Develop a Blockchain-Based Lending Platform like SALT Lending

Blockchain-based lending platforms are changing the game by offering fast, secure, and asset-backed liquidity, which is exactly what’s needed in today’s unpredictable market. With the collapse of platforms like Celsius and BlockFi, it’s clear that traditional lending models have their flaws. That’s why solutions like SALT Lending, which combine blockchain’s transparency with solid financial management, are becoming the new standard. They’re not just offering loans, they’re restoring trust and giving users the security they need to navigate the world of decentralized finance.

We’ve helped several companies build blockchain-based platforms that mirror the success of SALT Lending, offering users asset-backed liquidity while reducing intermediaries and risk. IdeaUsher’s experience in integrating decentralized protocols with blockchain ensures that lending platforms can offer automated loan approvals, transparent risk assessments, and real-time loan monitoring. That’s the reason we’ve created this blog, to show you how to create your own blockchain-backed lending platform with smart contracts, enhancing security and compliance.

Key Market Takeaways for Blockchain-Based Lending Platform

According to MarketResearchFuture, the blockchain finance market is experiencing impressive growth, projected to rise from $18.81 billion in 2024 to $204.48 billion by 2034, with a CAGR of 26.94%. This surge is driven by innovations in decentralized finance (DeFi), particularly blockchain-based lending platforms that connect borrowers directly to lenders, bypassing traditional financial institutions.

Source: MarketResearchFuture

Platforms like Aave, Compound, and Curve Finance leverage smart contracts to automate lending and borrowing, improving efficiency and transparency. Other services, such as SALT Lending, allow users to secure loans using digital assets as collateral, while Venus Protocol and Liquity offer unique features like interest-free loans and stablecoin-focused lending. These innovations make the lending process more efficient, borderless, and secure, reducing costs and increasing trust through blockchain’s immutable records.

The sector’s growth is also supported by strategic partnerships, with platforms like Aave and Compound integrating with crypto exchanges and wallet services to expand accessibility. Celsius Network further boosts adoption by emphasizing community engagement and offering user rewards.

Understanding Blockchain-Based Lending Platform

A blockchain-based lending platform enables users to borrow and lend digital assets, typically using cryptocurrency as collateral. Unlike traditional lending methods that depend on credit scores, these platforms leverage blockchain technology and smart contracts to automate processes, enhancing security and transparency.

Key Characteristics:

• Crypto-backed Loans: Borrowers deposit digital assets such as Bitcoin (BTC), Ethereum (ETH), or others as collateral in exchange for loans, often in stablecoins or fiat currencies.
• No Credit Checks: Loans are secured solely by the value of the cryptocurrency collateral, eliminating the need for traditional credit assessments.
• Automated Processes: Smart contracts handle various loan-related functions, such as approval, interest calculation, repayment schedules, and liquidation in case of collateral value fluctuation.

Types of Blockchain Lending Models

Why Are Blockchain Lending Platforms Gaining Popularity?

Blockchain-based lending platforms are booming because they offer users access to liquidity without selling their crypto. They’re secure, transparent, and global, removing traditional banking barriers. Plus, they allow users to avoid taxable events while maintaining exposure to their assets.

1. Growing Crypto Asset Adoption 

As more people and institutions hold crypto, the demand for crypto-backed financial services grows. Blockchain lending lets users access liquidity without selling assets, becoming a popular solution with mainstream acceptance.

2. Increased Demand for Non-Custodial Liquidity Solutions

Traditional lending platforms face trust issues due to custodial risks. Blockchain lending offers a non-custodial, automated, and transparent solution, where users retain control of their crypto and access loans securely.

3. Global Accessibility with Fewer Intermediaries

Blockchain lending removes barriers like geography and bureaucracy, allowing borderless loans with lower fees and faster approvals. It enables unbanked populations and businesses to access credit and capital quickly.

