Utilizing Ethereum-Based Lending System to Prevent Defaulting on Loans

Borrowers and other interested parties in the loan process can create a number of untrustworthy situations that make traditional lending systems less safe and reliable. Although smart contracts and the decentralized nature of the blockchain make it impossible for predatory lending to occur, the decline in cryptocurrency value may make it possible to pay back loans using less amount of fiat currency than was borrowed. In this research, we develop a blockchain and smart contract-based lending system, including ERC-20 tokens as collateral to mitigate borrower risk. Using the smart contract feature, the mechanism operates autonomously, with no human oversight required. By recording transactions in chronological order, the system fosters trust and openness among its users. The system tracks the currency exchange rate’s volatility and periodically raises the value of ERC-20 tokens to combat the aforementioned issues. At the paper’s conclusion, we take a look at the method’s effectiveness in a handful of test cases and data-specific charts.