The Crypto economy has been expanding at a rapid speed. However, some things are limiting its expansion. These areas are where the crypto market should focus to offer and facilitate its community globally. This article will be decoding some of the major things that can play an active role in making crypto bigger than it is now.
We saw how 2021 provided exceptional growth for DeFi, NFTs, and decentralized markets. Ranging from $18 billion to $240 billion in terms of the total value, making the total crypto market liquidity $400 million. But still, all of this is not enough for the crypto lending market.
Consumers are still struggling with token-collateralized loans and many other old-school frameworks. Here are some things that can act as a worthy addition to the crypto sphere for its future sustainability.
1. Diversity, Diversity, and Diversity
We regularly elements of the crypto sphere such as NFTs, DeFi- oriented items, liquidity pools, and launchpads. However, even after having massive growth, the infrastructure is unable to include diverse elements for consumers.
People often compare crypto with paper money and seek tangible assets. This used to happen in the traditional finance system, you pay for something and then you get to use it. Currencies acted as a medium for people to attain their tangible items. This medium allowed people to have goods and services.
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The current crypto infrastructure lacks good service facilities for its users. The market falls short in providing sufficient goods and services to have a balanced supply and demand. Currently, NFTs and DeFi-oriented items are serving as a medium for many seeking supply and demand networks. Making it pretty hard and almost impossible for many newbies that are interested in participating.
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Crypto infrastructure should offer a sufficient supply and sufficient demand from customers to investors equally. The new addition of a digitally monitored supply and demand system will be a diverse move for the industry. Consumers will be able to own what they will be paying for.
2. An Active Credit Scoring System
Currently, there is an obvious space for a proper and credible credit scoring system in crypto lending markets. The reason is many consumers experience a monitored loan-to-value (LTV) ratio. That is highly functional and operates frequently. The problem comes when we cross the defined liquidation LTV threshold. Turning the collateral sold at a discount price in terms of recovering the said debt or loan. The crypto lending market never makes good use of the collateral value. The actors often reserve a large amount of sum to overcome sudden highs and lows in value.
But we know that traditional banks offer their customers a credit scoring system to monitor such tasks. The credit score acts as a charge sheet of their previous transactions and behavior with the bank and the financial industry. This is different in crypto due to its decentralized nature.
Users should be given a medium where their transactional histories should be tracked. This tracking will help them navigate through the industry safely. Previously we saw that the crypto market is rapidly increasing job opportunities for people and making an impact. Multiple people are being paid in cryptocurrencies in many developed countries.
If the crypto market comes up with a credit scoring system that is efficient and fast. This will reward create many people for their continuous flow of cash in their wallets, having timely transactions, and much more. This will benefit both the investors and the consumers and if we focus on the lending markets, it is surely profitable for lenders as well.
The rewards should be in specific packages based on a consumer’s tracking history and good consumers with no flawed record should be given access to loans of their choices with bearable interest rates. This will provide the opportunity for lenders to earn their desired fees with less risk and to their desired borrowers that they can trust.
Borrowers will have the advantage of long-term return dates and rewards like access to large loans. It will create a transparent and trustable record for both lenders and borrowers, providing both a well-maintained lending market. We can see this coming in the future as more and more launchpads are coming up with their features. This addition will be no surprise in a few years.
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3. A Highly Managed Evaluation System
By now this is an understood factor about the crypto world that it has extreme volatility. Because of this volatility, there should be a managed evaluation system. This evaluation should be done frequently. This is needed because the industry faces rapid highs and lows from time to time.
Lending platforms need to include highly active evaluation systems. This will easily provide a quick estimation of any asset’s market value to users. Given the advancements and technology in the crypto markets, such an evaluation system is not a big deal for many platforms to achieve. If the crypto market keeps on introducing a variety of goods and services, a highly active collateral evaluation system will be a necessity for many.
In terms of cost, it will be an expensive one but it will surely help to pave the future. This task should be taken seriously by lending platforms to help people recognize risk-weighted assets (RWA). This will give an insight to the consumers about lower liquidation thresholds and riskier collateral.
Providing the security of their investments. This will be easy to understand with a trendy example of NFTs. The rarer an NFT is the more it should have a high-frequency collateral evaluation system because of its higher liquidation LTV threshold.
This evaluation system will provide more opportunities and financing options. Every industry needs to evolve with time, and so does the crypto industry. The future depends on providing diverse goods and services to the crypto community. Turning it into a safe and secure symbiotic cycle of consumers and ecosystems. It will compete with traditional ways of offering goods and services turning into a captivating marketplace for people globally.
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