Centralized lending platforms facilitate the development of marketplaces where individuals can borrow money from institutions like banks. Over the years, borrowers have realized that the centralized lending marketplaces are not democratic and limit the potential of the lending/borrowing models. To overcome these challenges, entrepreneurs started using traditional software solutions to facilitate peer-to-peer lending. While this P2P crypto lending software became increasingly popular, it created a lot of challenges for the industry. Some of these are management of business rules, tracking pull-through ratios from the loan origination system, documentation, and contract management.
Interestingly, blockchain promises to help P2P lending marketplaces overcome the existing challenges. Using blockchain-driven P2P lending software solutions, the market players can lend/borrow both fiat and crypto. All this became possible with the advent of decentralized finance or DeFi.
The traditional P2P lending software enables the creation of democratized marketplaces but suffers from challenges like:
• Unsecured loans due to the lack of collateral
• Not enough transparency
• No tracking of transactions
With the introduction of blockchain, entrepreneurs like you can develop P2P crypto lending software and provide fiat support too. Here are the advantages of blockchain infrastructure.
• Automated transaction processing
P2P crypto lending software development involves the use of smart contracts that eliminate the involvement of middlemen. Effectively, every transaction handling like collateral calculation, collateral locking, interest calculation, interest payments, and more is completely automated. Effectively, this enables the creation of a marketplace where no central authority controls any processes and it functions democratically.
• Data immutability
The existing P2P solutions are susceptible to hacks. As these platforms hold a lot of financial and personal data of participants, the hacks can greatly impact the users as well as the credibility of the platform. With the introduction of blockchain, the data once saved on the blockchain cannot be altered. Thus, the participants’ trust in such a data immutable P2P marketplace is always high.
• Transaction transparency
Blockchain technology helps establish a transparent and decentralized P2P network. With transaction transparency, the users can always have access to data, interest rates, and all.
The identification of the blockchain that is perfectly suitable for a P2P platform is a tedious job. That’s because as a P2P crypto lending platform operator, you might have some different features in mind. For example, a substrate framework based blockchain like Polkadot can be more suitable for the development of P2P crypto lending software. Also, chaincode structure-based blockchains like Hyperledger add additional security to the P2P crypto lending platform.
A P2P lending platform is data-sensitive. When a lot of data generated on the platform is maintained on-chain, it could slow down the P2P network. While developing the smart contracts, determine which data will be stored on-chain and off-chain.
On-chain data
• Transaction IDs
• User IDs
• Transfer amounts
This data is important to be stored on-chain because the nodes can quickly access this data again and again. Being available on-chain, the data is easily validated and processed to calculate collateral and interest amounts.
Off-chain data
The KYC data is generally accessed by the P2P platform when a new participant signs up or money needs to be withdrawn.
The peer to peer lending blockchain platform can be designed to facilitate the following loan options:
• Fiat to Crypto and crypto to fiat loans
• Crypto to crypto loans
However, if a decentralized finance setup is being used to develop the P2P marketplace, it will generally be a crypto-to-crypto lending market.
DeFi lending holds a lot of potential for the marketplaces as well as the lenders and borrowers. Thus, the technology can reshape the entire lending setup as it promises to support all the traditional financial services like insurance, lending, payments, borrowing, trading, and investments.
If you’re looking for a trusted and experienced P2P crypto lending software development company, Antier Solutions can help. We harness our technical prowess, deep domain knowledge, rich blockchain experience to build high-performance P2P crypto lending platforms integrated with market-leading features. We are known for delivering a white label P2P crypto lending platform that accelerates deployment and reduces the development cost. In addition, we specialize in the development of a custom P2P lending platform from the ground up.
Schedule a free demo of our white label P2P crypto lending software or connect with our subject matter experts to share your business needs.
