On-Chain Financing: The Future of Lending for the Web3
On-chain financing revolutionises credit for Web3 companies by removing banking barriers and using crypto assets as collateral.
Not all organisations have the cash to finance new or existing initiatives. Businesses, whether new or established, will need financial support sooner or later. In traditional finance, banks use credit scores to assess whether or not a company is eligible for financial loans.
However, credit scores are a source of controversy. They are often inaccurate and do not fully take into account a company's financial potential. Moreover, credit scores are exclusive systems that exclude borrowers without access to traditional forms of credit.
On-chain financing, on the other hand, allows companies to obtain funds directly via the blockchain. Tools such as Bulla Network enable on-chain crowdfunding, in which businesses can raise capital directly from the community.
The Current State Of Blockchain Financing
NFT, Crypto, DeFi, Metaverse and play-to-earn projects are facing severe financial difficulties, leading many of them to close due to lack of bank support. Some banking networks avoid these projects altogether, labelling them as gambling activities or illicit content.
Banks that allow cryptocurrency transactions tend to freeze accounts without warning. For example, an Indian bank recently froze over 70 Bitcoins, while in South Korea, authorities asked exchanges to seize 3,000 Bitcoins linked to the Do Kwon case.
If a Web3 project cannot access a bank account, how can it get a loan? And even if it does get one, how can it ensure that the account is not frozen? That's where on-chain financing comes in.
What is On-Chain Financing?
On-chain lending, also known as decentralised financing or crypto financing, is a lending system that takes place directly on the blockchain. Companies can obtain financing directly from investors using crypto assets as collateral and based on their transaction history (such as invoices and payments) instead of credit scores.
On-chain financing is revolutionising the financial challenges for Web3 projects. It removes the barriers of the traditional system, offering financing opportunities to businesses excluded from conventional credit.
The key innovation lies in the use of cryptographic assets as collateral, eliminating the need for a credit score and giving access to organisations with little or no credit history. Furthermore, the system incorporates an over-collateralisation mechanism to protect investors' capital. Finally, the inherent transparency of the blockchain provides unprecedented visibility into the use of funds.
Web3 Accounting Platforms For Financing On-Chain
Traditional accounting software, such as QuickBooks and Xero, designed for the conventional financial world, struggle to keep up with the complexity of Web3. These platforms cannot handle crypto assets and on-chain transactions. As a result, they cannot accurately track the fluctuating value of cryptographic collateral, a key element of decentralised finance, nor record the unique characteristics of blockchain transactions.
This is why accounting platforms specifically for Web3 are being created. These tools are designed to manage digital assets and interactions on the blockchain. They offer companies the tools to monitor their crypto assets and transaction history effectively, providing an up-to-date financial overview. This accurate information is essential not only for internal operations, but also for building trust with investors. In the Web3 world, verifiable records and transparency are critical, and these platforms provide the necessary infrastructure.
Conclusion
On-chain financing is the ideal solution for Web3 applications, allowing companies to use cryptocurrencies and digital assets as collateral and transaction history as a credit score. This reduces dependence on banks, allowing organisations to finance their projects with greater freedom.
By March 2025, Pi Network expects to unlock 188 million PI tokens, involving over 1.1 million users. This event raises questions about the impact it could have on token pricing and market dynamics.
Not all organisations have the cash to finance new or existing initiatives. Businesses, whether new or established, will need financial support sooner or later. In traditional finance, banks use credit scores to assess whether or not a company is eligible for financial loans.
However, credit scores are a source of controversy. They are often inaccurate and do not fully take into account a company's financial potential. Moreover, credit scores are exclusive systems that exclude borrowers without access to traditional forms of credit.
On-chain financing, on the other hand, allows companies to obtain funds directly via the blockchain. Tools such as Bulla Network enable on-chain crowdfunding, in which businesses can raise capital directly from the community.
The Current State Of Blockchain Financing
NFT, Crypto, DeFi, Metaverse and play-to-earn projects are facing severe financial difficulties, leading many of them to close due to lack of bank support. Some banking networks avoid these projects altogether, labelling them as gambling activities or illicit content.
Banks that allow cryptocurrency transactions tend to freeze accounts without warning. For example, an Indian bank recently froze over 70 Bitcoins, while in South Korea, authorities asked exchanges to seize 3,000 Bitcoins linked to the Do Kwon case.
If a Web3 project cannot access a bank account, how can it get a loan? And even if it does get one, how can it ensure that the account is not frozen? That's where on-chain financing comes in.
What is On-Chain Financing?
On-chain lending, also known as decentralised financing or crypto financing, is a lending system that takes place directly on the blockchain. Companies can obtain financing directly from investors using crypto assets as collateral and based on their transaction history (such as invoices and payments) instead of credit scores.
On-chain financing is revolutionising the financial challenges for Web3 projects. It removes the barriers of the traditional system, offering financing opportunities to businesses excluded from conventional credit.
The key innovation lies in the use of cryptographic assets as collateral, eliminating the need for a credit score and giving access to organisations with little or no credit history. Furthermore, the system incorporates an over-collateralisation mechanism to protect investors' capital. Finally, the inherent transparency of the blockchain provides unprecedented visibility into the use of funds.
Web3 Accounting Platforms For Financing On-Chain
Traditional accounting software, such as QuickBooks and Xero, designed for the conventional financial world, struggle to keep up with the complexity of Web3. These platforms cannot handle crypto assets and on-chain transactions. As a result, they cannot accurately track the fluctuating value of cryptographic collateral, a key element of decentralised finance, nor record the unique characteristics of blockchain transactions.
This is why accounting platforms specifically for Web3 are being created. These tools are designed to manage digital assets and interactions on the blockchain. They offer companies the tools to monitor their crypto assets and transaction history effectively, providing an up-to-date financial overview. This accurate information is essential not only for internal operations, but also for building trust with investors. In the Web3 world, verifiable records and transparency are critical, and these platforms provide the necessary infrastructure.
Conclusion
On-chain financing is the ideal solution for Web3 applications, allowing companies to use cryptocurrencies and digital assets as collateral and transaction history as a credit score. This reduces dependence on banks, allowing organisations to finance their projects with greater freedom.
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