4. Tax-Efficient Liquidity 

Borrowing against crypto avoids taxable sales, allowing users to access liquidity without paying capital gains taxes. This enables them to maintain exposure while unlocking funds for personal or business use.

How Does the SALT Lending Platform Work?

SALT Lending lets users take out loans by using crypto as collateral. After a quick KYC check, they lock their assets in a smart contract, and the loan is disbursed either in fiat or crypto. If things get volatile, their SALT Shield™ system helps protect users from liquidation with a 72-hour grace period.

Step 1: Loan Application & KYC Verification

To start, users submit their personal or business details via SALT’s platform. These details are reviewed by SALT’s centralized compliance team to ensure identity verification, as well as compliance with KYC and AML regulations. Once approved, users can connect their non-custodial crypto wallet or deposit funds into a custodial account for the loan process.

Step 2: Smart Contract Collateral Lock

Once approved, borrowers choose their loan terms, including the loan amount, duration, and interest rate. The smart contract calculates the required collateral, which is typically 150% Loan-to-Value for BTC-backed loans. Depending on the user’s preference:

• Non-custodial users: The collateral is sent to a multi-sig smart contract vault.
• Custodial users: The collateral is stored in SALT’s cold storage wallets.

Step 3: Fiat/Crypto Disbursement

Once the collateral is secured, SALT disburses the loan based on the type of currency requested:

• Fiat loans (USD): Funds are sent to the borrower’s bank account via ACH or wire transfer.
• Crypto loans: Stablecoins (USDC/USDT) are transferred to the borrower’s crypto wallet. 

All loan details are recorded on a private Ethereum sidechain for transparency and security.

SALT Shield™, LTV Ratios & Repayment Logic

Dynamic LTV Management

The initial LTV ratio ranges from 50-70%. For example, if a borrower applies for a $100k loan, they need to provide $150k to $200k in BTC collateral.

• Margin Call Threshold: At an 80% LTV, the borrower receives a warning.
• Liquidation Threshold: Typically, a 90% LTV triggers liquidation, but this can be overridden by SALT Shield™ protection.

SALT Shield™ Protection System

SALT’s proprietary protection system uses real-time volatility detection from an oracle network to monitor price fluctuations. If a collateral value drops by more than 30%, the following actions are taken:

If the collateral value drops too much, a circuit breaker kicks in to stop automatic liquidation. This gives the borrower a 72-hour grace period to stabilize the loan. During this time, they can add collateral or adjust the loan terms to avoid liquidation.

Borrowers can:

• Add more collateral.
• Adjust LTV thresholds temporarily.
• Extend the loan’s duration.

Repayment Engine

The repayment system is flexible, offering both automatic and manual payment methods:

• Automatic: Scheduled deductions from a linked bank account.
• Manual: Borrowers can make crypto repayments by interacting with a smart contract.
• Early Repayment: Borrowers who pay off the loan early can receive a 1-2% fee discount.

Hybrid Architecture: Centralized + Blockchain Components

SALT Lending uses a combination of centralized and decentralized components for an optimized user experience.

Smart Contract Layer (Decentralized)

• Loan agreements, collateral balance tracking, interest calculations, and liquidation logic are all handled by smart contracts.
• Collateral management is fully automated, with all operations occurring on the blockchain.

Custodial Infrastructure (Centralized)

• SALT’s compliance hub handles KYC/AML verification.
• The customer support team offers assistance, including loan specialists and account managers.
• SALT maintains banking relationships for fiat transfers and provides an arbitration center for dispute resolution.

Interoperability Bridge

SALT ensures seamless communication between the centralized and decentralized layers, with bi-directional data flow between on-chain and off-chain systems. Daily reconciliation audits and emergency pause functionality are also available to maintain security and integrity.

Smart Contracts & Oracle Interaction

Oracle Network Architecture

SALT uses Chainlink’s ETH/USD price feed as the main oracle to track price changes. If that fails, Band Protocol steps in as a backup. They also have an internal price averaging system to make sure the data is spot-on and reliable.

