30 Oct SALT – Loan Sharking on Blockchain
A great white shark is capable of detecting blood from a distance of five kilometers away. A loan shark is built similarly, though its senses are specialized to home into human desperation and sadness – and their senses are often powered by greed, lowering the bar, and age-old “predatory lending” practices. Economics never rests; it’s a constant ebb-and-flow like the waves of an ocean. There are profitable times and times of anguish. But when you and your wallet are in distress, count on SALT to be there to offer an option, albeit a horrible one.
In short, SALT allows a user to leverage their cryptocurrencies for an equivalent exchange of fiat as a loan at a “competitive” interest rate.
SALT is basically a cryptocurrency pawnshop. The biggest advertised advantage is the ability to leverage your cryptocurrencies’ values while maintaining your long-term position in the assets you loaned.
The lenient registration procedures are very appealing and offer many perks such as no credit checks or direct deposit, no prepayment fees, and fast approvals. Through a look at their credit agreement contract, it’s clear that those perks come at an equally high risk.
- If a borrower fails to meet their monthly payment, an equivalent portion of the collateral will be liquidated as payment for the lender.
- The borrowing power of members is limited by the summation of their collateral; a single asset’s value or that of a portfolio of various blockchain assets.
- Depending on some contracts and terms, a LTV (loan to value) ratios are required [overcollateralized].
- In the event that the collateral assets increase in value, then depending on the terms of the contract, the borrower may have the option to:
- Add the increased value to the principal of the loan for an additional extension of credit from the lender or
- Withdraw the excess collateral.
Perhaps the one positive thing that is for certain is the terms and conditions of the contracts will be determined by market values. Qualified members are able to select the loans according to the size, type, and term lengths that they want. SALT’s network of lenders may be the key to creating a competitive market and providing users with the most optimal price available. However, due to the volatility of the cryptocurrency market, lenders would need to be properly compensated for the risk in the form of a significant interest rate.
All of these interactions will be utilized on the lending platform. The SALT Lending Platform is used to facilitate the creation of lending agreements, secure and monitor the value of the blockchain assets acting as collateral, and automatically enforce the terms of each smart contract credit agreement. As an ERC20 PoW smart contract token, Ethereum will provide SALT with the platform it needs to build their proposed ecosystem. With a fixed total supply of 120 million memberships, SALT believes the need for lending/borrowing will drive the demand for the tokens.
Membership is a prerequisite to accessing information and obtaining the financial products on the platform. A person/entity must create an account by providing a username and an email address, among other requirements established by SALT, before you can purchase a Membership. Completion of both Anti-Money Laundering (AML) and Know Your Customer (KYC) screening is required before distribution of any purchase in excess of $2,000 USD. The process is not quite as instant as advertised, as there are still some hoops to go through.
Customers are able to buy SALT memberships in any quantity, and the initial purchase of SALT will result in “an immediate redemption representing the purchase of a base annual Membership to the SALT Lending Platform.” Besides membership, the token can also be used to:
- Gain higher member tier: products, services, and benefits are available to members in several tiered packages based on the redeemed quantity of SALT.
- Reduce a portion of the interest rate associated with a financial product underwritten by a lender on our platform [buying down the rate].
- Access the platform’s API and lender network: this service offers clients, such as exchanges, wallets, and digital asset custodians, an API subscription service whereby they can access the SALT Lending marketplace to offer credit products to their own customer base, for a subscription access fee.
SALT means to enable “members of the SALT Lending Platform to leverage the value of certain digital assets, thereby giving them access to cash, offsetting tax events, avoiding exchange fees and maintaining their long position in the asset they hold.” Disregard the sugarcoating – this is outright predatory lending. The word “unethical” could be used in their terms, and then it would be more accurate.
The team at SALT is quite large for a recent project. Investment from the personal funds of the team members no doubt provided a strong foundation. The most notable member of the team is Erik Voornees, the reigning CEO and founder of ShapeShift, previously of Satoshi Dice and Coinapult. Additional members include two other past CEOs and an experienced legal expert. This level of horsepower behind SALT seems necessary, given that the loan-shark-style business model may see backlash in the future if the platform is ever used by a large consumer-base for any length of time.
SALT is relatively fresh on the scene, and not operational yet, so it is difficult to determine the value in the project. Time will tell how the team performs. Our chips are on scalp the token for profits if you really feel the need to make trades during FOMO pumps; otherwise, for the low-low cost of exceptionally risky money and your soul, you could probably use the platform to lend some cryptos to the poor, or be the poor and borrow some of the most volatile, high-risk, expensive money you’ll ever buy.
I’d recommend just going to a check-cashing outfit where annual interest rates are a steal by comparison, coming in around 380% per annum.
Contributors: Duy (Author), Evan (Research), Enrique (Research/Editor), Karth (Editor)