In real world there is a very big market for the lending and the borrowing. And on the top of that most of the domestic and the international movement of the funds happen due to this market. So it was kind of obvious for the centralized market to get into the blockchain.
Now the lending and borrowing is going digital and decentralized using variety of the lending protocols. In past some of them worked on the basis of the non-KYC based system in the market. But now that govt are cracking down on the non-KYC based exchanges, there is a strong growth going on in the market, it'd lead to the new protocols adapting to the lending and borrowing.
Let's take a look at how the decentralized lending and borrowing works in the blockchain space.
Let's take a look at scenario where you want to take out the loan. In real world you would be asked to sign up documents and also keep something on a collateral. So if you want to skip the real world agreements and the documents and people manipulation then you should think of the blockchain platforms.
In the blockchain platform. You would not know who lending the system and who is adding to the liqudity. However people who want to borrow are asked to keep crypto on the collateral. Like say Kava requires Ethereum or Bitcoin for the collateral before offering the loan. And they also have a decent set of the interest rate for repaying the loan. So it all works out. You can explore the Kava ecosystem on this part.
Kava is not the only one. And for each blockchain built on the fintech space, we are going to be seeing the lending protocols that are making the blockchain market more secure and safe for lending and borrowing. And so I wish to give pointers for some of those protocols if in case you wish to explore any further. So Kava being already mentioned one, let's look at other protocols.
Maker is one more protocol in the Ethereum space. It makes use of the DAI as it's stablecoin where they are offering the lending and borrowing options for the people. Aave on the other hand is non custodial liqudity platform for those who want to offer liqudity and earn along the way in p2p spaces. Finally one more popular protocol is compound. This is more inclusive platform with support to variety of cryptos and smart contracts.
Lending and Borrowing has gone digital and it is going to be the future for the funding of many projects out there. And as the collateral and the locking of the funds part is concerned if the centralized market picks this up with the govt regulation, that would add up for the more security and safety for both sides who wish to participate in this type of the sector.
These new protocols are going to help with the insurance, retirement, smart contracts on the deposits and also variety of other financial sector products. So if the centralized world needs to adopt the blockchain that would require them for making some changes in the fintech sector like this for growth.
When it comes to lending and borrowing the market is very strong offline and yet there is a slow growth going on in the internet based lending protocols. In near future if this space gets regulated and secured on both sides, it'd bring some amazing results for this industry.