Smart Contract Decision Flow

Every 60 seconds, the oracle updates the price, and the smart contract recalculates the collateral’s value. It checks the current LTV ratio, how long it’s been since the last margin call, and if SALT Shield™ is active. This ensures everything stays in line and helps prevent issues with the loan.

Based on these checks, the contract executes appropriate actions:

• No action needed (normal operation).
• Margin call notification.
• Collateral stabilization options.
• Partial or full liquidation.

Collateral Management & Security

Cold Storage Protocol

SALT keeps collateral safe with cold storage using Ledger Enterprise and Fireblocks MPC tech. To minimize risk, they spread the collateral across three or more jurisdictions. Plus, withdrawals need a 5/7 multi-sig approval, so no one can access funds without team agreement.

Rehypothecation Prevention

SALT ensures that all collateral wallets are publicly verifiable on the blockchain.

• Third-Party Audits: Monthly attestations by independent auditors confirm that collateral remains 1:1 backed.
• Smart Contract Enforcement: Rehypothecation is prohibited, ensuring that no collateral is used for purposes other than the loan.

With these security features, SALT Lending aims to offer a reliable, transparent, and secure lending experience in the world of digital assets.

Benefits of Building a Platform like SALT Lending for Businesses

Building a platform like SALT Lending helps businesses offer fast, borderless loans with lower operational costs through smart contract automation. It opens up access to a broader customer base, including underbanked and global users.

Technical Benefits

1. Transparent On-Chain Processes

Every transaction, collateral deposit, and repayment is recorded on the blockchain, making it easy for users to independently verify loan terms, collateralization ratios, and interest calculations. This transparency builds trust without needing third-party audits.

2. Automated Loan Lifecycle Management

Smart contracts automate the entire loan process, from origination to collateral valuation, interest accrual, and repayments. This reduces operational costs by eliminating manual underwriting and streamlining loan management.

3. Reduced Fraud via Smart Contract Enforcement

Smart contracts ensure that loan terms are executed exactly as coded, with no risk of manipulation or chargebacks. Automated calculations minimize human error, making the process more reliable and secure.

Business Benefits

1. Faster Loan Disbursement & Settlement

Unlike traditional banks, which can take days or weeks for approval, blockchain lending platforms can disburse loans in minutes or hours. For example, a small business can secure a $50K USDC loan in just two hours by locking ETH as collateral.

2. Broader Customer Base

Blockchain lending serves a wide range of customers, including underbanked populations, crypto holders, and global users. A platform like SALT can onboard customers from over 100 countries, bypassing the need for local banking partnerships.

3. Regulatory-Ready Framework

Hybrid models like SALT blend the best of DeFi with centralized finance compliance, such as KYC/AML checks. This makes it easier for platforms to partner with traditional financial institutions and stay regulatory compliant.

4. Long-Term Revenue Model

Blockchain lending platforms can generate revenue through interest income (5-15% APR), origination fees (1-3%), and premium services. These services include liquidation protection, custodial solutions for institutional clients, and white-label APIs for other fintechs.

How to Build a Blockchain Lending Platform Like SALT Lending?

We specialize in developing robust blockchain-based lending platforms like SALT Lending, helping businesses launch secure, efficient, and scalable crypto-backed lending solutions. Here’s a step-by-step overview of how we approach building these platforms for our clients:

1. Define Business Model & Loan Products

We start by understanding your target audience, whether it’s individuals, businesses, or institutions, and help define the types of loans your platform will offer, such as personal, business, or stablecoin-backed loans. This ensures that your platform aligns with market needs and provides tailored solutions to your customers.

2. Develop Smart Contract Architecture

We write, test, and audit the smart contracts that will power your platform. These contracts handle crucial functions like LTV monitoring, repayments, and collateral management. Our team ensures these contracts are secure, efficient, and fully tested to prevent vulnerabilities and maintain transparency.

