Think the growing peer-to-peer (P2P) economy isn’t for you? Think again. If you have utilized services through Airbnb, Lyft, or DogVacay, you are an active consumer participant in the P2P ecosystem.
Even if you have not taken advantage of services such as these, it is impossible to ignore the P2P economy and its profound impact on traditional service industries.
The difficulty with these platforms generally is that they still charge substantially higher fees than what consumers want to pay. While cheaper than their completely centralized counterparts, these platforms still push consumers for profits.
The difficulty, of course, is with the profit-centered model. Simply providing the platform for P2P interaction, these traditional models are seeking to make dramatic profits with low infrastructure investments.
However, a revolution appears to be coming in each of these areas, and many more. The revolution is through blockchain technology and cryptocurrencies. While infrastructure models allow companies to make profits in P2P systems, blockchain technology replaces the infrastructure needs with a decentralized automated platform.
By removing the need for centralized structures, these new systems are revolutionizing the way P2P economics take place. No longer is there a need for profit-centered firms to manage the platform. The technology replaces them and returns those funds to the pockets of the platform users.
Lending and Borrowing
Take, for example, the P2P lending industry. The P2P lending marketplace, like home-sharing, is young—less than 15 years old. However, it has ramped up quickly. The industry niche is expected to be worth over $450 billion by 2020. The impressive growth is also forecast for the next five years.
The goal of P2P lending is to remove the middleman, directly connecting borrowers with investors. Lenders and loan applicants open individual accounts, set parameters and risk profiles that determine interest rates, and review and accept each other’s offers.
Niche segments even exist within P2P lending. There are options for small businesses, auto loans, even medical bills. Borrowers and lenders can select a specialized loan area.
There are other obvious advantages to breaking free of traditional lending solutions. Absence of set fees, lengthy and complicated escrow processes, and high credit score requirements are just a few.
However, blockchain technology is creating new and better solutions in this area as well. Intermediary-free and managed by smart contracts, blockchain platform KYC/AML requirements are notably less intrusive and time-consuming than traditional banks. Additionally, borrowers can typically get a better rate than a conventional loan would offer.
An expanding market, several solid platforms are now available within P2P lending. Lenders simply to choose the option that best suits their needs.
Up until recently, the main market drivers were P2P lenders Dharma and BlockFi. As of April 2019, BlockFi had acquired $53 million in interest-earning accounts. This represents a client base growth of around 50 per cent in less than a month.
Interestingly enough, it wasn’t until a new lender entered the space that a previously gaping hole in existing service offerings was revealed.
New and Better?
Newcomer MyConstant provides the usual perks of a decentralized lending platform. Both parties in each transaction retain control of their finances. Third-party middlemen do not exist, as all contracts are powered by the Ethereum blockchain.
However, MyConstant is different in that users can be confident in the fact that each transaction is fully secured. Every loan is collateral backed. Investor funds are held in escrow accounts when not on loan. This level of security sets MyConstant apart from other platforms.
The P2P lending market’s projected growth, expected to reach $897 billion by 2024, means that the industry will likely see additional lending services built on blockchain platforms. More and more borrowers are pursuing loans for business and personal ventures.
Additionally, the continued increasing visibility of blockchain technology, in general, makes clients more likely to seek blockchain technology-driven platforms when looking for services.
Like the hotel industry, banks may begin to change their business models to compete with the new kid on the block. While this could change the rate and type of growth, it certainly won’t remove P2P lending on blockchain as a contender. The technology is improving at a rapid rate, and will only continue to get better with age.