The success of Bitcoin has accelerated the growth of the blockchain and cryptocurrency market. Various business enterprises are adapting to this new trend of market capitalization.
Bitcoin was the firstborn of blockchain technology and after that numerous digital assets like NFT, ICO, and other cryptocurrencies like Ethereum, Dogecoins are catching wind nowadays.
Among them, cryptocurrency lending platform development is a common term on the lips of everyone in the Banking, financial services, and insurance industry.
According to research, the blockchain lending platforms will elevate to $27 Billion with a CAGR of 18.13% by 2028.
If you are planning to step into the crypto lending industry, we advise you to read this quick guide about the things that nobody will tell you about cryptocurrency lending platform development.
What Is a Cryptocurrency Lending Platform?
Cryptocurrency lending is a new avatar by rising blockchain technology to the financial investment industry.
A cryptocurrency lending platform is an online marketplace where an individual lends their crypto assets to generate some distribution of profits as a dividend in exchange of interests.
It also omits the involvement of any governmental body and a financial institution.
Such a platform is viable to two types of individuals:
- Borrower: A borrower is an individual that needs physical money in exchange for interests
- Lender: A lender is an investor that lends its crypto assets to generate some income without selling them
Why Do We Need A Cryptocurrency Lending Platform?
A Cryptocurrency lending platform is beneficial for an investor as well as the borrower.
Let’s look into both cases:
- Borrower: As compared to the traditional loan system, applying for a loan at a crypto lending platform is quite feasible. Here, the credit checks are usually not required, the loan limit is given upon the basis of collateral amount.
- Lender/Trader: The crypto lending platform eradicates the middleman and gives options to lenders to invest in different types of loans with greater interest value. Hence, instead of selling their crypto assets, traders can keep liquid funds and avoid the hustle of short-term capital gains tax.
Working Process Of A Crypto Lending Platform
A cryptocurrency lending platform acts as a point of contact between a lender and a borrower. Before delving into the working of a crypto lending platform, let’s understand the significance of each party i.e trader, lender, and the lending platform.
- Trader/lender: Trader lends their crypto in return for some passive income on compelling interest rates.
- Borrower: The borrower applies for a loan on a crypto lending platform through collateral like crypto or fiat assets.
- Crypto Lending Platform: It acts as a third party between borrowers and traders, these platforms are usually decentralized and responsible for the transactions and loan-related formalities.
Now, let’s proceed further to understand the working process of such digital lending platforms.
- Step 1: Borrower applies for a loan at the crypto lending platform.
- Step 2: The borrower provides the information about collaterals that he/she can offer for the loan.
- Step 3: The crypto platform verifies the borrower’s profile and collateral.
- Step 4: The crypto platform accepts the loan and deploys the limit according to the value of the collateral offered by the borrower.
- Step 5: The borrower returns the loan amount according to the smart contract and thereafter, the lending platform returns the stakes to the respective borrower.
In the aforementioned steps, the trader provides funding for the loan via a cryptocurrency lending platform.
Smart contracts include pre-installed terms and conditions that monitor the transaction and other activities happening between two entities on a blockchain network.
Reasons Fuelling The Growth Of Cryptocurrency Lending Platform
Blockchain technology has the potential to replace the traditional finance industry with cryptocurrency lending platforms. Here, the process of applying for loans is much easier and requires very few credentials as compared to bank loans.
Let’s dive in to understand the factors behind the growth of such digital lending platforms.
We all know that the loan approval process of traditional banks is very lengthy and a time-consuming process, it requires monitoring of various parameters like Credit Score, employment history, current income, the purpose of the loan, etc to disburse a loan.
If you have a low credit score, then it is impossible to get a loan from a traditional bank. This is where a blockchain lending platform takes the charge, here the loan disbursement is quick, a crypto lending platform doesn’t ask for a bank account and a credit score.
Therefore, applying for a loan at virtual lending platforms is much more accessible than standing in the queues of traditional banks.
2. Fast Funding
A traditional bank takes about a few days or few weeks to approve a loan and if a loan gets approved then it takes a few more days to disburse the amount.
Although most of the banks approve a loan within the same day, if the loan amount is higher then the waiting period extends to a few more days.
However, in the case of a blockchain lending platform, it only takes a maximum of 24 hours to approve a loan. They don’t ask for a whole pile of documents, a valid government-issued ID, and enough collateral to apply for a loan on such platforms.
3. Flexible Loan Terms
A traditional banking system doesn’t provide flexible terms and conditions for any type of loan. You can hop around any bank as you want, all of them will provide loans on similar terms and interest rates.
However, the loan process with a crypto lending platform is quite feasible. Here, the borrower has the power to select the submission timeline for repayment and as well as the loan-to-value ratio.
Here, the terms and conditions are very convenient, only the loan amount depends upon the evaluation of collateral and if there is any additional charge then it is already mentioned during the time of loan agreement.
4. Lower fee
Traditional banking systems have a higher fee structure, if you apply for a loan in a different currency then you’ll be charged with a higher processing fee and a disastrous exchange rate.
However, cryptocurrency lending platforms have a lower fee structure than the traditional banking system. Here you’ll only have to pay a one-time processing fee.
Even the currency exchange rates are pretty simple on such platforms because they are completely decentralized and which is why they don’t charge higher taxes on international transactions.
