Celsius – a peer to peer lending service built on the Ethereum blockchain – is a bold attempt at putting a dent in the consumer credit industry.
How Does Celsius Work?
Celsius aims to target millennials who have less access to the formal banking system owing to their relatively lower credit scores. On the other hand, this group of citizens also has the highest debt in the form of consumer debt or student loans. Celsius plans to target this demographic.
Celsius just like any other peer-to-peer network allows members to deposit US dollars and thereafter lend to borrowers through its platform. Since there is no bank or any other financial institution involved, the interest which the members are able to earn is much higher. Thus, a lender would typically make 5 to 8 times the interest that they normally get. This could be enough to cover for any bad debts that the investor may make.
The borrowers would be sharing the credit score as well as other information about himself or herself through a hash. This will ensure that lenders will have enough information about the borrowers. It is up to the borrower to decide how much information they want to disclose to the lenders. The more information they disclose to the lenders, the lesser would be the interest rate. Also, the amount of money which they are able to raise would also be dependent on the amount of information which they are willing to share with the borrowers. That is why it is in the interest of the borrowers to share their accurate information with the lenders. With the help of accurate information sharing, they would be able to significantly reduce the amount of interest which they are paying.
Celsius aims to help millennials, and anyone with limited access to credit, with loans and other forms of credit, that they might have not had access to through the conventional banking system.