By Zeus
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Core idea: Private credit is just direct lending. Tokenization can improve access and admin, but it can't remove default risk.
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Private credit is just lending money without using a bank. Instead of going to a high street bank, people and businesses borrow from private lenders. These can be investment funds, specialist lenders, or finance companies.
The borrower gets the cash. The lender gets paid interest for taking that risk. That's it.
Banks don't lend to everyone. They have strict rules, long processes, and a lot of things they simply say no to. Private lenders step in where banks won't.
But they charge more interest because the risk is higher and the money is usually locked up for longer. That's why private credit often pays more than savings accounts or government bonds. Someone is paying that yield. It is not coming out of thin air.
For a long time, private credit was hard to access. You needed a lot of money to get in. Your cash was often locked away for years. You couldn't easily sell your position. You didn't see much information once you invested.
Tokenization does not change what private credit is. The loans still exist in the real world. There are still legal contracts. There are still borrowers making repayments.
It changes how it is handled. Ownership can be tracked digitally. Payments can be reflected more clearly. Admin overhead can drop.
Tokenization can make access easier, reduce admin work, speed things up, and improve visibility. What it cannot do is remove risk.
If borrowers stop paying, losses happen. If lots of people want to exit at once, liquidity can disappear.