I mean while it does sound good on paper, I don't think it's really something that can come to fruition due to the nature of bitcoin. Once it's sent it's gone so people aren't even able to do anything if you lend them money and they default then you're shit out of luck. The only thing that is going to work is if collateral is provided But I don't see a future of lending in Crypto if there isn't massive amounts of paperwork, centralized authority, and garnishments of wages if you don't pay your debts.
It's something that banks and lawyers would have to get into. Don't know how it would work in the crypto space.
Exactly. Lending practice in Cryptocurrency is not going to go far because it's almost impossible to recover money from the borrower if the borrower is not willing to repay the loan. Even if the lending company does due diligence of the borrower, due to complex cross border laws, it is mostly impossible to get hold of that person.
Second thing is collateral. I believe, in Cryptocurrency related lending company, the collateral will also be in Cryptocurrency. So if a person is already holding other coins of similar value, why would he require a loan? Instead the borrower can simply sell those coins to get the fund.
I was an active lender in btcjam long back. Two years back, I have given out loans of almost 0.54 btc to many lenders that platform. I could not recover even 15% of that amount. I remember, only one person repaid his loan and rest all ran away with the money they have raised from btcjam platform.
Decentralized lending to individuals is not a viable business model, at least to me. If it can be done for small enterprises and if strict due diligence can be done, probably it will add some more security to the loan amount, but nothing else. The entire business model runs of trust which is a rare case in online decentralized market.