The Next Generation in Blockchain Lending part 1

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Now back to our original programming.....Blockchain-based lending to be specific

Bitcoin lending went through its first stage with 3 platforms: BTCJam, BitLendingClub, and Bitbonds. Jam and BLC are going out of business so get your BTC out if you have any there. Bitbonds is still around and doing a great job but having a tough time attracting enough borrowers to get the scale they are looking for.

Now we are on to BlockChain Lending 2.0.  Thanks to Ethereum and its ability to issue smart contracts and let companies do ICOs, there are many new companies getting started in Blockchain based lending.

I’m going to look at 6 new platforms to see what they are doing and if they might be viable in the future. So far, I’m NOT lending on any of these platforms nor have I bought any of these ICOs for those that have issued their token (Coins) already. That’s my disclosure to you…..Here’s the 6:

  • EthLend
  • Wish
  • Meridian
  • Everex
  • Salt
  • Celsius


Let’s look at EthLend first.


EthLend, based in Estonia, is a lending platform using the Ethereum network and its scripting/smart contract capability to create loan contracts. Like most ICOs, it starts with the EthLend white paper. Check out the link and read it yourself. They raised 2000 ETH in 77 hours or ~$580,000 for product development.

One of the main issues of the Bitcoin lenders is credit analysis. The early platforms tried to do it based on reputation, but people learned how to game that system.

EthLend solves this problem by collateralizing loans. Any ERC20 token, which is the standard for Ethereum based wallets and smart contracts, is eligible as collateral. They also have their own ERC20 token called LEND, which just sold out in its pre-sale.

As a refresher, a smart contract is really a self-fulfilling contract. Loan data, rate and repayment schedule can be loaded in and set so payments are automatic in a crypto-based ACH style. Here’s what it looks like:



While these loans are collateralized to help the lenders, EthLend is working on a credit analysis system based on reputation and those credit tokens can be used as collateral for future loans.  Eventually, per the white paper, the borrower will emerge with a ‘decentralized credit rating’.

They intend to use prediction markets, AI, and big data to help with credit assessment but let’s be real. That’s years away at the earliest.


The Legal Evaluation section of the paper states that ‘Even though lending is traditionally local, there have always been international financial institutions that are not restricted by jurisdictions.’ While this is not exactly accurate as each branch of HSBC has to abide by the local banking laws in its jurisdiction, the idea of staying compliant is a smart thing to address. Many countries have not regulated cryptocurrencies except to say that they are not legal tender and how they should be taxed.

KYC/AML Policy

The paper states that the subject of whether ‘lending ETH is subject to KYC is an unsettled question’. This is true and a conservative interpretation of those rules, which I like, while keeping the lending as a strictly peer to peer network activity. EthLend endorses a KYC policy, also good.

Over the ETH network, it’s easy to hide your identity and whereabouts so if some markets chose to clamp down on the KYC/AML this could be an issue later, but there are numerous workarounds if a jurisdiction gets too restrictive on cryptos.

Why Borrow If You Have Crypto Collateral?

If you already have the collateral in ETH or another ERC20 token, then why would you borrow? There are 3 good reasons.

  1. Want to Hold their Crypto-Some want to hold what they have and only have a short-term need for funds
  2. Taxes-Investors, especially, early investors that made lots of money don’t want to create a taxable event for themselves by selling so they borrow instead when they have a financial need
  3. Want ETH but have Dash, Monero, Ripple, etc- get the crypto you need while not having to sell the crypto you have

ICO Status

The presale for 2000 ETH sold out early to fund the rest of the development. The token sale for LEND starts on November 25 with a goal of 37,600 ETH at a starting exchange rate of 27,500 LEND = 1 ETH. The rate drops to 25,000 to 1 until they raise/issue 1 billion LEND tokens. The LEND token does NOT represent ownership or a part of a Revenue share. If you use LEND as your payment on a loan you get a 25% discount and the LEND token is distributed as a bonus to power users through an airdrop. The sale ends December 9 or when they reach their fundraising goal.

They make money charging 0.01 ETH (around $3) to originate the loan and another 0.01 ETH at funding of the loan.


The good of ETHLend is the following:

  • Use of smart contracts
  • Secured Lending
  • Intend to implement a KYC policy (yes this is a good thing)
  • Their development is self-funded through ICO
  • Decentralized
  • Loan data are written into the smart contract


The downsides of ETHLend are:

  • Its new and not established
  • Regulation could be on its way, and not just for KYC/AML
  • Team is untested in lending/finance (look them up on their website)
  • Unknown if smart contracts legally enforceable

ETHLend is worth a look. Go check it out. I’m watching from the sidelines to see how they operate before lending with my funds.

Would I buy the ICO at the token sale? No, I wouldn’t. I’d prefer an ownership stake or a share of Revenue for my investment. That doesn’t mean you shouldn’t especially if you like and want to support this project.

Would I lend my funds there? Here is a much more interesting opportunity than the ICO itself. I’m watching the platform develop to see if I want to lend there. I like what I’ve seen so far.

Next post in this series, we’ll look at WishFinance

About the author

Stu Stu Lustman, the author of this post, is a Credit Analyst by trade trying to bring Commercial Credit Analysis techniques to the world of Peer to Peer Lending. Check me out on Twitter, LinkedIn and Google+

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