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Process Explained

Inside Lendingblock

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Lendingblock Process Explained

An introduction to the end to end Lendingblock process

Lendingblock is the open decentralised exchange for borrowing and lending digital assets. We directly connect borrowers who want short term access to an asset with lenders who hold the asset and who want to generate interest income from it. In this series of blogs we will look in more detail at what motivates borrowers and lenders, and how the Lendingblock marketplace will allow them to achieve their objectives.

Firstly though, let's take a quick look at how the process works end to end, using the example of Alice, who has a long position in ETH that she is planning on holding long term, and Bob, who wants to borrow ETH for three months and is prepared to provide BTC as collateral. For the sake of simplicity we will assume that the loan amounts and interest rates match, and we will examine the offer/request matching alogorithm in a separate post.

  1. After registering with Lendingblock, Alice and Bob specify what they are looking for. For Alice, this means entering a lending offer for ETH for a defined duration and a minimum annualised interest rate, and optionally specifying which digital assets she is happy to accept as collateral. For Bob, this means entering and lending request for the same amount in ETH, duration and interest rate with BTC as an acceptable collateral to put away;
  2. Once Alice's offer and Bob's request have been entered and matched, a bespoke lending agreement is formed and agreed to by both parties, and a unique Lendingblock smart contract is created between Alice and Bob;
  3. Alice places her loan into the secure contract, and once Bob has done likewise with his collateral, the loan is released to Bob for him to use without restrictions;
  4. Bob makes agreed regular interest payments via the Lendingblock smart contract to Alice, who has the comfort of the BTC collateral should Bob fail to make a scheduled payment;
  5. At the conclusion of the agreed three months loan term, Bob repays the ETH loan principal via the Lendingblock smart contract, which returns it to Alice and releases Bob's BTC collateral.

The benefits for borrowers and lenders here are clear: lenders benefit from the interest payments of an asset they are passively holding and borrowers can now use their existing assets to enter into positions in other cryptocurrencies.

In our following blogs, we will explore who the crypto lenders and borrowers are in more detail and what motivates them to use the Lendingblock platform.