the gimbal The ecosystem is preparing for massive changes in 2022. According to the latest announcement, AadaFinance, a peer-to-peer lending protocol on the gimbal ecosystem, will launch the first version of the protocol in May, effectively enabling P2P lending on the Cardano platform. The development could soon see Cardano rubbing shoulders with Aave and Compound, both of which have an early mover advantage.
P2P Crypto Lending – How It Works
In theory, P2P crypto lending platforms aim to replace the age-old lending system that suffers from high fees, variable interest rates, and longer approval times.
By using blockchains and smart contracts, crypto projects can rebuild the traditional lending process and eliminate middlemen, effectively reducing costs and increasing efficiency.
The process normally consists of 2 components – the lender and the borrower (and a guarantor in some cases). Cardano’s lending process specifies that a borrower first creates an application and deposits collateral in a smart contract. The lender funds the loan through the smart contract, after which both parties receive a non-fungible token. The interest rate at which the loan would be repaid is also set in the smart contract. Once the loan is repaid, both parties return their NFTs issued under the smart contract.
Crypto P2P projects are not a new concept. Companies like Aave, Compound, and MakerDao have built their success on the new lending method, each having phenomenal price performance in 2021. The Future Looks Bright, Too, with Market Data Compilers Business Wire to suggest that the crowdfunding market would grow by $240 billion between 2022 and 2026, driven by blockchain technology and niche crowdfunding platforms.
Cardano – New Competitors?
An entry into the nascent lending space may open the doors to further price advancement for ADAbut Cardano should compete with some well-known projects.
For example, Aave, Compound, and Maker have been active in P2P lending since 2017 and 2018. Although Cardano’s current market capitalization of $40 billion far exceeds its upcoming counterparts, proper reserves and security measures should be taken into account. maintained to emerge. as a better alternative. Cardano is also expected to guarantee attractive interest rates and minimum collateral requirements to encourage selling and lending on the platform.