DEVELOPMENT UPDATE: Unboxing the new LEND utility and fee structure — LEND to become the blockchain lending currency
Ethereum network is the backbone for ERC-20 digital tokens. All of these digital tokens have something in common: They all enjoy a market capitalization defined by the supply and demand of these tokens or currencies.
Currently, Ethereum itself has a 120 billion USD market capitalization. Ethereum based ERC-20 tokens such as EOS has 9 billion USD, TRON 4 billion USD, ICON 3 billion and QTUM 3 billion market capitalization. Moreover, there are at least over 200 other liquid ERC-20 based tokens currently exchanged, amounting to billions of USD in market capitalization.
ETHLend provides the possibility to unlock the liquidity of these aforementioned ERC-20 based digital tokens (and soon Ethereum as well). Practically, an ERC-20 token holder, who does not want to sell (close the position) the tokens can pledge these tokens to receive Ethereum for other investments or to finance any goal.
From the Alpha 0.2 Release from 15th December 2017, ETHLend dapp has reached over 2.5 million USD lending volume (2 500 ETH) within a month and a half time period with approximate of 8.5% interest rate (212 500 USD as interest collected by the lenders) and average loan size of 4.79 ETH.
Creating a lending currency. Since currently the medium of exchange (the lending currency) is Ethereum, it means that ETH cannot be pledged to receive ETH loan. ETHLend team wants to disrupt the whole finance world by creating a completely new standard: the lending currency by using LEND tokens as the medium of exchange for all lending transactions in the Ethereum application.
By using LEND as the medium of exchange, all loans in the future on the decentralized application would be handed as LEND tokens instead of Ethereum. The result is that LEND would become ** the main utility ** in the Ethereum network (and beyond in the future) to unlock billions of dollars worth of liquidity that is locked in Ethereum and ERC-20 tokens (and even Bitcoin in the future).
On January 25th ETHLend announced the current list of 130 tokens in total, which can be used as collateral in the decentralized application. These tokens are more or less the top liquid tokens on the coinmarketcap, totaling all together to a whopping 52 billion USD in market cap with Ethereum itself currently on 120 billion USD market cap. If even 1% of these would be used as a collateral for loans on The ETHLend platform, this would mean that over 1,7 billion USD worth of LEND would be consumed for the lending activity, which would amount to over 10 billion LEND at the current USD rate (Over 8x total supply of LEND).
Becoming a lending currency would mean that before a lender enters the lending market, lender must purchase LEND (or have LEND already as the early adopter). When the borrower repays the loan, the borrower pays back the lending capital (LEND) and the premium as the interest, which will also consist of LEND.
ETHLend team believes that with LEND being a currency, this would provide more opportunities for both the project and the LEND token. There might be a drawback that the borrower would need to convert LEND to other currencies first such as ETH or BTC depending on the needs. However, this factually creates more opportunities to ETHLend to create more gateways such as partnering with credit card providers to spend LEND in real life or to convert LEND to ETH or to any other cryptocurrency by using specially designed protocols.
Switching to LEND does not mean that ETH would disappear from our decentralized lending application. During Q4 2018, ETHLend will deploy the feature to borrow tokens and later on this stage, ETH could be used as a collateral (if not even earlier) by unlocking this over 120 billion USD asset opportunity. Moreover, ETHLend will allow borrowing with Ethereum until the end of Q1, which creates enough time to get the base lending traction and user base before switching to LEND token. The timing is perfect.
We would like to thank our community members for proposing the new utility and special thanks credit goes to William LeGate.
Benefits
During Q2 when we expect the monthly lending volume to be around 5 000–10 000 ETH (5 000 000–10 000 000 USD) plus the premium (currently around 8,5%) switching to LEND will result in more demand and use for the LEND token.
Switch to LEND as the medium of exchange means that unlocking any ERC-20 token and even ETH liquidity is done with the use of LEND token. LEND becomes the tool of collateral based lending.
When LEND is the medium of exchange, ETH can be used as a collateral, unlocking 120 billion USD in liquidity.
If even 10% of the current ETH and ERC-20 tokens market capitalisation could be unlocked with the use of LEND, LEND market capitalisation could become of one the most important ones on Ethereum network.
Drawbacks
Borrowers would need to convert to other currencies and tokens depending on their needs. ETH has more gateways and pairs currently than LEND. ETHLend team will work to provide more gateways for conversion or spending LEND in real life such partnering with credit card providers and exchanges or using protocols to convert LEND to ETH or BTC.
