25 February 2018
What is ETHLend? – ETHLend is a fully decentralized financial marketplace built on top of the Ethereum Network allowing lenders and borrowers from all over the world to create peer to peer lending agreements in a secure and transparent way using Blockchain and Smart Contracts.
Lending crypto-to-crypto removes the need for banks to be the only available option for borrowing. By placing a loan request on ETHLend, lenders from all over the globe can fund loan requests by competing to provide the most competitive interest rate. ETHLend is trustless and transparent and can be used by individuals and institutions.
A short intro video by our Media Correspondent is located at https://www.youtube.com/watch?v=IGaoqUoL1F4
Abstract: ETHLend.io introduces decentralized lending on Ethereum network by using ERC-20 compatible tokens or Ethereum Name Service (ENS) domains as a collateral. ETHLend solves the problem on reducing the loss of loan capital on default. On healthy loan relationships the loan is paid back. However, the pseudo-anonymous nature of Ethereum blockchain network opens the possibility to avoid repayment of the loan since the lender might not have all the necessary details of the borrower to enforce the debt in the borrower’s jurisdiction. Moreover, enforcement in a decentralized environment, where the parties can be from any part of the world, might not be efficient. ETHLend provides decentralized solutions to avoid loss of capital and to make one true global lending market available.
Copyright 2018 ETHLend.io
Without explicit permission, anyone has the right to use, reproduce or distribute any material in this white paper for non-commercial purposes and educational use, provided that the original source and the applicable copyright notice are cited.
DISCLAIMER: This White Paper is inteded for distribution solely on information purposes. ETHLend.io does not guarantee the accuracy of the conclusions and statements reached in this white paper. Moreover, this white paper is provided “as is” with no representations and warranties, express or implied, whatsoever, including, but not limited to: (i) warranties of merchantability, fitness for a particular purpose, title or noninfringement; (ii) that the contents of this white paper are free from error or suitable for any purpose; and (iii) that such contents will not infringe third-party rights. All warranties are expressly disclaimed. ETHLend.io and its affiliates expressly disclaim all liability for and damages of any kind (direct or indirect, including loss of profit) arising out of the use, reference to, or reliance on any information contained in this white paper, even if advised of the possibility of such damages. Under no circumstances ETHLend or its affiliates will be liable to any person, entity, partners, partner’s customer or end-users for any consequential, incidental, direct, indirect, special or punitive damages, including without limitation damages for lost profits, revenues, lost business or loss of use of products whether or not ETHLend advised in this white paper or any of the content contained herein, that such damages will or may occur, and whether such damages are claimed based on breach of contract, negligence, strict liability in tort or any other legal or equitable theory. No action regardless of form, arising out of this white paper may be brought against ETHLend.
Table of Contents
- ETHLend.io White Paper – Democratizing Lending
- Summary on What We Are Developing
- Background
- About the White Paper
- Lack of True Global Lending Market
- Peer to Peer Lending and Cryptocurrency
- Benefits of Decentralized Lending
- Trustless
- Transparency
- Democracy and Access to Finance
- Tokenization of Things
- Current and Future Use-Cases for Decentralized Lending
- Why Ethereum Network?
- Smart Contracts
- Ether
- Tokenization
- Paradox of Value: Smart Contract Deployment
- Expanding Decentralized Lending and Decentralized Credit Rating beyond Ethereum network
- The Decentralized Application (DAPP)
- Secured Lending by Pledging Ethereum-Based Digital Tokens
- Demonstration of the DAPP
- New Loan Request
- The Loan Contract
- Sending Digital Tokens to the Smart Contract
- Funding the Loan
- Paying the Loan Back
- Default Scenario
- On-Demand Lending
- Secured Lending by Pledging Ethereum Name Service Domains (ENS)
- Lending Based on Reputation and Credit Token (CRE)
- Credit Risk Assessment
- Decentralized Credit Rating (DCR)
- Prediction Market to Predict Credit Risk
- Artificial Intelligence and Ledger Big Data to Predict Credit Risk
- Gateway for Decentralized Identities to DCR
- Oracles: Feeds from Centralized Providers to DCR
- Risk Sharing
- Sharing the Risk with Other Lenders (Crowdlending)
- Decentralized Insurance Policy
- Currency Exchange Risk Management
- Competitive bidding on interest rate between lenders
- User Experience on ETHLend
- Accessibility
- User Interface
- Performance
- Translations
- Technical Roadmap
- Map of ETHLend DAPP
- Legal Evaluation of the Loan agreement on ETHLend
- Contractual Relationship
- Collateral
- Know Your Customer (KYC)
- ETHLend
- The Team
- The Advisory Board
- Governance
- Roadmap
- Introducing LEND Token and the Token Sale
- Utility function 1: LEND token as a discount ticket on fees on ETHLend
- Utility function 2: Rewarding active lenders and borrowers with airdrops of LEND
- Utility function 3: Featured functions that are accessible only with LEND tokens
- Utility function 4: Rewarding Introducers with LEND
- Token Sale
- Purchase Price
- Token Distribution
- Vesting
- Security
- Token Sale Entity
- Funds Allocation
- Further Updates
Use-Cases for Decentralized Lending
In crypto-economy: Borrowing Ether to participate in different ICOs, buying dips (bear market movements) and purchasing tokens from the exchange for investment strategies without the need to sell tokens. Lending altcoins and tokens for short selling or hedging. Financing mining expansions, liquidity for trading, finance for blockchain startups for ICO marketing by pledging ICO tokens. Unleashing the Ether locked in ENS domains for any finance goal.
