Recapitulation of SmartCredit.io AMA event held at AMA LOVERS CLUB
Date: Saturday, 24th October, 2020
Time: 19:00 UTC
The SmartCredit team was represented by Martin, CEO & Co-Founder of SmartCredit.io and Tarmo, Co-Founder and CTO of SmartCredit.io. They both judiciously shared with us detailed knowledge and information about the project.
1st Segment: INTRODUCTION
Good day everyone. Welcome to our AMA session with SmartCredit.
Hi All, I’m very happy to be here tonight! I’m Martin, CEO & Co-Founder of SmartCredit.io.
Before SmartCredit.io I worked 10 years as Vice President for Credit-Suisse in Zurich. Before this, I worked in startups and I launched 4 successful software products with a 250'000+ user base. I’m CFA (Chartered Financial Analyst), MBA, etc — so we know credit-systems inside out and we want to transfer this know-how into DeFi!
Hi, I am Tarmo, Co-Founder and CTO of SmartCredit.io. Before starting SmartCredit.io I was Chief-Architect of Finnova (it is the largest Swiss Banking Platform). And before that I was ten years Vice Precident in Credit Suisse Global Architecture.
SmartCredit.io focuses on the DeFi fixed-income. We offer a low-collateral ratio for the borrowers and personal Fixed Income Funds for the lenders. Additionally, widgets and APIs for the integration for the partners.
SmartCredit.io revolutionalizes DeFi by introducing fixed income capabilities to DeFi
So, what’s different from others? We are focused on fixed-term loans, on non-fluctuating, but on fixed interest rate loans. Fixed income can be described as following:
The DeFi issue is the following — in traditional finance, the money-market funds are 10%, and the fixed income funds 90%. DeFi today has just money-market-funds (Compound, Aave, etc). The Fixed-Income-Fund are missing. That’s what we deliver.
2nd Segment: TWITTER QUESTIONS
Q1 : What holds the non-fluctuation of interest rate? How does the Low provision fund help protect the loan? How do you avoid hacks, bugs on your application, do you allows developers once a while test your apps to avoid glitches?
Ans : Money market funds have fluctuating interest rate, it’s so by the design. One day up, other day down. That’s why traditional finance has the fixed-income-fuunds — users can lock in their interest rate
Loss provision fund is an additional protection mechanism of SmartCredit.io — DeFi lending protocols are using very high collateral ratios, that’s the only credit-risk management approach usally
The idea of loss provision fund is to collect a little bit from every interest payment and to buffer for edverse situations. Having loss provision fund allows as well to reduce the collateral ratio’s for the borrowers
Regarding security — we have security reviews, high security hosting, and very extensive testing
System is hihly secured and extensively tested. Its security is actually higher than in Credit Suisse or UBS
Q2 : You offer the borrowers to do the credit scoring. Isn’t this a very risky thing to do as borrowers could falsify details to have better interest rates? What is being done to checkmate this?
Ans : We have algorithms which cant be falsified. We use combination of ethereum blockchain, social media and psychological scoring to calculate credit score
Credit scoring will give relative indications about the borrower’s quality. Of course, borrower’s can fake their data, but the algotithms on other side will catch the patterns. Let’s keep in mind as well — the loans are always over-collateralized
Let’s think on the traditional finance — there is always credit score
The borrower’s with good qualities have better rates and vice versa. That’s standard in the traditional finance. But it’s missing in DeFi
Current DeFi missis credit score. As a result collateral ratio in DeFi is often very high
This means low usability in DeFi as it is today. However, the credit-score is not the only way to reduce the collateral ratio, there are other ways too — we do fixed term loans // we have loss provision funds. The combination of them results in lower collateral ratios then today’s hard-coded collateral ratios in for example Compound or Aave
Q3 : How do you ensure that your Lendings are fully recovered from those given to? What approach do you take to ensure that borrowed funds are collected?
Ans : Our key advantage is that our collateral ratio for the borrower’s is less than on the money-market-funds with their hard-coded ratios. How do we do this:
(1) there is always over-collateralization
(2) there is loss provision fund
Loans are still overcollateralized, by using lot of mathematics we can manage risks quite well. Extensive risk management is big advantage of SmartCredit.io platform
(3) money-market funds have unlimited loan maturities, i.e. for avoiding liquidations they have to have more collateral. But if you go to fixed maturity loans, you just do some maths and you know how much collateral need (definively less than money-market funds)
The collection as legal process will not be required because of the ^^^above mechanisms. However, the longer term vision is to integrate the NPL (non performing loans) collection. If we have this — then we could reduce collateral even more
Q4 : “Every lender will have capabilities of a commercial bank, every lender will become a commercial bank, when using the SmartCredit.io platform”. This amazes me, can you delve more into it? How can I be a commercial bank by lending?
Ans : Thank you — you were looking on our whitepaper! YES — that’s the idea — every lender will get commercial bank capabilities
How do we do this — we create the ccTokens (credit-coins) which represent the underlying loans. The ccTokens are mean of payment, they are transferable, they are interest bearing
Now, let’s think what the commercial banks are doing in lending: (1) they create new money (2) they lend out the money
All the Fintech P2P platforms today are only lending out existing money. So, they will never be able to compete with the commercial banks
However, if we tokenize the loans and we make them transferable, then every lender will have the capability of the commercial bank — (1) lend money (2) create money
Let’s think that 40% of commercial banks profits are coming from the lending / money creation. With systems like SmartCredit.io — one will not need commercial banks ;-)
Advantage for the Lender is, that he is liquid. He can transfer his value protected ccTokens whenever he needs.
Lender just needs to lend out his funds and he receives the ccETH, ccDAI, etc. Lender just needs to use the system.
ccTokens are ERC-20 tokens
SmartCredit.io just replicates the credit-system how it worked before the commercia-banks took over. We are getting into monetary theory here — we have on our youtube and blog a lot of stuff about this
Q5 : I’m interested in this smart card. How can I get it?
