Altcoins Talks - Cryptocurrency Forum
Learning & News => News related to Crypto => Articles about Cryptocurrency => Topic started by: Goodcat49 on July 26, 2018, 05:11:19 PM
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Over the years, several blockchain platforms have tried providing crypto-backed lending services for the global market. However, these companies have issued less than $100 million loans, unable to service the needs of the market and highlighting the difficulties in putting up and accepting crypto assets as collateral due to margin calls. Cryptocurrencies volatility affects crypto backed lending especially when there is a significant drop in price. Both parties of borrowers and lenders are equally affected. Lenders risk losing their funds and borrowers are forced to replenish their collateral by fixing the drop or reducing the loan. The risk involved for both parties is notable for keeping the lending market in crypto world small.
Deribit is turning this problem around.
A Dedicated Solution for Crypto-backed Loans
Deribit platform reduces borrowers and lenders risk through its innovative derivatives concept, eliminating the problems of margin calls. Derivatives works as a contract that owns its value to the performance of an underlying asset. Deribit’s solution leverages the Put-Options of derivatives to facilitate risk-free, crypto-backed loans for both lenders and borrowers. Put-Option acts like an insurance policy for the collateral.
A Put-Option is simply the right to sell the collateral at a predetermined price, called the ‘strike’ price. This ensures that-the collateral value never drops below the value of the loan, making it possible for borrowers to always repay loans, while the lender has minimum fear of risk. With this option, risk-free USD loans backed by cryptocurrency collateral is now a reality for the industry.
Read the details in the article of Coinidol dot com, the world blockchain news outlet: https://coinidol.com/blockchain-startup-deribit-bridges-gap-between-crypto-usd-loans/
(https://coinidol.com/upload/resize_cache/iblock/e77/900_900_1/e77a3557ae291c7e7bd52583ece3426b.png)