Introduction to SALT
SALT is a centralized cryptocurrency loan platform which enables users to borrow money against their crypto assets. The platform, however, has stricter requirements compared to other lending services, as only customers in certain US states, the UK and New Zealand are supported.
Also, users can only become lenders if they are accredited investors. In the US this means you have to prove you have a net worth of at least $1 million. SALT also requires your account go through a KYC/AML (Know your customer/Anti-money laundering) verification before you can create contracts on their network.
Once the loan terms are agreed and settled, the lender will deposit fiat currency in the borrower’s bank account while a smart contract locks up the borrower’s digital assets. The borrower will be required to make fiat payments on a regular basis and should he miss a payment, his/her assets will be reassigned to the lender.
In order to be able to use the platform, you must purchase SALT tokens which you use as collateral. The total supply of SALT tokens is of 120 million. The platform features three membership tiers – base (1 SALT/year), premier (10 SALT/year), and enterprise (100 SALT/year).
Introduction to ETHLend
ETHLend is a decentralized peer-to-peer cryptocurrency lending network. ETHLend works solely via Ethereum smart contracts, so the platform never keeps any money. This also means that borrowers and lenders can only use ETH and ETH-based tokens when entering a contract.
The loan process involves two parties initiating a smart contract and agree to terms for rates, collateral, and other details. Borrowers will then post their Ethereum-based tokens and lenders their Ethereum. After confirmation, the Ethereum will be sent to the borrower who will be required to pay back the lender in Ethereum (with interest) regularly.
ETHlend uses a reputation system to attach to each Ethereum address a score so that users can now see how trustworthy the other party is.
Pros and Cons of SALT
The first issue with SALT Lending is that it assures users that their loan will be repaid and that they’ll receive all their collateral back- there is a high risk that the collateral could be lost. This event would occur if a margin call were executed.
A margin call is when your collateral depreciates so much that the company algorithms will demand you to pay them to have the loan rebalanced to collateral ratio. Once the margin call is sent, the borrower has a limited period of time to respond. Their response options can either be to deposit more collateral, to repay enough of the loan, to rebalance the ratio or to have their collateral liquidated- which could also incur an additional fee.
Another issue would be that the borrower does not know how much time he or she has to respond to the call.
Another drawback of SALT is that the average person is only able to borrow money. SALT is not a P2P platform so most average people cannot act as a lender and earn interest on their cryptocurrency or fiat currency. To lend crypto you have to be an accredited investor or a financial organization that has past the platform’s verification process.
The biggest advantage of using your crypto as collateral is how cryptocurrencies appreciate long-term against fiat currency. Sometimes you just need cash at short notice and you don’t want to sell your crypto to get it. SALT allows users to keep ownership of their crypto while gaining access to liquid funds.
Pros and Cons of ETHLend
ETHLend is a decentralized lending application (dApp) built on the Ethereum Network and all loans are made in Ether. This can pose difficulties for a regular person to get a loan in cash if they need to buy something that does not accept crypto as payment.
The disadvantage is that a cryptocurrency-only ecosystem does not suit most users’ needs, as they still transact in daily life with fiat currency and will most likely want a loan in USD, Euro or other local currency.
Of course, when there is fiat currency involved there’s always some element of centralization. ETHLend eliminates this aspect, so this is either a good or a bad thing depending on your interests.
If users do need fiat cash, they would have to exchange their crypto in order to get cash, which is appeared incur fees and could be subject to capital gains taxes, and thus you end up losing a chunk of your loan.
ETHLend focuses on providing financial access to those who otherwise would not be able to receive loans, which brings another huge issue because the lender will require more assurance regarding the person they are lending to.
LEND, ETHlend’s native token can be used as collateral, and this gives both the lender and the borrower 50% discounts in application fees compared when other tokens are pledged.
At this stage, ETHlend only supports MetaMask for blockchain asset transfers. MetaMask is currently not regarded as being the most secure way through which you can transfer your cryptocurrency. Several reports show that users have been hacked or phished in the past and until this problem is solved, it remains a security issue for Ethereum.
Which is the Better Crypto Lending Platform
Both of these lending platforms have different benefits and advantages. However, while SALT offers cash loans for Bitcoin and Ethereum, it has proven to be a wavering project regarding service delivery. While, ETHLend, even though it just offers cryptocurrency as a means of value, its services are compatible with a wide range of ERC20 tokens that it accepts without any issues.
Both projects also have margin/collateral calling which can put investors and borrowers at risk.
While SALT’s token only handles platform access, ETHLend’s token has multiple functionalities on the platform and there are plans to extend the scale of LEND’s usage as well.
SALT vs ETHLend Conclusion
SALT and ETHLend are lending platforms that give users unique borrowing and lending options to crypto owners. Although different, they both have massive potential in the world of blockchain-based loans.