Here is the Youtube video explaining the idea of SmartCredit.io
Here is the transcript
Hi guys, this is Tarmo speaking.
Hi guys, I’m Martin, I’m Co-Founder of SmartCredit.io. We are here in Zurich in one of the financial centers in the world. And we are in the heart of the financial center in the old town of Zurich.
Martin, you are Co-Founder of SmartCredit.io. What is the idea of SmartCredit.io?
The key idea of SmartCredit.io is to create credit-money for the crypto sphere. If you are thinking of Bitcoin, everyone speaks about the Bitcoin, but Bitcoin is just the base money-in the same way the base money, as central banks are creating the base money.
But let’s think about the economy. In the real economy, people are using credit-money. Base money is 3% – 7% of the money and 90% to 97% is the credit-money.
If you are thinking of Bitcoin and Bitcoin economy then we have only base money. The real economy needs credit money. It has not been so in the last 5 years or the last 50 years. It has been so for the last 5’000 years.
There is a simple reason for this – production, farming – it needs time. We have to pay for energy, we have to pay for the labor, we have to pay for the time. Everything needs to be financed. And this financing, in the last 5’000 years, has been done with the credit and credit-money.
Back to the Bitcoin – Bitcoin is missing the credit-money approach. What we want to introduce is the credit-money approach into the crypto sphere and to achieve this enabler of higher penetration of crypto technology and decentralization of the economy.
How does the credit-money creation work today?
Let’s speak about the base money creation – created by central banks like Swiss National Bank, European Central Bank, or Federal Reserve – the base money.
But the credit money is created by private companies – these are the commercial banks. And credit money has to be legally accepted as a means of payment. Private companies are creating fiat money and public people have to accept it.
How is it created – it’s created in the lending transactions. If I am taking a loan from the bank, then the bank is creating new credit-money and he is lending me this credit-money. Bank does not own the money, what they are lending to me; they are creating it and this is a legal means of payment in the respective national economy.
You mentioned lending, but lending is a risky business?
Everyone is saying that lending is a highly risky business. Now, let’s look at this way – commercial banks have most of their business created through lending.
If we are taking a traditional bigger commercial bank, then 40% or so of the profits are through the lending business. The lending business is a money creation business.
Commercial banks are doing the risk analysis of the clients, they are calculating how much a client can borrow and all other parameters. Commercial banks are doing this for many years, they are doing this for hundreds of years. They have developed the systems and like said – around 40% of commercial bank’s profits are created through the lending business.
Do you want SmartCredit.io to become a decentral commercial bank?
We have commercial banks, they are creating credit-money, and in SmartCredit.io our aim is as well to create credit-money for the crypto sphere. But we do not want to be a bank.
We want to be a marketplace – we want to be a marketplace, where we are connecting borrowers and lenders globally. So that people can provide to each other the credit and from this credit, we create the credit money to pay the next person.
We are doing everything that commercial banks are doing. But we are doing this without being a bank – we are doing this by being a marketplace.
Very interesting! Let’s take the customer’s viewpoint – what can customers get from SmartCredit.io?
Let’s take a borrower’s viewpoint and let’s take a lender’s viewpoint. For the borrowers, it means a very advanced credit process. We are doing automated credit risk rating by the registration, so we know credit risk and borrower gets fast process. Compared to our competitors we have many advantages and much less collateral and so on. So, that’s for the borrower.
If we are looking on the lender – the key advantage of our system is – when I’m lending Ether to another peer-to-peer person in the world – I’m lending out my Ether and I’m receiving Smart Money tokens, which is the crypto credit-money and I can use this crypto credit-money to pay the next persons.
So, I’m lending out my money, my Ether; and I receive crypto credit-money – Smart Money tokens, which exists as long, as the loan exists, and I can pay next persons with this.
Sorry, do you mean that I can earn profit and in parallel I am liquid?
Exactly. That’s what the commercial banks are doing at the moment – they are liquid and they earn a profit – because they are creating credit-money.
So, I can earn profit from my Ethereum funds and still have liquidity. Does it sound like a miracle?
Again, commercial banks are doing this. When I am a lender, I’m lending out my money, I’m receiving crypto credit-money. And this crypto credit-money, the Smart Money tokens, are the mean of payment to pay the next parties.
Commercial banks are creating credit-money, I’m as a borrower- I’m receiving it. In SmartCredit.io as well we are creating the Smart Money tokens and through this the lender has liquidity. He has immediate liquidity.
And not only that he has liquidity – who is keeping Smart Money token, will receive as well interest. If I am passing my tokens to the next person, then he will earn the interest; if I am passing to the fifth person, then he will earn the interest. So, it’s pro-rate interest is earned from the holders of the tokens.
So, it’s not only that I have liquidity – we distribute as well the profits from credit creation to the peer-to-peer network.
It sounds wonderful! Can you tell a little bit more about these Smart Money tokens?
SmartMoney tokens represent the claims. There is a borrower and there is a lender. The lender is receiving Smart Money tokens. If the lender is lending 5 Ethers, he will receive 5 Smart Money tokens. And the owner of Smart Money tokens is as well the interest.
Smart Money tokens are backed up with the respective claim, with the respective lending contract. Smart Money tokens are protected, which means their value is always one Ether. We have a protection mechanism, it’s a unique protection mechanism, which is protecting the value of Smart Money tokens.
If commercial banks are creating the credit-money, they are protecting the value of credit-money through their balance sheets and reserves. The same way SmartCredit.io is protecting the credit-money through its protection mechanism.
So, this means – Smart Money token represents the claim, it can be used as a means of payment, it collects interest to the holder and its face value protected.
Sounds really like a break-through innovation?
What we are doing – we are just mirroring what commercial banks are doing today. Commercial banks are doing this in a centrally. It has been so because of scale effects and lower transaction costs.
Thanks to the blockchain it will become possible to do all this what commercial banks are doing in the lending business, where they generate 40% of their profits to the view instead of the many. Thanks to blockchain technologies it will be possible to decentralize all these logics – for the benefit of many instead of the benefit for the few.
What are your plans?
The first step is to create a decentral marketplace for the credit, then we create credit-money. The second step is to create a crypto credit- card. But this is not the credit-card or debit-card, which is connected with the huge existing credit card businesses.
We want to create a virtual crypto credit card, without having any connectivity to existing credit card businesses, but having only SmartCredit.io account, which you can use in online shops and by the online merchants.
So, you can buy from an online merchant on credit and it’s all backed up with the Smart Money tokens in the same way as in lending transactions.
So, the first step is – we are creating a peer to peer decentral lending and the credit-money; the second step is – we are creating virtual credit cards, what can be used in the online processing.