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Fixed-term/Fixed-rate Borrowing/Lending

SmartCredit.io offers DeFi fixed-term/fixed-interest loans for borrowers and personal fixed income funds for lenders. Rates and terms are locked at loan creation, with no bank-run risk.

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Key Takeaways

  • SmartCredit.io provides collateralized DeFi loans with fixed interest rates and fixed terms from 11 to 180 days.
  • Lenders earn via personal Fixed Income Funds (FIFs) with no platform fee; borrowers pay a 0.5% platform fee.
  • Rates and collateral ratios are locked at loan creation, eliminating variable-rate risk.
  • Maturity matching between borrowers and lenders eliminates bank-run risk, unlike Aave or Compound.
  • SmartCredit.io never earns on liquidations - any remaining collateral is returned to the borrower.

General borrowing/lending flow

Borrowers and lenders keep their assets in self-custodial wallets. The platform has no access to the borrowers’ and lenders’ assets-only users can access their crypto assets.

The general flow is following:

  • Borrowers define their loan requests with Credit Lines.
  • Lenders define their personal Fixed-Income Funds.
  • The platform uses AI-driven predictive Crypto Fraud Score to do Continuous Transaction Monitoring
  • The platform uses AI-driven Crypto Trust Score for the borrowers
  • SmartCredit.io does the matching between the borrowers’ and lenders’ requests.

Credit Lines and Fixed Income Funds

Lenders define their personal DeFi Fixed-Income Funds in SmartCredit.io. They define what kind of loans they want to invest in and describe their investment rules. Every lender can choose if they prefer short-term lending strategies (with less interest) or long-term lending strategies (with more interest). Every lender can define how much of their portfolio to invest in the shorter-term and/or longer-term.

Borrowers define their collateralized loan requests within the Credit Lines. The concrete collateral ratio depends on the volatility of the collateral asset, the loan term, and the trust score of the borrower. The interest rate curves are predefined. The concrete interest rate depends on the underlying asset, the loan term, and the trust score.

SmartCredit.io does, in the background, automated matching of borrowers’ loan requests with lenders’ fixed-income funds.

Fixed-term and fixed-interest-rate

Most DeFi borrowing/lending platforms offer variable-rate, variable-term loans for borrowers. SmartCredit.io focuses on the real economy, offering borrowers fixed interest rates and loan terms.

Why does a fixed interest rate matter for borrowers?

  • Because the actual economy works based on predictability. It’s about knowing the costs of capital in advance. Or it’s about knowing the value of your liabilities.

Why does a fixed term matter for borrowers?

Efficient use of collateral and Positions Monitoring System

SmartCredit.io has a Positions Monitoring System - borrowers can order telegram notifications if the liquidation probability increases. This automated feature is available for any user.

Position Monitoring System enables efficient use of collateral.

Liquidations

SmartCredit.io monitors the loan, and if the borrower does not pay or the borrower’s collateral value sinks too much, the loan is liquidated. The borrower's collateral assets in the smart contracts are protected with the oracles - the liquidation process starts only after the oracle confirms the liquidation.

SmartCredit.io never earns on liquidations-what remains from the liquidation is transferred back to the borrower. This is one of the key differences from competitors like Aave, Compound, and Maker. Those protocols earn revenue while liquidating the under-collateralized borrower because the collateral is sold at a discount. The remainder of the collateral value becomes the profit of liquidator bots. Most of these bots are hosted by the respective platforms, and liquidation revenues transfer into the platform revenues; in some months, even 50% of the respective platforms’ revenues.

If the collateral does not cover the borrower's obligations, the Loss-Provision Fund will pay the gap to the lender.

No bank run risk like in Aave or Compound

Most of DeFi platforms have bank run risk. Why? It's because their maturities are not matched. SmartCredit.io is the opposite - it matches the borrower/lender maturities. It's like a traditional bank, but noncustodial - without the bank run risks.

Regulations

And from a regulations point of view:

  • SmartCredit.io is not pooling client assets; it's pure peer-to-peer play. Therefore, it does not need to register as a security.
  • Competing protocols have implemented the peer-to-pool-to-peer business models; they have to register as a security (and they have faced enforcement action or been forced to exit markets).
  • SmartCredit.io has implemented Transactions Monitoring as mandated for all Virtual Asset Service Providers

Further info