3. Set Up Secure Custodial Infrastructure

Security is a top priority, which is why we implement cold storage wallets, multi-sig logic, and asset segregation protocols to safeguard your users’ collateral. This infrastructure protects assets from hacks and ensures that funds are securely stored and managed across different user accounts.

4. Integrate Oracle Services

We integrate reliable oracle services such as Chainlink, or develop custom oracles, to provide accurate and real-time asset pricing data. These oracles are essential for loan collateral valuation, and we ensure that failover mechanisms are in place to avoid disruptions in pricing data, ensuring the stability of the platform.

5. Design Frontend & Admin Dashboards

We create user-friendly portals for borrowers where they can easily track loan terms, repayments, and collateral status. For administrators, we build comprehensive dashboards that allow easy monitoring of loan activity, user accounts, and platform performance, ensuring smooth operations and user satisfaction.

6. Implement Compliance & KYC/AML

To ensure compliance with regulatory standards, we integrate KYC/AML processes using reliable external APIs. Sensitive data is stored off-chain, encrypted, and linked to wallet addresses, giving you and your users peace of mind that their information is secure while remaining compliant with industry standards.

Challenges in Developing a Blockchain Lending Platform

After working with numerous clients, we’ve seen firsthand the challenges that can arise when building a blockchain lending platform, and we know exactly how to handle them. Here’s a breakdown of the common issues and the best ways to address them:

1. Smart Contract Vulnerabilities

Smart contracts are vulnerable to bugs, which can lead to significant losses or disrupt loan management entirely. We’ve seen cases like the $600M Poly Network hack.

Solutions

• To mitigate this, we always ensure thorough third-party audits with trusted firms like CertiK and OpenZeppelin before launch. 
• We also recommend formal verification to mathematically prove contract logic is error-free. To further secure the platform, we encourage bug bounty programs to catch any remaining vulnerabilities.

2. Market Volatility & Liquidation Risk

Crypto price crashes, like the 30% drop during the 2022 bear market, can trigger mass liquidations, impacting both lenders and borrowers.

Solutions

• To address this, we implement dynamic LTV adjustments that automatically adjust collateral ratios based on market conditions. 
• In addition, we build in liquidation shields, such as SALT Shield™, to temporarily pause liquidations during market crashes. We also set up circuit breakers to halt liquidations if prices fall too rapidly, protecting borrowers from sudden market swings.

3. Regulatory Compliance

Changes in regulations or government action, like the SEC’s case against BlockFi, can pose a serious risk to compliance. Non-compliance with KYC/AML rules can lead to fines or platform shutdowns.

Solutions

• We help mitigate this by partnering with licensed custodians like Anchorage or BitGo for secure custody solutions. We integrate regional KYC/AML checks using services like SumSub or Onfido and ensure geo-blocking of restricted jurisdictions. 
• Additionally, we often adopt a hybrid model (like SALT), keeping loan logic decentralized but managing compliance off-chain for flexibility.

4. User Trust & Platform Credibility

Concerns around fraud, insolvency, or hidden risks can drive users away. Incidents like the Celsius collapse have made users wary of centralized platforms.

Solutions

• To build trust, we always publish smart contracts so users can verify fairness, similar to how Aave operates. We also implement proof-of-reserves with Merkle tree audits, showing real-time collateral backing. 
• For extra security, we recommend setting up insurance funds to cover hacks or unexpected events, like Nexus Mutual. Additionally, cold wallet transparency allows users to track their collateral storage, ensuring peace of mind.

Tools & APIs for Building a Blockchain Lending Platform

To build a blockchain lending platform, you’ll need solid smart contract frameworks for loan management and collateral handling, along with reliable price oracles for accurate valuations. Focus on secure wallet integrations, whether custodial or non-custodial, and implement strong KYC/AML compliance tools.

