As Bitcoin hits new record highs in ever-decreasing time frames, the conversation about it is filtering down from the tech-savvy geek to the bleeding-edge investor and now, finally, to Joe Public.
With it comes the conversation about Blockchain technology, the code and principles that allow Bitcoin to exist, but which occur entirely separately. Blockchain’s uses are far wider than simply replacing cash in a transaction or acting as a store of value.
We see the rise of blockchain as a huge opportunity for the P2P finance industry. Why? Read on to find out.
To save explaining blockchain every time we enter the subject, we’ll point you at this definition if you want to be brought up to speed.
Blockchains are useful wherever there is paperwork and trust, and allow a market to bring automation and 100% trust into play. Specifically, Ethereum’s Smart Contracts can allow for situations like:
The markets which are ripe for transformation using blockchain technology are those where there’s either a need for authentication or a process that is held up by repetitive administration tasks. Every action on a blockchain network is completely transparent and agreed upon by the network as a whole, removing the need for costly manual checks.
There is a huge amount of administration involved in a Peer-to-Peer platform. The list of administration tasks is vast, and not limited to:
All of these tasks take time and resources. Smart contracts, as part of blockchain technology, can automate many of these activities based on a pre-defined set of rules. For instance, a process can be triggered automatically on completion of repayment of a deal to return capital and investment yields (minus any fees and costs) to lenders.
The ability to set up a series of rules in advance of any deal creates a ‘trust-less’ environment, where trust is not required to show the validity of any transaction or decision made by the network. By pre-defining the automatic outcome of payment or default, everyone who takes part in a deal can enter with full knowledge of the possible results of their investment.
By using blockchain technology, P2P platforms will have the opportunity to create a superior customer experience for borrowers and investors alike. They’ll be able to do this while also cutting costs and improving efficiencies, so I envisage we’ll see a few early adopters popping up over the next 12 months.
Clearly, I’m not the first person to notice that there is a great overlap between the benefits of blockchain tech and the needs of the P2P market, and there are already a couple of names I’ve seen making progress. LoanBit are somewhere close to their ICO and platform launch, according to their roadmap. Inspeer are also well on the way, but not looking to launch in the UK until sometime in 2019. Who is to say if these two will be the winners in the market, but I’ll be incredibly surprised if there isn’t a functional blockchain P2P platform live by this time next year.
If you are developing a P2P platform on blockchain technology, I’d love to hear from you. Drop me a line.
by Neil Edwards, 4 minute read
by Neil Edwards, 7 minute read