Since the dawn of time, assets have been lent from one to one without the intermediation of a third party. These were usually people who knew each other personally, while records of loans were kept through ledgers or in rudimentary contracts until the creation of proven schemes in 18th-century Europe.
A short P2P lending history
The exponential increase in the interconnection between people then led to the emergence of social lending, also structured in cooperatives. This P2P exchange had several benefits to consider:
- a high-interest rate, usually above 15 percent, as all the resources usually required by bank intermediation were saved
- the possibility of low capital investment, because it was possible to finance less “demanding” borrowers, depending on the availability of the investor.
The drawbacks were a lack of regulation, in that the terms were not always properly established; and approximate perception of risk, as the criteria for establishing creditworthiness were most often rudimentary and excessively creative.
The advent of Pear Credit
As it is possible to lend assets without using intermediaries, all the more reason it is possible to give them away, for example as part of loyalty programs.
During the Plan ₿ Forum in Lugano, it was announced a new P2P credit system that will enable the creation of a variety of tokens. We are talking about gift cards, travel miles, reward points and stablecoins that will simply be issued as part of loyalty programs.
Pear Credit (that’s the name), is being created thanks to the joint effort of Tether, Holepunch and Synonym and has been launched with a bombastic press release that can be summarized in bullet points:
- Pear Credit will put control of the economy back in the hands of the people
- There will be Bitcoin and credit, obsoleting all else
- Scalable from big enterprises to one-person companies
- Gift cards, travel miles, reward points and stable coins will be issued
- A transparent and resilient accounting system that leverages peer-to-peer technology
- It will combine the Lightning-Network-styled speed with cutting-edge P2P networked storage systems
- A faster, cheaper, and more scalable token format, without relying on blockchains
Analysis of the statement
For those of you who are not yet familiar with Tether, it is one of the first companies ever to issue stable coins, namely tokens that have a value pegged to real currencies: USDT is in fact pegged to the dollar. Despite having a market cap of nearly $70 billion, this company has never been properly audited, so it is safe to say that some of the collateral is currently uncensored. The obvious question is, “will they exist”?
The one thing that I’m guessing jumped immediately to your attention as well, is the possibility of issuing stablecoin WITHOUT relying on a blockchain. It sounds like a definitely curious proclamation. It immediately reminded me of my previous medium related to CBDCs, where indeed the digital yuan is not based on any blockchain, being a centralized system.
What to expect
Pear Credit’s white paper will be available around the spring of 2023. In the meantime, we can only speculate about what will be the principles that will govern it:
- the stablecoin with which the credits will be issued will obviously be USDT
- companies will have to pay a fee for issuing Pear Credits
- the lack of blockchain implementation within the project will make it easier to change the “rules of the game” by the issuing companies, which will be potentially able to change policy and value of the credits issued
- there can be decentralization without blockchain: it is sufficient to go at an higher level, as both are based on standardized protocols
Enthusiastic statements aside, it is presumable that it will consist of a partially centralized system, based on the Lightning Network, that is a Layer 2 of Bitcoin. It is, in any case, an innovation that could yield interesting surprises when (and if) it will be launched.
