LendingBlock: Cross-Chain Securities Lending with Cryptocurrency

LendingBlock is a new crypto-based lending platforms that is the midst of an initial coin offering (ICO). There are other crypto-based lending platforms out there but the ones I have looked at recently are more about getting Fiat by using your cypto as collateral. LendingBlock is a cross-chain securities lending platform that allows you lend your ETH while using BTC as collateral. If you are a passive holder of a cryptocurrency, and want to put it to work, this provides a secured path using a smart contract. On the other side of the transaction the person may be speculating on relative price changes.

LendingBlock explains the process in a blog post, a portion of which is shared below:

  1. After registering with Lendingblock, Alice and Bob specify what they are looking for. For Alice, this means entering a lending offer for ETH for a defined duration and a minimum annualised interest rate, and optionally specifying which digital assets she is happy to accept as collateral. For Bob, this means entering and lending request for the same amount in ETH, duration and interest rate with BTC as an acceptable collateral to put away;
  2. Once Alice’s offer and Bob’s request have been entered and matched, a bespoke lending agreement is formed and agreed to by both parties, and a unique Lendingblock smart contract is created between Alice and Bob;
  3. Alice places her loan into the secure contract, and once Bob has done likewise with his collateral, the loan is released to Bob for him to use without restrictions;
  4. Bob makes agreed regular interest payments via the Lendingblock smart contract to Alice, who has the comfort of the BTC collateral should Bob fail to make a scheduled payment;
  5. At the conclusion of the agreed three months loan term, Bob repays the ETH loan principal via the Lendingblock smart contract, which returns it to Alice and releases Bob’s BTC collateral.

If you start to extrapolate this out further, LendingBlock is looking to build a trading system that can power some derivative fun. One of the best things about trading crypto is the volatility. Traders love it. As a greater number of sophisticated trading and institutional money has entered the space there is a growing demand for robust and secure transactional platforms that enable more complex trading situations like  cross hedging  but things can quickly, and easily, go synthetic – if you have the right type of platform.

As for the token, LND, this will be used for payments from borrowers to lenders, or sold on secondary markets.

Platform launch is scheduled for August 2018 after a possible regulatory approval in July. LendingBlock says they are taking a “proactive” stance in regulation and welcome an appropriate approach. This will be interesting to watch.

 

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