1. Smart Contract Development

Core Technologies

Key Features Needed

• Loan Origination Logic: Defines how loans are initiated, including the borrower’s identity, loan amount, and collateral.
• Collateral Management: Smart contracts that track, secure, and evaluate collateral to ensure loans remain underwritten correctly.
• Interest Rate Algorithms: Automated formulas or models that calculate interest rates based on market conditions, borrower risk, or other factors.
• Liquidation Engine: A mechanism for triggering loan liquidation if the collateral value falls below a certain threshold.

2. Oracle Integration

Price Feed Solutions

Implementation Tips

• Time-Weighted Average Prices (TWAPs): Use TWAPs to prevent flash loan exploits by averaging the price over a fixed window, ensuring more stable data
• Multi-Oracle Consensus: Implementing a consensus mechanism with multiple oracles ensures accuracy and resilience in critical operations like price feeds.

3. Wallet & Custody Infrastructure

Custodial Options

For secure crypto asset management, you’ve got enterprise-level solutions like MPC wallets for private keys, along with regulated custody services offering insurance. If you’re aiming for decentralized control, a multi-signature wallet is a great fit for governance-based setups. 

Non-Custodial Solutions

To make wallet integration seamless, you can use tools like MetaMask SDK for easy Web3 connections via browser or mobile. For mobile users, WalletConnect provides a secure way to link their wallets to your platform. If you want to simplify user access, Web3Auth lets them log in with familiar social accounts like Google or Facebook.

Security Must-Haves

• Multi-Signature Approvals: Require multiple private keys to approve transactions, adding an extra layer of security.
• Cold Storage for >95% of Collateral: Store the majority of the collateral off-line to mitigate risks from hacks or breaches.
• Daily Balance Reconciliation: Implement regular checks to ensure that balances and asset holdings match the ledger, minimizing the chance of discrepancies.
  

4. KYC/AML Compliance Tools

Top Providers Comparison

Implementation Flow

User Uploads ID and Selfie: The user submits a government-issued ID and a selfie for identity verification.

System Checks: Verify the user’s identity against:

• Sanctions Lists: To ensure the user is not involved in illegal activities.
• PEP (Politically Exposed Person): A check to prevent corruption-related activities.
• Face Match Verification: AI-driven face recognition to ensure the ID belongs to the person submitting it.

Risk Scoring & Ongoing Monitoring: Evaluate the risk level based on various parameters, including transaction behavior and country of origin.

5. Frontend & Backend Stack

Frontend (User Interface)

For building fast, dynamic web apps, React and Next.js are your go-to frameworks. To easily connect wallets, Web3Modal makes the process smooth, while Ethers.js helps you interact with the Ethereum blockchain. For data visualization, Chart.js lets you create interactive loan analytics and dashboards with ease.

Backend (Business Logic)

For building scalable apps, Node.js is perfect, especially for handling APIs. PostgreSQL is great for storing loan and transaction data, while Redis boosts performance with fast session caching. If you need to query blockchain data efficiently, The Graph makes it easy to fetch transaction history or smart contract states.

6. Infrastructure & Monitoring

Blockchain Nodes

To interact with blockchain networks smoothly, Alchemy offers a comprehensive suite of tools. Infura is a solid choice for scaling Ethereum and IPFS interactions. For a broader multi-chain experience, QuickNode supports multiple blockchains, making it a flexible option.

Cloud Hosting

For reliable and scalable hosting, AWS or GCP is perfect for managing centralized components like user data and analytics. IPFS is your go-to for securely storing decentralized documents like loan agreements. And to keep your platform safe from attacks, Cloudflare provides top-notch DDoS protection.

Monitoring & Alerts

For smart contract issues, Tenderly offers real-time debugging and performance insights. Sentry is great for tracking errors and quickly resolving them. To keep tabs on system health and performance, Prometheus and Grafana provide detailed metrics on everything from transaction volume to critical system stats.

