate, and time frame. The borrower puts up tokens of EthLend as collateral. If the loan isn’t paid in time, the lender receives tokens as collateral.


Disruption doesn’t happen in a day

Blockchain technology is still in its initial phase. At this point blockchain technology can bot replace the entire banking system or help traditional financial institutes to innovate in a more efficient way.

Anyway there is a fact about blockchain, this technology will transform the banking industry.


Don’t miss all my stories about blockchain
1. Blockchain and payments
2. Blockchain and fundraising
3. Blockchain and security
4. Blockchain and banks

See you soon, thanks for reading.

Andrea

Written by

Andrea

Wev developer and Marketing Manager with a passion for sharing what I learn

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