Those days are long gone when traditional banks were known for their cutting-edge security measures. Apart from robberies, traditional banks have been the victim of various money laundering scams because they are run by humans and in such areas human errors are inevitable.
However, blockchain lending platforms are highly advanced and far more technical than a traditional banking system. These platforms adhere to the concept of blockchain technology which means that your collaterals are totally impossible to hack.
Most of the crypto lending platforms store their digital assets in cold wallets which are totally hack proof and safe from human errors.
The term irreversibility states that blockchain platforms are transparent and versatile. Their main standalone feature is that once data is credited inside the system, no one can either change or delete it.
How To Develop A Crypto Lending Platform
In this section, we’ll learn how one can develop a highly secured blockchain lending platform:
1. Competitor Analysis
Although the blockchain industry is in its infancy, still the market is flooded with a lot of cryptocurrency lending platforms. If you’re also wondering to step into the market then it is necessary to construct a road map to enhance your platform with some unique selling points that other competitors lack.
Conduct in-depth marketing research, analyze the business strategies of various clients, examine the case studies of competitors that have already failed.
Such thorough research will help you justify the business goal with the scope of improvement and other critical aspects.
2.Gear up with a Reliable Blockchain Technology
Once you’re done with your business goals, it will be easier to pick the best blockchain technology capable to cater the project requirements.
Study about the software development kits (SDKs) having suitable features to develop a crypto lending platform as per your expectations.
3. Smart Contract
A smart contract is the backbone of a peer-to-peer blockchain lending platform, it is a computer-coded contract that stores all of the pre-programmed terms and conditions between a lender and a borrower inside the blockchain ledger.
The main purpose of a smart contract is to control which data should be stored on and off-blockchain. The smart contract also facilitates the process of repayment because this process is totally automated and the smart contract automatically notifies the lending platform about the remaining debts and other loan-related actions of a borrower.
The development of smart contracts requires an experienced workforce with exceptional coding skills.
It requires the development team to run specific tests, integrate the smart contract with the virtual lending application or website, and test the program logic.
4. Examine the use Cases of the Platform
An effective use case analysis will help you determine the usability and efficiency of your virtual peer-to-peer lending platform.
Various case studies state that ignorance towards use case analysis could bring fatal results to a lending platform.
Try to analyze the usability of tokenomics and other main features of the platform to derive an effective Software Requirement Specification module.
Examining the use cases in such software will add multiple benefits like liquidity trading and a lot more during its development phase.
5. Platform Testing
The platform testing helps to determine the gaps in the pooling architecture. Usually, most blockchain lending platforms follow the architecture of isolated pools.
These pools allow any form of cryptocurrency as collateral, any gap in the mining pool can complicate the recovery process of collaterals because once data is entered into the blockchain it becomes impossible to manipulate the operations.
Such issues may lead to the loss of collateral which is very harmful to the credibility of a cryptocurrency lending platform.
Moreover, the development team should also check for the possibility of shitcoins in the distributed ledger.
Cost To Build A Crypto Lending Platform
Launching a blockchain lending platform is always a daunting task that requires a lot of experience and at least 10 months of software development and rigorous testing.
Usually, the cost to develop such a top-notch platform ranges between $10,000 to $15,000.
To develop a crypto lending platform, you need a proficient team of following blockchain experts. Here are they-
1. Project manager
2. Business analyst
3. 10-20 Blockchain developers
4. 1-2 Legal Advisors
5. UI/UX Designers
6. QA Engineer
7. Back-end Developers
Moreover, it also depends on the required features, cost of technology, advertising, developer charges, the timeline of the project development, legal consultation, and governmental formalities.
Following are the main key factors that determine the total expenditure.
- Hosting cost
- Networking with other competitors
- Payment processing gateways
- Legislation and licensing cost
Why Choose BR Softech For Cryptocurrency Lending Platform Development
BR Softech is a leading blockchain lending platform development company with 10+ years of experience. The company has an experienced workforce of 50+ blockchain developers that have years of industry experience.
We strive in every field of blockchain development which starts from business analytics to design and testing, our experts have a knack for developing the platform within and before the deadline.
Our experts possess professional etiquettes like complete project transparency, competitor research, and real-time communication.
We have worked on over 50+ blockchain projects related to bitcoin exchange software solutions, NFT development, and a lot more. Our programmers have the caliber to shape any complex crypto business idea into reality.
If you’re looking to start your own Cryptocurrency lending platform business with cutting-edge security and interactive features capable of catering to the requirements of end-users then you’re at the right place.
Feel free to reach out to our experts or contact us
Frequently Asked Questions
How to start a Bitcoin lending platform?
You can purchase a Whitelabel Bitcoin lending platform from a blockchain development company and get it customized according to the business requirements.
Why is Nexo a Trending Lending Platform for Crypto?
Nexo is a trending investment option because it provides higher interest rates and loans without credit checks.
What are The Best Bitcoin and Crypto Lending Platforms?
Nexo, Celsius, BlockFi, Binance, etc are some of the best Bitcoin and crypto lending platforms that provide secured loans at borrower-friendly terms.
BR Softech Pvt. Ltd. excels in providing cost-effective IT Solutions. Established in August 2010 with over 10+ years of rich experience. An Apex rated IT serving company around the world. Our team of innovative and creative designers deals in web designing, mobile/ software development and other digital marketing services intending to deliver outstanding digital outcomes.