Use Case: Crypto-Backed Lending Platform for a Bank

A mid-sized European bank came to us with two key goals: modernizing their services to compete with fintechs by offering crypto-backed financial products and ensuring compliance with strict regulations as they entered the digital assets space. 

They needed a solution that balanced innovation with regulatory requirements. We worked closely with them to deliver a platform that met both needs.

Solution: Hybrid Blockchain Lending Platform

We developed a hybrid solution combining blockchain’s efficiency with the bank’s trusted infrastructure.

Phase 1: Smart Contract Development & Security Audit

We built the platform using Solidity for smart contracts and OpenZeppelin for secure, reusable templates. Hardhat was used for testing and debugging to ensure everything worked flawlessly. Key features included collateral management, dynamic LTV calculations, and an automated interest accrual system for smooth loan operations.

Security Measures:

• Full CertiK audit before deployment on the mainnet.
• Post-launch bug bounty program to enhance security.

Phase 2: Custody Solution Integration (Fireblocks)

We chose Fireblocks for its SOC 2 Type II compliance, ensuring top-notch security standards. Their insurance-backed custodial wallets offer added protection, while multi-party computation (MPC) enhances the security of private keys. This made Fireblocks the ideal choice for safe, regulated custody integration.

Integration Workflow:

• The bank created a regulated custody pool.
• Smart contracts were integrated with Fireblocks API for seamless transfers.
• Daily reconciliation ensured alignment between blockchain and custody records.

Phase 3: White-Label UI for Bank Customers

We created a custom React.js dashboard that seamlessly matched the bank’s branding. With Web3.js, users could easily connect their wallets, and we integrated fiat on/off ramps using the bank’s existing payment systems. This made the platform user-friendly and fully aligned with the bank’s services.

Outcomes & Metrics

In just six months, the platform attracted over 12,500 new customers, processing $47M in loan volume. The default rate came in at a low 1.2%, well below the industry average of 3.4%. This rapid growth highlights the platform’s strong performance and adoption.

Key Benefits Achieved

• Regulatory Compliance: All loans comply with EU MiCAR regulations, with automated travel rule reporting via Chainalysis, ensuring seamless regulatory adherence.
• New Revenue Streams: The platform generated a 4.5% interest margin on crypto loans and $1.2M in origination fees in its first year, unlocking new revenue.
• Competitive Differentiation: As the first bank to offer non-custodial crypto loans, the platform attracted 23% more millennial customers, standing out in the market.

Conclusion

The rise of secure, hybrid blockchain lending platforms like SALT highlights the growing demand for innovative financial solutions that prioritize security, speed, and compliance. Proper architecture, smart contract design, and a compliance-first mindset are key to building platforms that provide users with safe, fast, and capital-efficient loans while allowing them to retain ownership of their crypto. 

At Idea Usher, we specialize in helping fintech and Web3 businesses create customized, secure, and smart contract-powered lending platforms, tailored to your unique goals and market needs. Let’s shape the future of lending together.

Looking to Develop a Blockchain Lending Platform like SALT?

At Idea Usher, we specialize in helping businesses like yours launch blockchain-based lending platforms, similar to SALT Lending, with a hybrid DeFi/CeFi architecture. We combine the efficiency of smart contract automation with the necessary regulatory compliance, ensuring your platform is both innovative and secure.

Why Choose Us?

• 500,000+ Hours of Expertise – Our team includes ex-MAANG/FAANG developers who have built scalable fintech solutions.
• End-to-End Development – From smart contract audits to a white-label UI, we manage the entire process.
• Proven Success – Our track record speaks for itself—helping banks, startups, and enterprises innovate and lead the market.

We Deliver:

• Crypto-Backed Loan Systems (Like SALT)
• KYC/AML-Compliant Hybrid Models
• Smart Contract & Oracle Integrations
• Custodial & Non-Custodial Wallets

Let’s Build Your Lending Platform—Get a Free Consultation Today!

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