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Stani Kulechov edited this page Apr 4, 2018 · 3 revisions

General

What is ETHLend?

ETHLend is a decentralized peer to peer lending platform running on Ethereum blockchain network. Anyone from anywhere from the world can lend and borrow, peer to peer. ETHLend provides the possibility to lend and borrow without borders quickly and efficiently. For example, a borrower in UK does not need to rely on local UK banks and lenders. Instead, with a single loan request, the borrower can access funding from all parts of the world. Simultaneously, any lender from Tokyo to Los Angeles can fund this loan request. Safe by design due to the use of smart contracts and blockchain. A short intro video by our Media Correspondent is located at https://www.youtube.com/watch?v=IGaoqUoL1F4

Who is Behind ETHLend?

Future superstars of blockchain. The ETHLend team consists today of over 20 people located in different parts of the world. All team members share the common aim to provide more democratic lending environment by more liquidity to the local lending markets. Moreover, the ETHLend team believes that once the decentralized lending has evolved further, it could provide more access to finance for the unbanked. Team introductory video found here: https://www.youtube.com/watch?v=z2XnxTOrhKo

Do you have a White Paper?

ETHLend has written almost 55 page long white paper on ETHLend and on decentralized lending. The aim of the white paper is to elaborate on logic and functions that ETHLend is designed to operate. The paper contains also much information on decentralized lending which helps other projects in this field. The document contains the roadmap of functions shall be developed during the next couple of years. The documents is written in plain and easy form and you do not need to have programming skills to understand how ETHLend works. The white paper is available at GitHub:
https://github.com/ETHLend/Documentation/blob/master/ETHLendWhitePaper.md

What are the benefits of decentralized lending?

Liquidity available globally. Today, borrowers are limited to local banks and peer to peer lenders, which creates a local lending market. Decentralized lending provides the ability to reach capital from different parts of the world. Borrower from the UK is not limited to UK lenders. Instead, the borrower can receive funds all the way from Tokyo to Los Angeles. Such wide scale lending might provide more competition to local lenders and pressure the interest rates to decrease.

Funding Initial coin offerings. Decentralized lending might be plausible alternative or additive for funding before initial coin offerings (ICO). Blockchain startups can take the advantage of decentralized lending by placing some of their future sold tokens as a pledge for a loan. This might be an innovative solution to fund research, development and marketing before the ICO. Once the ICO is finished, the startup can repay the loan. The solution provides temporary funding for the startup without giving away tokens.

Faster process and the unbanked. Transactions within the Ethereum blockchain network are settled within seconds or minutes. Moreover, the lending process of placing a loan request and funding a loan request takes few minutes in total including the transfers of the cryptocurrency. The speed is competitive edge compared to centralized lending process. Decentralized lending might eventually provide access to finance for the unbanked as well.

Are you planning any partnerships?

Yes we do. We are even currently having discussions with other blockchain startups. However, we want to establish only such partnerships with a technology that we see as fit to use in our DApp in the near future. We do not want to form partnerships solely for the purpose to gain more popularity for our token sale. We want to build relationships on a healthy basis and only when we see that there is really an edge for it.

Where can I get more information?

Please visit the about page at https://ethlend.io for further information on ETHLend and the token sale.

Fundamental questions

Volatility

How the application handles volatility of the loan currency?

Even though Ethereum and cryptocurrencies are volatile in general, that does not mean that the lender and the borrower needs to bear the volatility. The volatility of the loan currency (Ethereum) becomes an issue when the borrower wants to repay the loan with FIAT-earned income. To avoid this issue, the borrower can use a FIAT currency such as USD or EUR as a basis for the loan (this is called currency pegging).

Using currency such as USD means that the borrower could example borrow 100 USD worth of Ethereum and repay 100 USD worth of Ethereum plus interest. This means that even if the Ethereum price increases in value, the borrower does not bear the volatility since the borrower is repaying the loan tied against non-volatile currency.

Does the lender loose Ethereum during a FIAT based loan?

When the lender chooses to fund a USD based loan it does not result in loss when in case the Ethereum price increases and the lender receives less Ethereum from the borrower. In these occasion the lender receives the same value of Ethereum plus the gained interest since the value of the Ethereum increased. The situation is only seen as an opportunity loss, since in these price increases the lender would have gained more than anticipated from the interest of the loan.

However, one should mind that even though the lender might be a holder of Ethereum, it does not always mean that the Ethereum price would go up. On the contrary, lending might be a perfect tool for hedging Ethereum. Additionally, lending could be seen as diversification in Ethereum investments since a savvy investor could use part of the Ethereum portfolio for lending and greater part for holding.

More importantly, not all lenders are Ethereum holders. ETHLend is used additionally by lenders from the FIAT economy that want to access the opportunities of global lending market. For this aim, Ethereum is a perfect way to fund within seconds loans from different parts of the world. Such FIAT economy based lender is mainly interested in deriving profit in FIAT such as USD than Ethereum.

How the application handles ERC-20 collateral volatility?

Digital Tokens such as ERC-20 tokens are subject to volatility. However, even though the fact that these tokens bear volatility, it does not mean that digital tokens are not suitable as a collateral. On the contrary, since digital tokens have generally liquidity, which means that these tokens have a market price.

The borrower can set a sufficient amount of token to cover the volatility on a certain period of time based on the history of the volatility in the past 3, 6, 12 or 24 months. The sufficient collateral would require a haircut. Haircut means that the collateral is devalued based on the volatility. For example, a collateral that has low volatility might get a “haircut” of 20%, therefore the collateral is devalued to 80%. This means that one must set 120% collateral against the loan amount.

