Until now, the only way for cryptocurrency investors to access the value of thier assets was to sell them off.
This isn’t ideal, selling cryptocurrencies incurs fees, taxes must be paid on earnings, and (worst of all) you miss out on any future growth in the currency.
But things are about to change, with SALT Lending’s Blockchain Backed Loans.
SALT’s platform requires an Ethereum based SALT token to gain access to it, but is this token a good currency to invest in?
In this review, I look at what SALT is, how it works, and help you to decide if SALT is a worthwhile investment.
Don’t want to watch? Here’s a summary of the video:
What Is SALT?
SALT is an Ethereum token used to gain membership to the SALT Lending Platform.
This platform allows for ‘Blockchain Backed Loans’, where holders of blockchain assets can put their blockchain assets up as collateral for a cash loan. This means they’re able to access some of the value of their holdings without having to sell any of their tokens, so they don’t miss out on it’s future growth.
Because users are putting their assets up as collateral, there’s no credit checks necessary. Anyone owning digital assets can have access to cash through SALT, provided they have SALT tokens to gain membership to the service. Meanwhile, the risk that lenders are exposed to is reduced because of this collateral. If the borrower fails to make payments, or they try to run away with the cash, the lender can liquidate the holdings to get their money back.
How SALT Works
The Lending Process:
Lenders on the platform post terms they’d be willing to lend at. Members looking to borrow can select which loan’s terms best suits them.
Borrower sends blockchain assets to SALT’s secure, multi-signatory collateral wallet, where they’re stored for the duration of the loan. The Lender transfers funds to the borrower’s bank account. Right now, borrowers can use their Bitcoin, Ethereum, and Ripple holdings as collateral, and can receive cash in a range of fiat currencies including US Dollars, Euros, and Pounds. It seems likely that SALT will be expanding this offering in the future.
Borrowers make a series of monthly payments to repay the loan. Once the loan is repaid in full, their assets are returned to them.
SALT’s Collateral Wallet:
The wallet used by SALT is designed to be capable of holding any blockchain assets.
Four individuals will hold private keys for this wallet: the borrower, the lender, a third party custodian, and the SALT Oracle.
For funds to be moved out of the wallet, at least three of these parties must allow it. This ensures the borrower’s funds are safe throughout the duration of the loan.
It should also be noted that throughout the duration of the loan, the ownership of the collateral remains with the borrower.
Changes in Value:
Cryptocurrencies are always fluctuating in value.
This could result in issues for the borrower or lender, but SALT has designed their service to reduce the affect of changing value.
Firstly, the loans are overcollateralised, meaning the value of assets is greater than the value of the loan.
Then, throughout the loan’s life, the SALT Oracle monitors the value of the collateral, and as well as the repayments made by the borrower.
There are, of course, two possible ways the collateral’s value could change: it could decrease or increase.
If the value of the collateral falls below an agreed upon amount, the Oracle triggers a maintenance call to the borrower. The borrower is told to either deposit additional collateral, or make a cash repayment.
If the borrower is unable, or chooses not, to make payment, the Oracle triggers a liquidation order. With the lender and custodian’s permission, a portion of the holdings will be sold off, again returning the loan-to-collateral ratio to its initial state.
After this, the borrower continues to make their monthly payments as before, and there may be further maintenance calls if the value of their asset’s drops further.
Of course, there’s also a good chance that the value of the assets increases.
In this case, there’s two possibilities that could happen.
- The borrower could add the increased value to the loan, receiving additional cash from the lender.
- The borrower could withdraw the excess collateral from the wallet.
Which of these scenarios plays out depends on the original terms of the loan.
If the borrower is unable to increase their cash loan, but they want to do this, they can pay off the loan early (not facing any early repayment fees as a result of this) and open a new loan for a greater cash sum.
The team here looks fantastic.
It’s already a sizeable team, and they’ve been adding new members since SALT’s creation.
There’s a number of impressive team members here, most notably Erik Voorhees, the CEO and Founder of ShapeShift. He’s a pretty well known name in the cryptocurrency space, and you may well recognise him from the Banking on Bitcoin documentary.
It’s also great to see that the team has a number of members working on the technology and product, which is probably the most important aspect to focus on.
I won’t go into too much detail here, but if you’re interested definitely check out the team here: https://www.saltlending.com/about.
Unfortunately, SALT doesn’t have the strongest social media presence. This is a shame as marketing through social media can be useful in attracting new users to the service.
However, their presence isn’t bad, and they only launched recently so there’s still time to improve.
Whilst everything so far has sounded pretty good, I have a number of issues with SALT.
There are a few minor issues, but there’s one large problem that just kills the possibility of investing in SALT for me.
That issue is that I don’t see the value of tokens increasing. Or, at least, I don’t expect to see any dramatic increase in their value.
The tokens don’t really do much. They’re just access tokens used to gain membership to SALT. As soon as a user makes their payment to join the SALT Network, the token will be sold on to the next person.
And, even if the SALT team held some of the tokens back to drive up the price a little, it’s not in their interest to let it get too high. They don’t want membership prices to rise too high and put potential customers off.
And finally, there’s 120 million SALT tokens. Even if many of users buy the most expensive, enterprise level membership to the platform, there’s unlikely to be enough tokens taken off the market to create scarcity.
So, SALT sounds like a brilliant idea. It solves a problem that many people in the cryptocurrency space currently face, and there’s a brilliant team backing it up. I’m fairly confident that the SALT platform will do well in the future.
But the SALT tokens just don’t make a good investment.
Maybe the token value will increase a little, but I can’t help but think that there’s a number of far better investments to make that will result in far, far greater gains.
Of course, this is just my opinion, and yours may differ, and I’d love to know your thoughts on SALT and it’s future prospects.
Thank you for reading and watching, I hope this has been useful for you.
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