Lenders would make profit in LEND. This should not be a concern seeing as most of the lenders are in fact both the early stage adopters of LEND token and the decentralized application. There is currently no shortage of lenders. Moreover, LEND could be easily converted to ETH if that is the aim of the lender.
Institutional users might prefer Ethereum. It is well known that Ethereum is one of the most wide spread cryptocurrencies on the blockhain sphere. However, the aim of Ethereum is to act as the transaction fees to use the protocol (gas) and was not designed to be a cryptocurrency in the first place. Therefore, we believe that when we are able to provide decentralized lending and unlock the dormancy from Ethereum and all the liquid ERC-20 tokens, which amounts to hundred of billions of USD, LEND token is set to become the choice for the finance currency in this cryptocurrency world.
Introducing the new fee structure
LEND creates a leveraged experience for the lenders and borrowers in decentralized lending. First and foremost as LEND becomes the new standard currency of lending, LEND itself will grant extra utility features for the lenders and borrowers. ETHLend introduces discounts for borrowers and lenders who initiate in loan transactions, which are backed by LEND tokens.
Moreover, by using LEND, the lenders and borrowers can access additional features on the decentralized application and overall, LEND token holders are able to participate in voting on the protocol level, such as deciding upon the token listing on ETHLend. Below is presented all the utilities on the ETHLend protocol and the decentralized application:
Remove old fees (Q1 2018)
Borrower deployment fee
Lender funding fee
- LEND to become lending currency on Ethereum network (Q2 2018)
a. Using LEND as the lending currency on the DAPP and the Ethereum network
b. Removes the debates on security and utility
c. Creates more demand and use for the currency
- Borrower Fee and Discount (Q2 2018)
a. 0.5% of the collateral tokens is sent to ETHLend
b. Discounted to 0.25% If the collateral is LEND
c. Collected upon repayment or default
- Lender Fee — LEND as an interest rate (Q2 2018)
a. Premium is repaid in LEND
i. ETHLend collects 10% of the premium
ii. The discount is reduced to 5% in case LEND is pledged
- LTV (loan-to-value) Boost to 70% for LEND token (Q2 2018)
a. Borrower can borrow up to 65% of the collateral value
b. By pledging LEND, borrower can borrow up to 70% of the collateral value
- Collateral refilling with LEND token
a. LEND can be used to defends a collateral call by sending LEND to the loan smart contract
- Preview Feature (Q2 2018)
a. New loan is completely public for funding after 60 minutes when tokens are sent and the state is set to waiting for lender
b. Lenders who purchase the preview feature will see the loans 60 minutes before the loan is broadcasted to the public
c. Cost → 500 LEND for 30 days
- Featured loans (Q2 2018)
a. Loans will be featured on the front page, which can be only paid with LEND
i. Cost → 250 LEND for featuring 24 hours
- Late penalty fee reduction (Q2 2018)
a. 5% of the installment amount is charged as a penalty fee
i. 2.5% will be sent to the lender
ii. 2.5% will be sent to ETHLend
b. LEND is used as a collateral
. the penalty fee is reduced to 2.5%, which sent to the lender fully
- Rewarding active borrowers and lenders with airdrop (Q1 2018)
a. Allocation: 20% of the collected fees
b. Use: Rewarding active borrowers and lenders
c. Half (50%) is allocated to active borrowers based on volume
d. Half (50%) is allocated to active lenders based on volume
e. Rewards can be claimed 30 days after the Q ends
f. ETHLend reserves the right to make changes to the reward plan to ensure fair distribution of rewards to users.
- Rewarding introducers (Q2 2018)
a. Allocation: 5% of the collected fees
b. Use: Rewarding introducers to ETHLend DAPP
c. Details shall be defined when upon launching the program on Q2 2018
d. ETHLend reserves the right to change the allocation based on volume
- Protocol Voting Portal (Voting on Suggestions) (Q1 2019)
a. You will be part of the decision making on the protocol level
b. 1 LEND token equals 1 vote
c. Protocol Voting Portal will be launched latest on Q1 2019
d. One example of Voting is the possibility to vote for new potential additions to the collateral tokens list.
ETHLend team starts the development work on the new LEND utility and fee structure as of today to provide the new experience as soon as possible. Moreover, the next version (Alpha 0.2.1) will have bug fixes and new features such as faster browsing, collateral calling, loan filtering and my loans. More details on the Alpha 0.2.1 release announcement on the upcoming week.