Our aim in SmartCredit.io is to create self-reinforcing crypto lending/borrowing platform. Sounds easy, but how to achieve this?
There are three key components of the SmartCredit.io ecosystem. The interplay of these components results in the self-reinforcements and positive feedback loop. The components are:
- 2-Click consumer credit for the borrowers
- Immediate liquidity for the lenders
- Passive income via private fixed income investment funds for investors
2-Click Consumer Credit on the Decentral Marketplace
This is the traditional borrowing and lending against the collateral on the decentral marketplace. We aim to have the credit process as easy as possible for the borrower, that’s why we call it “2-Click Consumer Credit”.
Credit marketplace needs two sides – the borrowers and lenders. Our platform makes it easy for borrowers to create loan requests. And our platform offers private fixed income funds for the investors, who would like to earn passive income on their crypto assets.
Borrowers loan requests will be matched either manually via the marketplace or in an automated way via the private fixed income funds.
Immediate Liquidity via Credit Tokenization and Credit Transferability
All loans are tokenized on our platform into one standardized ERC 20 contract. This tokenization makes to loans transferable. The loans are protected with the collateral and loss provisions fund. This means the lender can use the tokenized loans as a mean of payment.
It works in the following way:
- When the loan is issued on the marketplace and Ether is transferred to the borrower, then the lender will receive the same amount of freshly minted credit coins (we call them Smart Money tokens)
- The lender can keep all these credit coins till the end of the loan, by when they will be replaced with the borrower’s interest and principal payments.
- Or the lender can pay with the credit coins the next parties, which can pay the next parties and so on. The final holders of the coins will receive interest and principal payments.
This means that the lenders will be liquid even after they lend out their assets – they can use the credit-coins, which get assigned to them, to pay the third parties.
Why is having liquidity important? Let’s imagine, that lender has lent out all his funds but needs to make some un-expected payments to third parties. The only way for him would be to take a loan. That’s how it would work on all fiat P2P or crypto P2P lending platforms – except SmartCredit.io.
Having liquidity option means the lender doesn’t need to take the bridge loans. It means, he can use his own loans, which are tokenized and value protected, to pay the third parties.
How would lender know who would like to receive his credit coins? There are two ways – the lender can do advertisement to SmartCredit.io and add new members into the network or he can send his credit-coins to the private fixed-income funds and receive the Ethereum in return.
Private Fixed income Funds for Investors
The investor needs only to define the investment rules – to which credit ratings and to which durations he would like to allocate which part of his assets. He does not need to monitor ongoing loan requests, but everything will run in a fully automated way.
That’s the way for the investor to earn easily passive income on his crypto holdings.
If lender/investor want’s to cancel the automated investment process, then he can do this by one button click. If he does this, then he is back in the manual mode.
Private fixed income funds will provide continuous liquidity to the platform, these are the assets, which will be lent to the borrowers.
Additionally, if some of the lenders have liquidity needs, then the respective lenders can always send their credit-coins into the private fixed-income funds and will receive Ethereum in return.
Every marketplace needs to create supply and demand. SmartCredit.io is doing this via:
- 2-click loans to the consumers
- private fixed-income funds to the investors for earning passive income on their crypto holdings
- credit tokenization and transferability to the lenders, so that they have immediate liquidity.
Difference to the competitors
There are several key differences from our competitors:
- Tokenization of Credit and creating Liquidity for the lender – we are the only ones doing this. We are tokenizing the loans into the standardized ERC 20 tokens. The holders of these tokens will receive the interest and principal payments of the underlying loans. If the lender does not transfer these tokens to third parties, then the lender will receive all principal and interest payments. If he has transferred some of the tokens, then interest and principal are distributed pro-rata from between token holders.
Tokenization of credit results in the liquidity for the lender – he lent out his assets, but he is still liquid after he receives freshly minted credit-coins, which lender can use as mean of payment to the third parties.
- Private keys belong to the clients – no one else can access the client’s assets. Although it sounds too basic, most of the platforms have not implemented it so – either the clients have to transfer their assets into dedicated platform controlled wallets or there are multi-signature on the addresses. In both cases, it’s not the client, which controls the assets.
- Fully decentral marketplace – if platform controls client assets, then this results in regulatory requirements for every borrower’s jurisdiction (usually it’s the financial intermediary license). As most of our competitors do not have these licenses and as the number of users is continuously growing, then it’s the only question of time, till the regulators will awaken and will “drink some tea” with the respective providers.
- Automated credit risk rating via social media, ethereum blockchain history analysis and psychometric analysis. The client can choose not to process with an automated credit risk rating, in this case, he would be assigned into the “standard” credit risk bucket
- Loss Provision Fund. Our competitors need always to prepare for the worst. I.e. they have to significantly overcollateralize to loans on their platforms (so that they can sell the collateral in case of adverse market events). Having Loss Provisions Fund and allocating a small piece of every loan into the Loss Provisions Fund allows better to deal with the adverse market events and to reduce the collateral requirements.
If the borrower is defaulting, then his collateral will be liquidated. If it’s not enough of collateral, then the Loss Provisions Fund will take over the remaining difference.
- Self Re-Inforcing Ecosystem, which provides usability to the borrowers; immediate liquidity to the lenders and passive income to the investors on their crypto holding. And on every step, it’s only the client who controls the private keys. Only the client and no-one else.