Blockchain in the Real World: SALT

Part of Hydro’s mission is to take blockchain beyond the proof-of-concept phase. To that end, this series will take a look at some examples of blockchain technology being used in the real world. There are a variety of blockchain projects out there with live, working products and services you can use today, and we want to highlight them here!

Background

SALT is an Ethereum-based ERC-20 token designed to allow users to leverage blockchain assets (currently Bitcoin and Ethereum) to get cash loans. The benefit of this approach, as opposed to selling the assets outright, is that a user still owns the same amount of Bitcoin or Ethereum at the end of the loan.

Lets go over an example of where this can be helpful.

I have 5 ETH and I need $1,000 cash right now. I could sell 2.5 ETH (~$1,000 at current prices), but I would probably need to pay some taxes on that money. Also, if the price of Ethereum then skyrocketed to $1000, it would cost me much more to buy back to the 2.5 ETH I initially sold at this rate. Alternatively, if I take out a loan from SALT and give them my 2.5 ETH as collateral, I will get all of my collateral back after paying off the loan.

As with all loans, SALT loans will accrue interest over time. This could result in you losing money on the loan compared to the value of your crypto assets, depending on the situation.

My Experience Using The Product

I didn’t actually need a loan from SALT, but I was interested in the process. When they announced that they had opened their site for applications, I submitted one. The site is very well created and easy to navigate. To actually request a loan you need to verify your identity. I uploaded a picture of my drivers license and filled in some basic information like my name and address. The process was fast and relatively painless.

After applying for my loan it was time to wait. After about 3 months, I have never heard back about being approved for my loan request. I don’t really care too much, because I never actually intended to take one out, but it does seem like a long time to wait. The other downside of the platform is it seems that you currently can’t payoff the loan in a lump sum when doing low level loans. This means you will probably accrue enough interest that it is not worth it.

Strengths and Challenges of SALT as it Currently Stands

These blockchain asset based loans are able to provide a few advantages over normal credit based loans.

• No centralized approvals — A normal credit score is based on a system that is run by several few large organizations. A system like SALT doesn’t care as much about a bad reputation from one credit score because your money given to you is backed by your crypto assets.
• Fast crypto to fiat — Outside of selling off your crypto, this seems to be one of the fastest ways to convert your crypto assets to real fiat. I do hope and expect that one day this will not be needed and we can just buy most things with crypto, but for now it is a very big feature.

Alongside these pros, there are definitely a few cons with the platform currently, but I expect to see SALT work on and fix these issues moving forward.

• You need money to get money — Unlike a normal credit score based loan, I need to have the USD value of my loan in crypto. For something like a college tuition loan, this platform would not work well in its current state.
• Still relatively centralized — Unlike a P2P lending system, users still need to go through SALT to get their loans. This means that users need to trust SALT to follow through on what they have said they will do in some cases. There isn’t much they can do about this as it is just the nature of getting USD from crypto at the moment.
• Competition — There are a lot of different tokens that are in the lending space (Ethlend, Elixir, Coinloan). SALT will need to continually work to set itself apart from the competition.

Altogether

Overall, I think the platform has a solid idea and is something that could see wider adoption as it is built out more. It certainly is still growing, but SALT has processed millions of dollars in loans already. In the future, they plan to release credit cards and alt-coin based loans as well. These things, along with an improved loan approval process could make for a great lending platform in the future.

Note: I do not own SALT or have any relation to the team.