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Little Mouse
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June 02, 2021, 01:02:19 AM
 #1

Defi has been very popular these days. Finance structure can be decentralized with Defi.
However, Defi is a peer to peer financing system where no bank or intermediaries are required. However, is it possible that banks are running some sorts of blockchain based platform, which can help them to reduce the rate of default loan?
Or, how blockchain technology can help in managing non performing loans? Share any idea you got or share any project you know.


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June 02, 2021, 02:03:47 AM
 #2

I'm sure I've heard of some banks that entered into the use of blockchain technology for more efficiency. I know, for example, that Ripple has partnered with certain banks such as Bank of America. But these are all centralized systems. Although some banks have already made use of the latest technologies such as blockchain, they remain 100% centralized. Even the decentralized in DeFi is questionable.

Anyway, when it comes to loan default, the traditional banking systems have more or less perfected their approach to it. As a matter of fact, loan defaults are probably more wanted than on-time payments, unless it is a massive loan default in times of recession or crisis. At least, that's what I've noticed locally. So I don't know how blockchain would lower down the rate of loan default, if at all banks really care about it. As a database though, it's probably more efficient to use than their old systems.





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June 02, 2021, 02:07:49 AM
 #3

I think banks today have a centralized system, I agree that banks will one day use blockchain to strengthen payment data systems, but they remain centralized, and I don't think we'll ever see banks become DeFi. Because DeFi can't be controlled.

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Little Mouse
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June 02, 2021, 03:19:39 AM
 #4

Anyway, when it comes to loan default, the traditional banking systems have more or less perfected their approach to it.
Maybe in some countries it is perfect but in Bangladesh, it’s close to 10% and Bangladesh is 2nd in the Asian countries in loan default. There are some factors like no perfect monitoring system, not enough investigation before sanctioning a loan, political issues for which rate of loan default has been increasing at alarming rate.
Isn’t it possible to decrease the rate through implementation of blockchain based platform to monitor loan, being transparent so that political pressure can't force anything?


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June 02, 2021, 05:11:04 AM
 #5

Defi has been very popular these days. Finance structure can be decentralized with Defi.
However, Defi is a peer to peer financing system where no bank or intermediaries are required. However, is it possible that banks are running some sorts of blockchain based platform, which can help them to reduce the rate of default loan?
Or, how blockchain technology can help in managing non performing loans? Share any idea you got or share any project you know.

P2P lending is a dangerous system. I have personally experienced it with BTCJAM website few years back and all I got is a page full of red glory. less than 10% people repaid their loan and rest all are now enjoying with out bitcoins. However, Defi lending is little different. here you will have to provide collateral assets against a loan which is locked in smart contract and it will be paid back to you once you repay the loan. So that's somewhat secured unless the value of the collateralized asset goes down. But the risk is higher than traditional financing.

Banks can definitely use blockchain based platforms, but that will be only for maintaining data. I don't think a Defi based system will be beneficial for them, because they usually deal in a single currency system for the retail customers. And every single loan taken out by retail customers can't be collateralized. It's easier for Defi because they deal in multiple currencies. So a true-breed Defi isn't beneficial in traditional finances. The risk of default is much higher and banks will end up loosing their capital.   

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June 02, 2021, 06:18:24 AM
 #6


Thanks for your input. It makes sense.
However, Isn't it possible to get the traditional resources into smart contract. I don't have a lot of knowledge but I think it is possible to use different property as collateral in a smart contract where only ownership will be handed over. Of course all the details should be well documented and notarized through blockchain.
Is it possible?


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