I guess here was typo, it should be “smartcredit”. You can onboard into your application via our website and you can start using it as a borrower or a lender. If you are borrower, then you can do the credit-scoring (optional). That’s it — it looks quite simple on the User Interface!
3rd Segment: LIVE QUESTIONS
Q1 : Borrowers on Maker and Compound face several issues such as limited choice of collateral, high collateral requirements, inability of borrowers to transfer their loans to other parties during the loan term, etc. What’s Smart Credit approach to solving these issues?
Ans : We will have high amount of the collateral accepted, much lower collateral ratio than the Maker/Compound, we have transferable credit tokens. So, we have solved these issues — and very interesting side effect of that is that we can now create the Personal Fixed Income Funds (they will come with the Release 1.1)
Q2 : How will the loss allowance fund be financed and in what situations will it cover the loss?
What privileges do you offer for lending / borrowing, fixed income funds and integrations?
Ans : In extreme market situations (like 5sigma events) when collateral liquidation havent provided 100% Protection.
Q3 : Can we get more details on how the upcoming SmartCredit PreSale would run and how to join the waitlist?
Q4 : What’s the vision of smartcredit towards blockchain-based?
Ans : SmartCredit.io is non-custodial platform, only you know your private keys, we will never ask it.
Q5 : What can I do to stake on SMARTCREDIT? and what benefit will it bring to me? and interested in staking
Ans : Staking is not yet implemented, we will add it. Practically there are 3 possibilities: (1) you are active borrower on the system (2) you are lender on the system (3) you are partner company, which would integrate our borrower or lender widgets
Q6 : TALKING ABOUT THE DEVELOPMENT OF SMART CREDIT NOW, WHAT ARE YOUR CURRENTLY FOCUSED ON?
Ans : Our Release 1.0 is live, we are focusising on our Release 1.1 — that’s the Release, which adds the Personal Fixed Income Funds
Q7 : How optimistic are you of the future use-case of the $SmartCredit compared to when you started it? It will encourage more users to engage in your platform
Ans : SmartCredit.io will reduce volatility for lenders and borrowers. As such outcome for users becomes predictable and is not unpredictable as with DeFi Money Market Funds.
To bring crypto mainstream we have to reduce volatility of outcomes for users.
Loss Provision Fund will get part from every borrower’s interest payments. If good credit score, then less payment AND vice versa. The prvileges: our focus is on growth via the integrations. So, with the other platforms we share the platform fee PLUS they will receive as well our tokens (depending on the volume via their platform)
Q8 : In a survey conducted online, people said they would use a service if the support was super responsive, Now How is your Support when handling issues? How robust are they to provide TRUST, SECURITY, privacy and dedicated services for the end users?
In parallel there is sophisticated production monitoring in place and notifications
Q9 : How can lending on SmartCredit is better than Compund or AAVE? I mean, how do you compete with that popular lending program, what advantages do SmartCredit serve?
Ans : SmartCredit.io offers smaller collateral ratio and predictable outcome for lenders and borrowers.
Q10 : From whitepaper, I have these questions:
1. If default, why should the credit coins be transferred to the Loss Provision Fund instead of serving as an interest to the lender since no interest will be paid?
2. In what form would the collateral be?
Ans : When the borrower defaults, then the claim is moving from the lender over to the Loss Provision Fund. As loans are tokenized, then this move to the Loss Provision Fund means that the tokens are moving over. Loss Provision Fund will liquidate the collateral and if required (flash crash?) will use his assets to compensate the lender
Q11 : ETH chain have high gas fee… is there any plan to add another Chain ?
Ans : Very good question. We have concrete plans to use Aeternity blockchain to reduce gas issue
Q12 : Borrowers can reduce their interest rates and collateral requirements via Crypto Credit Score, what tasks are performed by users in this feature and how is the palform able to lower the interest in a sustainable way?
Ans : The better your credit score, the better interests will you get. If your credit score is better, your risk is smaller and you can be offered better conditions
Q13 : Why should I lend #crypto to SmartCredit, what benefits does SmartCredit offer Lenders?
Ans : (1) We will have more borrowers on the platform. Why? Because the borrower’s will have lower collateral requirements. Lenders follow the borrowers. So the benefit for the lenders is that their money is working and is not sitting idle. In the money market funds you have oversupply of funds and borrower’s have bad conditions. Lender’s have little rate there. (2) we offer the Fixed Income Funds for the lenders, and they will get exposure to the 90% instead of the 10% — they can invest into the loans of different maturities
Q14 : Do I have access to my private keys on SmartCredit, or does Smart Credit control my crypto assets?
Ans : SmartCredit has no access to your assets!
Q15 : On Smart acredit platform loans are protected with collateral and Loss Provision Fund. Would you explain how it functions? Where do the assets of this find come from, and what possible loss cases on the platform?
Ans : Loans are still overcollateralized, also every loan participates by Loss Provision Fund. There is lot of mathematics for risk management of these issues. All risk management is offchain, it is not in the smart contracts
Q16 : Could you share with us how close is the SmartCredit presale? What are the requirements to participate in the presale?
Ans : Please join @SmartCredit_Community
And please have a look on: https://smartcredit.io
SMARTCREDIT Pre-Sale will take place on Bounce platform on the 1st of November at 16:00 UTC.
All details will come out in upcoming posts.
Make sure to join the waitlist on the website.
Follow SmartCredit on the following platforms:
… Website: https://smartcredit.io
… Twitter: https://twitter.com/smartcredit_io
… Telegram: https://t.me/SmartCredit_Community
… Medium: https://medium.com/smartcredit-io
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