Blockchain-backed loans: Does SALT really offer a better alternative?

SALT is the original blockchain-based loan platform. Here, we'll cover how SALT works and whether it provides a better alternative to traditional bank loans

SALT (Secured Automated Lending Platform) is a blockchain-based loan platform which enables you to use your crypto assets as collateral in exchange for a cash loan.

The platform allows users to use the same features they would expect from a financial loaning institution dealing with fiat currencies, but instead, they work with cryptocurrencies. Essentially, SALT allows users to leverage their assets on the blockchain to gain cash loans. These loans can then be used for anything the user wants.

As with most loan companies, the more you loan, the more collateral you have to give. Once the loan is paid back, the collateral (cryptocurrency) is given back to the user. However, if the loan is not paid back in the time period allowed, the collateral will be kept by SALT.

The loan-lending platform was founded in 2016. The following year, in 2017, the company raised over $55 million in funds, making it one of the most successful ICOs of all time. The team behind SALT includes adviser Erik Voorhees and CEO Shawn Owen.

SALT cryptocurrency

SALT tokens are ERC-20 tokens used for membership on the SALT platform. At the time of writing, the token has a total market cap of $16 million and a total supply of $120 million.

Users have to invest in the tokens to be able to become a member of the lending platform. Once a user becomes an owner of SALT tokens, they can redeem them to pay down loan interest. This allows users to receive better rates on their loan.

The ERC-20 token is available to purchase on Bitrrex and Binance with either Ethereum or Bitcoin. There are also a number of popular multi-token wallets that support SALT, such as MyEtherWallet, Jaxx, and Exodus. The SALT website recommends token owners store SALT on the Jaxx wallet. However, the most secure way to store your tokens is on a hardware wallet like Trezor or the Ledger Nano S. This is because hardware wallets keep your tokens offline and out of the reach of hackers.

How it works

To access the lending platform, a user will need to use SALT tokens to buy membership. Because the token is built on the ERC-20 smart contract protocol, the platform must comply with the Ethereum standard. A smart contract is a contract which enforces and executes the terms of an agreement with its cryptographic code.

Once a user owns some SALT tokens and is a member of the platform, they are able to borrow from a broad network of lenders. The users then put their chosen digital assets such as Bitcoin or Ripple up as collateral for the cash loan. The platform does not determine the eligibility of users from their credit scores like other lending platforms. Instead, it grants the loan based on the value of the user’s blockchain assets. This allows for the process to be fast and secure as the platform keeps the collateral assets safe in an ultra-secure architecture until the loan is paid back.

Does it offer a better alternative?

The SALT lending platform allows borrowers to maintain ownership of their blockchain assets whilst still gaining access to cash. However, it isn’t without its cons. Lenders need a large incentive to finance loans due to the high volatility of cryptocurrencies. This means if a user wants to borrow, say, $100,000 in cash, they would have to put up double that as collateral, and then pay up to 20% interest a year. This is great for the lender, but not so great for the borrower.

Also, unlike normal loans which are based on credit scores, a user needs to have the fiat value of their cryptocurrency to use it as collateral. This means a user is essentially just using their own money as collateral for more money. Therefore, this type of loan wouldn’t work well for student loans.

With this in mind, this sort of agreement and interest is not so dissimilar to those of other loan platforms. SALT is different because of the type of collateral used, and borrowers are able to borrow more.

Alongside this, the platform has a few other advantages. SALT does not care about a user’s credit history or bad reputation because the money is backed by their crypto assets. This type of loan is also one of the fastest ways to convert your assets to real fiat outside of selling off your cryptocurrencies.

Bad press

In November 2018, the SEC clamped down on cryptocurrency projects such as SALT which raised over $50 million in ICOs. The SEC made Eric Voorhees the centre of the investigation as he was reported to have played a leadership role in the lending platform. You can read more about the investigation here.

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