Blockchain and P2P Lending Platform

Blockchain and the business model of a peer-to-peer lending platform are natural allies. By taking advantage of blockchain technology (cryptocurrencies and smart contracts), P2P lending platforms can create new business models and enable transactions independent of trust relations between lenders and borrowers.

Blockchain Peer-to-peer lending connects investors/lenders with borrowers through an online platform to facilitate smart contracts. The three main agents involved in this process are:

  • •  Lenders (investors) invest excessive cash flow in loans on the platform and receives principal and interest in return.
  • •  An online P2P platformmediating the transaction utilizing cryptocurrencies, blockchains and smart contracts.
  • •  Borrowers (individuals or businesses) receive financing and pay interests on the loan amounts in return.

Blockchain technology allows peers to participate in the development of the underlying code supporting the database creating an open and versatile system where participants can develop and distribute their own code and functionality. This enables the creation of smart contracts – a contractual agreement between a lender and a borrower in P2P lending, based on a piece of code programmed to automatically fulfill the terms of the contract.

The key advantage of using blockchain technology in peer-to-peer lending is its ability to remove intermediaries and regulations from the P2P lending process. The need for intermediaries and regulations mean that transactions on traditional peer-to-peer lending platforms are subject to added cost and time requirements as well as security issues.