Lending is one of the oldest activity in the human civilizations – one participant lends certain productive or monetary assets and the other participate uses them and pays a fee for them.
Currently, most of the lending is done via commercial banks. However, commercial banks are not only lending money, but they are also creating credit-money in every lending transaction. And when the loans are paid back, then they are destroying the credit-money. From the total amount of money the credit-money is 90%, the rest is the central banking created base money. The profit from issuing the money is called “seigniorage“. It belonged earlier to the kings and queens. Nowadays it belongs to commercial banks.
In parallel, there is peer-to-peer lending. These platforms are lending already existing money, they are not creating any new credit-money like commercial banks are doing this. That’s the reason why peer-to-peer lending will never become a real competition to the commercial banks.
However, it was not always so. For thousands of years, the lending was decentralized and credit-money creation was decentralized too. The oldest artifacts of the decentral credit-money are from Mesopotamia, 5’000 years ago. Decentral lending means that the profits from the money creation – the “seignorage” – will remain in the hands of the lending network participants. It serves the interest of many as opposed to the few.
SmartCredit.io is implementing decentral crypto lending. Additionally, SmartCredit.io tokenizes the loans and makes the loans transferable. This results in the emergence of decentrally created crypto-credit-money.
In the previous article, we looked at the two dimensions of money — base money and credit money. We also looked at the different kind of monetary systems that existed in the last 5’000 years and possible scenarios for the future.