When it comes to consumer credit, there are a lot of points needed to take into consideration. First, there’s the fact that interest rates can very often be confusing and seem highly biased into benefitting the bank more than its users. Parting from that, the second thing is how centralized the lending market itself is, with major financial institutions being the only figuring names whenever someone looks for this kind of services.
That obscures the names and offers of many secondary institutions or individuals that might offer a better service for a lower interest rate or fewer transaction fees.
However, with the advent of blockchain technology, the concept of blockchain credit is starting to become a reality with many new projects beginning to show up for launch shortly,
Two of these projects, Celsius and Ripio Credit, are looking among the best competitors for the future of lending using the blockchain. To better understand them (and to differentiate them and help you choose which one is the best fit for your needs), we’ll give you a side-by-side comparison over several points.
- The Aim of the Project.
Both projects aim towards decentralized lending by allowing for lenders to upload their offers and borrowers to get money from these sources by collateralizing their blockchain assets (cryptocurrencies). That is known as Blockchain Lending.
However, their long-term goals start to separate after this.
First, Celsius aims towards the legitimization of the Ethereum network and blockchain platforms themselves as an investment and trading environment by providing safe opportunities for strengthening their acquisition power through a reputation system and the self-governance and self-regulation of the market.
Ripio Credit, on the other hand, looks to democratize the digital economy in Latin America by allowing its users to get consumer credit and thus inclusion in the crypto market.
- How It Works.
Ripio Credit works by allowing smart contracts on the Ethereum blockchain to manage the transaction by specifying the terms of the loan and distributing the money to the parts.
Additionally, the system acts by including a third agent who identifies the parts and acts as a warranty for the success of the transaction and the correct steps in the case of a default.
Celsius allows for a free market that lets lenders post their offers and borrowers to post their expectations.
The system then matches them by filtering those with bad reputations and grouping several lenders to minimize individual risks and improve interest rates.
- Pros and Cons.
Celsius pros are that it offers for real decentralized lending since all the transactions are done peer-to-peer, and the market itself is regulated and governed by its members through voting and the reputation system, which can even expel other users if their scores fall too low or if the community votes to do so.
The cons come to be only the fact that blockchain credit is still a new venture and that Ethereum smart contracts need to be very specific to work correctly.
Ripio, despite being a more established company, includes the same cons as Celsius with the addition that it’s a service only available in Argentina (for the time being) and seems to remain that way for a while before they branch out to Latin America and, then, the rest of the world.
However, their advantages include high safety thanks to the third agents and their compromise to protect lenders (even though some might see this last point as an actual con as it means the lenders will probably become dependent on the system).