Our product will initially be a 12 month term loan with interest only payments throughout the loan and a balloon of principal at the end. Payments can be made in dollars or crypto. For Bitcoin we will lend 40% of the value in USD and 35% of the value for Ether – says Zac Prince, founder at BlockFi.com in Bithub.pl’s #SundayInterview.
You offer loans in USD backed by BTC or Ether. Who are you targetting it at? Investors, companies, individuals?
Zac Prince: We will support individuals, corporations and institutional investors. Initially only US based borrowers but we hope to expand internationally in 2018. Our minimum loan size will be $10,000.
How does it work in detail? How much do you need to bring in as collateral, how much can you loan and how high is your interest?
ZP: The product will initially be a 12 month term loan with interest only payments throughout the loan and a balloon of principal at the end. Payments can be made in dollars or crypto. For Bitcoin we will lend 40% of the value in USD (so 40K USD secured by 100K in BTC) and 35% of the value for Ether. Most of our borrowers are concerned with not triggering a taxable event which is one of the reasons why we are starting with a conservative loan to value ratio. Interest rates will be between 10–15% depending on the size of the loan and type of borrower.
How are you securing the collateral? Is it done with smart contract?
ZP: We will be hosting the collateral in an escrow account managed by a leading US exchange. Their platform keeps almost 100% of the assets in cold storage at any given time and also offers a level of insurance against any platform hacks.
Why use your services rather than get a bank loan?
ZP: Banks don’t accept cryptoassets as collateral – so our available loan sizes will be higher and our rates will be lower than an unsecured loan from a bank.
Is this your only product for now? What will come next: how are you planning to develop your offer?
ZP: Yes, we are starting with just the term loan. In the future we will expand our product based on the needs of our customers. This could include things like: secured credit cards, 0% interest rate loans and structured products.
How does the market of crypto-backed loans look at the moment and how do you think it’s going to grow?
ZP: We expect it to be very large and are seeing a lot of activity in the space. No one is live with a USD denominated loan currently and we expect to be the first company that has ever provided a USD loan backed by cryptoassets. There is one competitor we know of who is lending USD and lots of emerging, decentralized credit providers that will offer exclusively token based lending.
Interviewed by Przemyslaw Cwik