What if the collateral value goes down?

Even though that haircut is set, a collateral might decrease in value. For these situations ETHLend shall have collateral calling and collateral filling. Collateral call means that in case the collateral drops to a certain threshold such as 100% of the loan amount, the lender can call the collateral. Therefore, the lender can claim the collateral and sell it. Setting the Calling to 100%, the loan transaction might become risk free. Before the collateral call, the borrower has an opportunity to fulfil the collateral. By adding more tokens as a collateral, the borrower prevents the lender from calling the collateral. This collateral refilling function will be available latest on Q2 2018, on 0.3 Alpha release.

Ideally, once the borrower has gained more reputation hair cut could be as low as 50%, meaning only 50% of collateral is needed and collateral call might be on 25%, if at all.

Does it makes sense to pledge more than you can borrow?

Pledging over the collateral value is suitable when the borrower has a portfolio of tokens and is in need for liquidity. By setting these tokens as a collateral that is above the collateral value provides affordable liquidity for the borrower. This is ideal in investing where the borrower can get additional liquidity for investing in other projects. For example, the borrower can pledge EOS and receive ETH to buy another token or cryptocurrency that is performing better than EOS.

Moreover, if such loan is pegged to USD, the investment needs only to increase more in value than USD (and not Ether). Such strategy provide new opportunities for cryptocurrency investors. Additionally, such secured loans might provide more affordable funding compared to unsecured lending in fiat economy.

Why would I just sell the tokens and avoid paying the interest?

Selling the tokens means that you close your positions on that particular tokens. The borrower might not want to close a position for multiple reasons. For example, the particular token might perform well in the near future or the tokens are scarce (for example due to the tokenization might be family business shares, art or rare commodities). In these circumstances, it would be convenient to pledge tokens instead of selling the tokens. Since the tokens are used as collateral, and once collateral call is introduced, the interest rate should be quite low.

Decentralized application

Do you have an application?

ETHLend has a Alpha version of the decentralized application located at https://app.ethlend.io. The app can be accessed with MetaMask, which lets the users to browse the Ethereum network through the browser. The decentralized application has the basic function which can be used to perform secured loans by pledging ERC-20 compatible digital tokens or Ethereum Name Service (ENS) domains as a collateral, or reputation based lending once reputation is gained. ETHLend has also a Kovan testnet application, where no real Ether is used for testing purposes, located at https://kovan.ethlend.io.

Is there an User Experience upgrades coming up?

There are two big UX/UI updates coming on 2018.

Competition and Markets

How ETHLend differs from the competition

Functionally, the known competition of ETHLend uses ERC-20 tokens as a collateral to borrow FIAT currencies such as USD. While such function might be suitable, ETHLend is emphasising in pledging ERC-20 to receive cryptocurrencies such as Ethereum or Bitcoin. Our ideal aim is to create financial tools for the crypto economy. However, we shall adopt FIAT-pegging as well which means that one could use FIAT currencies as a base calculation and send transactions by using Ethereum.

What makes ETHLend different from other ventures is that the team delivered their first ever prototype of the decentralized lending application this May. Based on the practical findings, the team wrote the white paper on decentralized lending. The ETHLend considers this as an edge since ideas that are good in theory might not hold in practice. Hence, we created proof-of-concept that our users can already adopt.

Technically ETHLend differs from others that the application is fully decentralized. Decentralization provides more security by design since all transactions are performed via Smart Contract. Therefore, the participants in a loan agreement do not need to trust ETHLend or the counterparty. Such solutions provides full transparent market since all transactions are broadcasted in the blockchain which can be explored by anyone.

Moreover, ETHLend is open to all participants from all parts of the world and the transactions are done peer to peer. We do not limited the market in any way and cannot interrupt in the lending. Participants are free to choose the parameters. Being free means that the application is open for banks, investment funds, companies and consumer end users. Never such wide-scale lending market has been deployed before. With ETHLend you can run a lending institution of your own.

Supporting ETHLend and Bounties

I love ETHLend, how can I support?

There are a number of ways in which you could contribute to ETHLend. You can spread the word to your friends and family through word of mouth or social media. We are always in need for people that believe in our vision and are willing to contribute in different tasks. Please see out bounty page for open tasks: https://bitcointalk.org/index.php?topic=2078686.0

LEND token

What is LEND token?

LEND is designed to create user adoption and more value for the product by rewarding active lenders and borrowers and to provide a 25% discount on the platform when paying platform fees in LEND instead of Ether. When more users are using the application, there are more lenders and borrowers that would purchase the token from the market (token holders). Moreover, ETHLend uses 25% of the application fees to purchase LEND back and to reward active borrowers and lenders with airdrops, therefore increasing the demand for LEND. This unique way is the only way to direct the the value to the product, thus to the project and hence to the token value (and token holders).

How LEND is used in ETHLend?

LEND is designed to create user adoption and more value for the product by rewarding active lenders and borrowers and enabling ZERO lending fee when LEND is used as medium of exchange and 50% fee reduction when LEND is used as collateral. Also, LEND will grant access to Preview Features, Featured Loans, Protocol Voting Portal, Boosting Borrowing Power and more.

This new structure accelerates user adoption and since LEND entitles zero lending fee and fee reductions the lenders and borrowers would prefer to purchase LEND from the market before going to ETHLend. When more users are using the application, there are more lenders and borrowers that would purchase the token from the market. Moreover, ETHLend uses 20% of the application fees to purchase LEND back and to reward active borrowers and lenders with airdrops, therefore increasing the demand for LEND. This unique way is the only way to direct the the value to the product, thus to the project and hence to the token value (and token holders).