Blockchains And The Lending Market
A loan is a debt provided by an entity to another entity at an interest rate, and evidenced by a promissory note which specifies, among other things, the principal amount of money borrowed, the interest rate the lender is charging, and the date of repayment or a recurring payment schedule.
The history of loans dates back to thousands of years. Forms of lending were evident even in ancient Greek and Roman times. During the Middle Ages and through the 19th century, indentured loans were practiced by landowners and the wealthy. Indentured servitude allowed poor individuals to borrow the money needed for major expenses such as travel and real estate, or to have substinance for them and their family.
Amidst the rampant indentured servitude, banking loans were later developed by money lenders such as the Italians who charged interest on their loans at a rate that they set, and would sometimes be quite successful and become very wealthy. Interest rates (in the form of a savings account) are even mentioned in the New Testament, during the Roman period.
Modern banking has improved the loan market’s interest rates, which are much more controlled, and loan terms have a much higher degree of fairness. The modern banks, finance companies, and online lenders that provide loans to the public and private sectors provide a great service to the world economy, and are regulated by both local and governmental policy so as to make sure that nothing interferes with that service. It can be quite a lucrative business.
Peer-To-Peer Lending (p2p)
Peer-to-Peer lending involves lending money to individuals or businesses through online services that match lenders with borrowers. P2P lending has grown rapidly in recent years and is a new source of fixed income for many knowledgeable investors. With interest rates at all-time lows since 2008, and many historically safe investments like government bonds carrying negative yields, investing in P2P loans in 2017 has become a great choice for many.
Peer-to-peer lending (P2PL) companies offer, often with their online services, lower overhead costs and services which are cheaper than traditional financial institutions. As a result, lenders can earn higher returns compared to savings and investment products offered by banks. Borrowers can borrow money at lower interest rates, even after the P2P lending company has charged checking and match-making platform fees.
P2P lending may also accept cryptocurrencies, with Bitcoin particularly appealing to some people who want to transfer cryptocurrency in a P2PL agreement, an arguably easier process than dealing with fiat currency. Additionally, the interest rates in BTC-based P2PL are fairly high, usually between 10 and 20 percent. Investors and borrowers wishing to go this route, however, will need to factor in the volatility of these traditional digital currencies.
Cryptocurrencies are easily transferable across borders, a feat that could help to scale the market and achieve enormous network effect. Smart contracts ensure secure & self-enforceable agreements, and move money without intermediaries. However, most loan markets and p2p lending still depend on centralized and institutionalized platforms. This situation has therefore finally led up to the creation of the GetLine Network — a decentralized p2p lending platform.
The GetLine Network
The GetLine Network is an open source, Peer-to-Peer lending platform on the Ethereum blockchain, allowing for trustworthy, yet trustless credit scoring, effortless lending, and accessible borrowing. The GetLine Network will empower people globally to be part of a single financial system built up on the Ethereum blockchain.
Blockchain Tech To Displace And Disrupt Traditional Bank Loaning
US consumers alone paid a trillion dollars in credit card interest to banks in the 2000s. Today, technology allows for the supplanting of costly middlemen by marketplaces; Such as traditional banks, which have been the middlemen for centuries, matching savers with borrowers at the expense of the real economy. Thanks to technology, eBay and Amazon managed to disintermediate retail, and AirBnB revolutionized room rentals. The same logic can apply to finance, and free up enormous potential for growth and prosperity. The GetLine Network aims to provide decentralized blockchain architecture for cryptocurrency lending that is trustless, available worldwide, stable, and compliant. The network will feature a decentralized credit scoring market where credit bureaus will compete for the best accuracy and price of credit assessment. GetLine’s mission is to make blockchain tech subdue the financial system by disrupting the $200 billion peer-to-peer (P2P) lending market and eventually displacing the legacy banking industry with a fully decentralized P2P finance system.
Components Of The GetLine Network
The GetLine Network will be comprised of a smart contract layer, a safe platform where the entire lending contract will be performed and settled. It will also be comprised of a credit risk scoring network, made up of entities called Attesters of Risk Analysis (ARA), providing risk-evaluation of borrowers’ creditworthiness, effectively forming a prediction market, and also serving as legal compliance agents, ensuring the viability of each lending contract according to applicable jurisdictions. Moreover, its scoring system will provide information on each individual ARA’s past accuracy to foster competition and allow lenders to evaluate each credit score’s trustworthiness, based on previous ARA’s performance. Additionally, future borrowers will be able to easily apply for a credit score, and later for a loan. Investors will be able to easily fund loans thanks to GetLine’s user-friendly browser. The GetLine Network’s deflationary GET tokens will also be issued to align incentives in the network and to help fund the development of the project.
Competition And A Competitive Advantage
Although currently booming, P2P lending marketplaces cannot scale worldwide. Blockchain technology, however, makes it possible to move value around the world freely and without borders. GetLine aims to close the technology gap and allow for borderless P2P lending and a single world lending market. Big financial institutions, as well as GetLine’s potential competition from other P2P blockchain lending platforms, such as WeTrust and Dharma, will be thwarted by the well designed, robust, and resilient GetLine Network that will withstand malicious attacks. We believe that the network’s blockchain technology, unique credit scoring system, its pioneering status, and the funds from the ICO crowdsale, will allow The GetLine Network to achieve the network effect and form a sustained competitive advantage.
GetLine’s Solution
The GetLine Network will utilize Ethereum’s blockchain technology as a perfect tool for moving value around the world, to allow assessing, transmitting, and storing of credit risk valuations for individuals. GetLine will also provide all the tools needed for individuals to easily apply for loans as borrowers, and to browse and fund loans as lenders. The protocol is designed to support a multitude of different clients’ ecosystems, risk assessment mechanisms, and last mile suppliers. This allows servicing and providing loan products to any person with a credit rating, in an easy and digital way.
GetLine could allow people all over the world to be part of a single financial system, in three simple steps. Firstly, borrowers apply for a credit score to a risk scoring institution. The institution calculates their default risk and transfers it to the blockchain. Borrowers can now apply for a loan on the platform. Lenders bid for lowest interest rates, taking into account the default risk and credibility of the credit scoring institution — the institution’s past performance in accurately determining borrowers’ creditworthiness is readily visible and transparently scored. Finally, borrowers can get the loan after the bidding is complete. Default on repayment will result in the loss of collateral, and gives the lender(s) the right to sue borrowers in an off-chain court of law or sell the debt to debt collectors.
The future of financial markets belongs to blockchain technology. We believe in the safety and benefits offered by blockchain in the P2P lending market: disintermediated, global, and truly P2P lending.
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