In FIAT-economy: By using FIAT-pegging (using USD instead of Ether as a calculation), any finance goal of real world can be met without bearing the volatility.
Future use-cases: Tokenization of Things. Pledging real property, shares, intellectual property and physical objects (such as cars, boats, power plants, solar energy plants and art).
Secured Lending with Digital Assets and ENS domains
ETHLend provides secured lending with the use of ERC-20 compatible tokens as a collateral. For example, users with a token portfolio are not required to sell the tokens to receive liquidity. Instead, the user can pledge the tokens to receive more liquidity. Alternatively, Ethereum Name Service (ENS) domains can be used to secure loans since these domain locks Ether when the domain is paid.
Creating the lending currency with LEND token
LEND token is used as the main medium of exchange (lending currency) on the ETHLend decentralized application. The main use of LEND is to be a lending currency, such demand is created by removing all smart contract fees on lending with LEND. Therefore, when users are using LEND token lending is zero-fee. LEND would be additionally the only currency to use Ethereum as a collateral. Becoming the medium of exchanges creates the main use-casr and demand for the LEND token.
Gamified Credit Profile
ETHLend introduced late 2017, decentralized credit rating (DCR) and reputation based lending. DCR means that any borrower could use decentralized credit tokens (CRE) as a yardstick to present creditworthiness and this creditworthiness could be exported to other decentralized application where a past compliance is valued.
Here is the excerpt description on what we presented:
Reputation based lending -> ETHLend will create reputation based lending with the help of decentralized and gamified credit rating, which consists of data from decentralized credit tokens (CRE), decentralized identities such as uPort, and data feeds from centralized service providers such as credit institutions and social media. Moreover, services such as Bloom would be used to broadcast defaults on to the centralized credit scores.
Decentralized Credit Rating (DCR) -> Unleashing decentralized credit rating. Credit history is borne once there is data available on paid loans, the interest rates, possible collateral, and details of the lenders (and their transactional data) and the transactional data of the address. From this data, a credit profile can be built by assessing the data. Moreover, such data can be exported to other applications and chains.
Gateway for Decentralized Identities to DCR -> ETHLend will add a gateway for self-sovereign identity providers such as uPort and credit rating providers such as Bloom. These functions assists borrowers to create more complete credit profile on the Decentralized Credit Rating.
Oracles: Feeds from Centralized Providers to DCR -> Feeds from centralized credit institutions. ETHLend provides a gateway for credit institutions and centralized data to be broadcasted on the user’s Decentralized Credit Rating profile. Additionally, oracles can also be used to provide feeds from social media for creating a more complete credit profile.
ETHLend will combine the whole concept of decentralized credit rating (DCR) and expands the concept to gamified experience. Therefore, decentralized credit tokens (CRE) are turned into ERC-721 collectible credit badges based on the lending activity.
Instead of using ERC-20 tokens to provide the user a number (score) on previous lending activity, gamified and ERC-721 based collectible badges present more of what kind of a borrower or lender the user is instead of providing a score. Such data is essentially rich not merely on ETHLend decentralized application, moreover in other applications and even in the real banking economy.
Practically all the Gateways for example Bloom Score (part of the decentralized gateway to DCR) or Fico score (feeds from centralized providers) are presented as a various kinds of badgets.
Gamified credit profile encourages to collect positive lending badges and to avoid negative ones. For example, borrower with reputable badge collection would not want to tarhish the badge collection since it would effect the borrower’s creditworthiness from the lender’s perspective. This would amount to true personalized and repuation based lending, and could affect on the amount of collateral the borrower would need to set.
Mobile access with mobile DAPP browsers
ETHLend will develop mobile web3 (Ethereum API library) ready mobile responsive interface so that the decentralized application can be used from the mobile with the user of mobile decentralized application browser (DAPP browsers).
Expanding Decentralized Lending and Decentralized Credit Rating beyond Ethereum network
ETHLend will expand the use of decentralized lending and the gamified credit profiles beyond Ethereum network to other distributed ledger networks.
