Cryptocurrency attributes
Other attributes
There is a need, and there will be a greater need for borrowing funds for short term not by pawning physical gold or a house but by pawning a digital asset.
Imagine opening a mobile app, depositing 20 REP / 10 MKR tokens and receiving 5 ETH / 100 USD-DC into your account that you can spend immediately. You pay back 5.01 ETH / 101 USD-DC in 10 days and receive your 20 REP / 10 MKR deposit back.
Individuals/Organizations can use Lendroid to raise funds as debt, leverage a trade position, avail a short term ‘payday loan’ style advance and more. No identity required and all on-chain without the need to trust a third party.
Lendroid is an open protocol based on the Ethereum blockchain that handles complete lifecycle of collateralized digital asset loans. Imagine ‘shapeshift’ where you deposit a token to receive another token, but with an option of getting back, the first token deposited, albeit for a short term.
A borrower can receive Ethereum based (ETH/ERC20) tokens (like ETH, USD-DC, etc.) by pledging some other Ethereum based tokens (like REP, SNGLS, DGX, DGD, etc.). The borrowed tokens come from lenders who expect to receive interest at a rate they choose.
Lendroid makes no sense in the absence of other DApps and tokens on the Ethereum platform. But in combination with other DApps, the real power of the Lendroid can be realized. A few examples:
- Lendroid + Melon = Allows traders to leverage their positions, allows traders to hold a short position.
- Lendroid + Stabl / Decentralized capital = Allows users to avail loans against any Ethereum token in stable government currencies
- Lendroid + Digix = Allows users to avail loans against physical assets in any Ethereum token
- Lendroid + Digix + Stabl / Decentralized capital = Allows users to avail loans against physical assets in stable government currencies and more…
A loan contract itself is pretty straight forward. But then, who fixes the terms of the loan? How do borrowers find and convince lenders? How do we make sure the borrower has the incentive to repay? What happens if the borrower fails to repay? etc
The Lendroid marketplace allows the creation of several loan markets.
Lendroid support tokens(LST) are the native tokens of the Lendroid protocol. Market creators (Lendroid support token holders) propose new markets using a unique set of loan terms (combination of collateral type and ratio).
Lenders and guarantors discover, gather and pre-fund markets which offer loan terms they prefer (terms that they believe will keep the loan solvent, protect their investment and enable them to make money). Guarantors are LST holders who choose to extend support to markets that issue loans that they believe will remain solvent and payout properly, in which case they receive a portion of the interest. If the loan becomes insolvent, they stand to lose their deposit. It is a requirement for every loan to hold LSTs whose value is at least 20% of the borrowed value. The LST deposit acts as secondary collateral for the loan.
Borrowers show up, choose a market depending on the type of collateral they wish to lock, create a loan contract, deposit collateral as defined by the terms of the loan and receive the loan funds.
At the end of the loan period, the borrower has the option to extend the loan by adjusting the collateral locked or repay the loan along with the accrued interest, or stands to lose their collateral.
If the borrower fails to repay the loan, the primary collateral held in the loan in auctioned off. If the funds raised in the auction is insufficient to clear all obligations as much secondary collateral (Lendroid support tokens) is auctioned off to raise additional funds. If even after auctioning off all secondary collateral locked in the loan there are not enough funds to repay all the lenders, the losses get spread proportionately across all lenders, and the lenders are paid out.
The lenders receive two layers of protection for the funds they lend. One from the value of the primary collateral and another from the value of the secondary collateral. This process increases the confidence of lenders and reduces the lender’s market discovery burden.
It is a great pleasure to be part of the Ethereum community. We hope to continue receiving the support from the community. Let’s build Lendroid together!
