SpectroCoin is bringing crypto lending to the mainstream and supports more coins beyond ETH.
Leading cryptocurrencies are valuable. They are enablers allowing users to move value in closed ecosystems. Systems like Bitcoin, Ethereum, XRP, and others are common examples.
The Rise of Crypto Lending
In the early days, digital currencies were highly speculative. However, times are changing and ownership of these assets are now viewed as a means of accumulating wealth through capital gains.
Highlighting the growth of crypto is the rise of lending platforms. Crypto loan platforms like SpectroCoin allow users to deposit their digital assets as collateral and take out loans. Considering how volatile the crypto market is, most of these loans are over-collateralized. Depending on the amount of loan, the borrower is required to top up their collateral or repay a portion of their loan to avoid liquidation.
In Ethereum – where accepted collaterals are ETH and its token, the lending sub-sector is part of the open finance, or DeFi, movement. According to BTC PEERS, DeFi will likely see more investment as crypto and blockchain “comes to age.”
The coronavirus pandemic is helping draw attention to crypto lending. Digital asset lenders, through DeFi, are earning decent returns from their activity. However, in Ethereum, the ability of users to borrow loans using coins other than ETH and ERC-20 tokens is limited.
Bringing Crypto Lending to the Mainstream
SpectroCoin is bringing crypto lending to the mainstream and supports more coins beyond ETH. The platform lists several coins and fiat including the Euro, BTC, ETH, XRP, XEM, and DASH.
Users can also borrow from as low as €25 to €1 million with options of withdrawing using the Euro or any of the supported cryptocurrencies including BNK, BTC, and others. Once a loan is approved, it is disbursed to the borrower’s account.
From their homepage, users can also select their interest rates to be in Banker Token (BNK). Using the BNK token draws lower interest rates. Also, customers can earn and save using the BNK token. Interest payments are automatically debited every month while the loan is repaid manually on the platform.
Loan-to-Value (LTV) For Risk Management
Clients can borrow up-to 75 percent of their collateral’s value. The Loan-to-Value (LTV) in SpectroCoin is between 25 to 75 percent.
The higher the LTV, the riskier it becomes for the crypto lending platform but the higher the loan a customer can borrow using their crypto collateral.
Crypto lending platforms like SpectroCoin don’t perform background and credit checks and anyone can borrow. Therefore, as they issue out loans, LTV is used as a risk management tool and estimates the value of the collateral a borrower must deposit to be granted a loan.
As an example, if a user wants to borrow $500, he/she must deposit $1,000 worth of crypto as collateral if the LTV is 50 percent. The LTV is frequently updated to reflect the state of the market.
When there is a misalignment, the borrower is required to deposit more collateral or repay part of the loan by selling the cryptocurrency deposited as collateral. Failure triggers an automatic liquidation of the collateral.
In SpectroCoin, the lower the LTV, the lower the interest, and the more coins there are supported as collateral. For example, a borrower wishing to withdraw over €5,000 in loans at an LTV of 50 percent can deposit either BTC or ETH as collateral and pay a 12.95 percent interest. Borrowing the same amount with an LTV of 25 percent draws an interest of 6.95 percent with several assets available as collateral including ETH, BTC, DASH, and XEM.
Andrey Sergeenkov is an IEO Adviser, digital entrepreneur with more than 10 years of experience, Hackernoon and BitTorrent investor. Assisted in raising more than 40 mln USD investments for more than 20 start-ups. He believes that actual usefulness is the best PR for any project.
