Earn interest on Fiat (USD, EUR etc.)

How could one earn more interest on his fiat money then be keeping this in his bank account? This article looks at how this could be done via crypto lending.

The issue with the banks

The banks are not paying interest to their clients. There is a simple reason for this – the central banks have pushed the interest rates very low in the hope that this will stimulate the economy. The low-interest rates mean that the savers will not receive the interest payments either. We will not go here into the details, why the central banking low-interest-rate policy is wrong.

However, let’s mention the following: the free economy should mean that the interest rate in the economy should be set on the free market as well. And not in the sowjet-style “politburo”, which are this time called central banks. Our view is that the economic recessions are created exactly through the central banks, which are fiddling too much with the interest rate. This fiddling results in the usual credit over-supply, which results in the investments into the non-productive projects, which cannot bear their costs of capital, which will then lead to the recession.

How to earn interest with fiat money?

There is a very simple alternative available:

  1. Convert some of your fiat assets into the crypto
  2. Crypto can be volatile against USD (or actually USD is volatile against the crypto). Therefore the safer bet would be to use stablecoins, for example, the algorithmic stablecoin DAI, which is pegged 1:1 to the USD
  3. Create Personal Fixed Income Fund in SmartCredit.io. It will automatically invest in crypto loans. You will earn interest, which gets automatically re-invested
  4. You can terminate your Personal Fixed Income Fund at any time and you can withdraw your funds
  5. After that, you can convert your funds back to fiat

Personal Fixed Income Funds

SmartCredit.io is a DeFi product, it is a non-custodial platform. The savers have to create Personal Fixed Income Funds, they have to deposit their funds into the Personal Fixed Income Funds and all the rest will run automatically. When users want to withdraw, then he has to stop the Personal Fixed Income Fund process and he can withdraw his funds (plus interest which has accumulated on his funds).

Savers can create a DAI savings account by creating the DAI Personal Fixed Income Fund. The borrowers, on the other hand, are submitting the loan requests. The Personal Fixed Income Fund will accept these requests and will invest in these loans.

The loans are protected with the crypto collateral and with the Loss Provision Fund. If the borrowers default, then their collateral will be liquidated and the proceeds will be used for the principal and interest payments.

Personal Fixed Income Fund will accumulate interest and it will reinvest. That’s how the DAI savings account will be created on the blockchain.

About SmartCredit.io

SmartCredit.io is a peer to peer crypto lending solution, co-founded by two ex Credit-Suisse Vice Presidents and CFA’s (Chartered Financial Analysts). The key problem’s which this platform solves are the following:

  1. Borrowers have today too high collateral requirements (i.e. Maker, Compound have ca 350% 400% collateral ratio), meaning their capability to borrow is low
  2. Limited choice of collateral – Borrowers on Maker or Compound have limited choice of collateral (just 4 or 8 tokens)
  3. Lenders cannot transfer their loans (or parts of the loans) to other parties during the loan term
  4. Other platforms would like to earn revenues with value-adding services (like credit as an API service)
  5. Investors would like to earn passive income (with no activity)
  6. The majority of existing solutions control the client’s private keys. For example, Nexo or Celcius is technically online investment platforms, which control clients’ assets. They can take clients’ funds at any time and in return, they pay interest to the client. The client can withdraw his funds, but technically Nexo / Celcius have custody of the client’s funds. This results in the “honey-pot” risk

SmartCredit.io offers the following solution:

  1. Non-custodial lending – only borrowers/lenders control their assets; no-one else has access to the borrowers/lenders assets
  2. Borrowers have 2x smaller collateral requirements
  3. Borrowers to have a wide choice of collateral
  4. Lenders to receive loan tokens after creating loans. Lenders can use these loan tokens as a mean of payment (loans are tokenized and transferable)
  5. Holders will receive interest for the loan tokens (interest-bearing to the holder)
  6. Passive Investors will have Personal Fixed Income Funds, which enable passive income on the investor’s assets
  7. Non-custodial API for the other platforms – wallets, payment engines, marketplaces