A Break from Bitcoin - Cryptocurrency Collateral on the Ethereum Blockchain

This article will explore the use of cryptocurrency as a form of collateral in secured lending. In doing so, it will examine the next generation of blockchain technology, including smart contracts, decentralised financial applications, and permissioned networks, and how these technologies may be used to support secured cryptocurrency lending transactions. The article proposes two models suitable for adoption and contends that smart contracts as supported by the Ethereum blockchain provides the most ideal structure for contracting parties in such transactions. However, a major inhibitor in its realisation is the current Australian legislative framework, which is outdated and inadequate in supporting novel technologies. Recommendations on how legislators may overcome these limitations are provided. The use of cryptocurrencies in collateralised lending presents an opportunity for prospective lenders to expand their borrowing base, and unlocks an additional avenue for borrowers in attaining finance.