The platform is built on blockchain and smart contract technology which enables lenders and buyers to negotiate terms, originate a loan, and automate payments without relying on third parties. Compared to credit-based lending (which measures trust based on income), collateralized loans are issued in exchange for cryptoassets stored within a smart contract. Lenders publish the loan terms that they are willing to offer borrowers through Salt’s platform. The borrower chooses which terms they’d like and sends their collateral assets to a multi-sig wallet. Lender then posts the cash funds and sends them to the borrower’s account. Borrower makes monthly payments through the duration of the loan, and upon re-payment the funds are returned. If the portfolio value of a borrower drops below a specified threshold, a call notice is sent to the borrower notifying them additional funds are needed. If the borrower fails to re-collateralize, a portion of their portfolio is automatically liquidated to re-balance the over-collateralized loan.
SALT Lending uses an oracle which initiates a loan by creating a smart contract linked to the collateral asset’s native blockchain. Collateralized assets are then sent to the ERC20 smart contract and the transaction is recorded on their native chain.
The smart contract is responsible for the following: 1) keeping track of the loan origination and borrower’s payments, 2) monitoring the value of the collateral asset, 3) generating alerts if the collateral asset drops below an agreed-upon price 4) triggering maintenance calls, 5) storing collateral for the duration of the contract, 6) liquidating collateral if the loan defaults. Three signatures (at minimum) are required before liquidation occurs.
The SALT (SALT) utility token is used to provide access to products, services, and rewards through SALT's "Proof of Access" model. Tokens can be stored on the lending platform in exchange for preferential loan terms such as lower interest rates, higher borrowing limits, and longer payment terms. Additionally, borrowers can pay down their principal or interest using SALT tokens, and they will soon be able to participate in dynamic pricing.