With the creation of cryptocurrencies, we have seen a new era of finance come to fruition. It ensures better international payments, permissionless financial primitives, and an abundance of free ground for developing products and services that were once unavailable. One such innovation that only continues to garner more steam as time passes is crypto lending, the trend that is opening opportunities for crypto players of all sizes.


Obviously, the practice of lending and borrowing is nothing new. With traditional fiat currency, applying for a loan or borrowing money is the norm. It is easy to say that an age-old practice such as this has been around for a long time, but just how long has it been going? For that matter, where and when did it all start?


The origin and progression of loans


Dating back 4,000 years ago in Mesopotamia, loans are among the first recorded instruments of finance in history. Records from around this time show how farmers borrowed seeds to sow and paid back the lender during the harvest season. 


One seed would grow into a plant that would in turn produce more seeds, hence the reason why these types of loans made sense. Lending farm animals was similar to lending seeds. However, instead of new seeds, the repayment of the animal loan would be done with the animal’s offspring. It is clear to see the origins of money (silver pieces, shells, digital currency, etc.) in this particular system.


Over the years and through various periods, civilizations continued to grow and develop. Because of this, grain and cattle herds were clearly not going to cut it as a payment mechanism and humans needed a better one. It is no surprise that the rise of borrowing and lending, effective exchange mediums, and fundamental bookkeeping practices would emerge at or around the same time. Every component supported each other.


Technology is the primary driving force behind the development of the value and state of money and continuously pushing it to the next level. Similar to how agriculture-oriented societies advanced simple lending and borrowing practices, the Industrial Revolution would accelerate the trend to new heights. After years of expansions and innovations, we would arrive at a point where currencies we can acquire as loans are no longer just physical; they can be digital.


With every launch of a new asset that society considers to be valuable, there is always someone who offers a loan against it. The most recent example of this is cryptocurrency-backed credit lines, the pioneer of this invention being Nexo.


Modern advancements


The increase in popularity of financial technology and cryptocurrencies is ushering in a new generation of finance. Crypto and blockchain technology both have the potential to eliminate traditional centralized entities from the borrowing/lending equation. Alternatively, financial technology can use them to circumvent any existing complications within the lending space.