ETHLend will introduce lender side offers (on-demand lending)
We will develop loan offers that lenders can place on the decentralized application. Loan offers are placed by stating how much liquidity and on what price the lender is willing to provide the liquidity. The lender also indicates which tokens the lender accepts as a collateral or which credit rating must be met.
Sharing the Risk with Other Lenders (Crowd lending)
ETHLend will introduce the option for crowd lending where the risk is shared amongst multiple lenders.
Prediction Market to Predict Credit Risk
ETHLend shall introduce prediction market on loans that are reaching certain threshold. Prediction market for assessing credit risk is a practical tool on large loan transactions. We shall either use Gnosis, Augur or create our own prediction market protocol.
Artificial Intelligence and Ledger Big Data to Predict Credit Risk
ETHLend shall provide amongst the first a protocol for artificial intelligence (AI) bot creators for assessing the Ethereum distributed ledger data to predict credit risk. Such AI bots shall harvest and asses the data on Ethereum addresses to assess the quality of the transactions and aid lenders on credit decisions.
Simplified User Experience
ETHLend is developing a more user friendly interface for the decentralized application to access mainstream. The lending process is simplified from 5 step to 2 step process. Additionally, instead of requiring the borrower to send the tokens or lender to send Ether to finance the loans, ETHLend shall use the “Approve”-function to collect these assets from the users wallet eliminating unnecessary steps.
Competitive Bidding on Interest Rate Between Lenders
ETHLend will develop auction-like bidding functionality for the decentralized application to provide the best market rate on interest rates for the borrowers. The interest rate bidding auction is a reverse auction where the lenders places bidding offers for a loan interest rate.
Decentralized Insurance Policy
Providing insurance for credit risk. ETHLend wants to provide a market for decentralized credit policies. The aim is to provide a way that insurers can assess the data required to calculate an insurance policy risk and cost and provide such offer to the lender.
Currency Exchange Risk Management (FIAT pegging)
A volatility risk might be in hand when a borrower borrows 1 ETH once the ETH price is at USD 200. Such issue is solved by providing FIAT based loans where the loan amount is represented in FIAT currency, even though the transaction is conducted in ETH. FIAT pegging also creates wider opportunities for lending ETH for investment purposes (investing in ICOs or tokens from exchange).
Sophisticated Collateral Management (Volatility risk mitigation)
ETHLend will use price feeds for the most popular tokens to adopt sophisticated collateral management where in case the collateral value (value of the tokens) drop below a certain threshold, the borrower must fulfil the collateral or the lender can call the collateral and sell it on the market. Alternatively, collateral swapping will be introduced where the lender can swap the collateral for a fee, to a less volatile tokens, instead of selling. Additionally price feeds shall calculate the overheads back to the borrower.
APIs for Creating Lending Bots
ETHLend will provide APIs for bot creators to automate lending and borrowing bots.
Lending Bitcoin, Altcoins and Tokens
We will introduce lending Bitcoin (altcoins) for wider adoption of the decentralized application. Moreover, lending ERC-20 compatible tokens are introduced to cover additional lending strategies such as short selling and hedging.
LEND token economy, usa-cases and utlities
Utility function 1: Zero-fee lending with LEND – Using LEND as the lending currency on the DAPP and the Ethereum network
By using LEND as the medium of exchange, all loans on the ETHLend platform would be handled in LEND tokens instead of Ethereum. The result is that LEND will become ** the main utility ** that is used for lending and borrowing within the Ethereum network. This will allow all ETH and ERC20 token holders the ability to unlock billions of dollars’ worth of liquidity. ETHLend will do the same with Bitcoin in the near future. Ethereum as a medium of exchange is still an alternative option.
Lending LEND will be zero-fee lending, which creates more demand and use for the LEND token as being the lending cryptocurrency.
Utility function 2: 50% discount for fees when LEND is used as a collateral
When LEND token is pledged as a collateral, the lender and the borrower are excepted from 50% of the application fees compared when other tokens are pledged.
Utility function 3: LTV (loan-to-value) Boost to 70% for LEND token
Borrower can borrow up to 65% of the collateral value. However, by pledging LEND, borrower can borrow up to 70% of the collateral value.
Utility function 4: Collateral refilling with LEND token
LEND can be used to defends a collateral call by sending LEND to the loan smart contract.
Utility function 5: Preview Feature
New loan is completely public for funding after 60 minutes when tokens are sent and the state is set to waiting for lender.
Lenders who purchase the preview feature will see the loans 60 minutes before the loan is broadcasted to the public.
Utility function 6: Featured loans
Loans will be featured on the front page, which can be only paid with LEND.
Utility function 7: Late penalty fee reduction
Generally, 5% of the installment amount is charged as a penalty fee on late penalties.
2.5% of the late penalty fee will be sent to the lender and 2.5% will be sent to ETHLend.
When LEND is used as a collateral, the penalty fee is reduced to 2.5%, which sent to the lender fully.
Utility function 8: Rewarding active borrowers and lenders
