5 Tips On Crypto Currency Investing From A Crypto Founder
I had the pleasure of speaking with Michael Collins, the CEO of an innovative new company called GN Compass. Michael and I discussed the blockchain, ICOs and the future of cryptocurrency. GN Compass is a crypto peer-to- peer lending platform.
- by Gene Swank, On the bleeding edge — Tech Interview Series
Gene: Thank you so much for doing this with us! Please tell us about your background?
My pleasure. Well my professional background is banking and I currently run a loan company, Great North Capital Inc. where we process loans to higher risk individuals. Before all that, I was raised by my grandparents in Lagos, Nigeria. Being raised by them was the best thing that ever happened to me. I got that good “old school” upbringing of discipline, honesty, hard work and respect. I came to Canada on the 25 th of August 2004 (on my 19 th birthday) as a student. I got my permanent residency in August 2007 and proudly received my Canadian citizenship in September 2012.
Gene: How long have you been involved in the crypto currency ecosystem?
I have been involved for a couple of years now, so I guess to some, I might be considered a newbie but I assure you that my knowledge of the industry is very sound.
Gene: So, what makes you an expert?
I wouldn’t consider myself an expert, I consider myself more of a student. This ecosystem is constantly changing and we all have to keep my knowledge base up to date constantly or else we run the risk of falling behind on the latest innovation.
Gene: What exactly does your company do?
We are creating a peer-to- peer lending platform for Cryptocurrency-Backed loans™. The main purpose is to increase liquidity in the peer-to- peer lending market. The current peer-to- peer lending structure backs loans with notes and securities which have low liquidity meaning if a person wants to sell part of their loan portfolio or individual loans, it’s quite difficult. Also, if the borrower defaults on a loan the lender is out those funds and has to go through the time-consuming process of trying to collect via the collection services that
these companies provide. In which case, they will not receive their entire sum back because most collection services charge a percentage of the collected amount. On our platform, if a borrower defaults the investor is transferred the GNCT backing the loan via the smart contract and after a certain grace period has passed. Then we take care of the collections process so our investors don’t have to worry about that.
Gene: How are you utilizing the blockchain?
We are using the Ethereum blockchain to confirm and distribute the transactions so anyone can view and verify transactions anytime, anywhere.
Gene: What do you think makes your company stand out?
The differentiators between us and the rest are that we are building a platform that minimizes investor risk by leveraging blockchain and cryptocurrency technology. Also we are creating a credit system that doesn’t just use consumer aggregation data (credit scores) to classify borrowers and make loan approval decisions.
Gene How is your approach different?
We started by asking investors what they look for before they made an investment. They simply want to minimize risk as much as possible and receive a good ROI (return on investment). Notice that minimizing their risk of was more important to most investors than the return on the investment. Then we asked borrowers what they looked for in a loan or lending company. They want low interest rates, access to funds quickly and a fair risk rating system that doesn’t just use their credit scores and credit histories to make loan approval decisions.
Gene: How do you assess the risk of a potential borrower?
We have a three step process in assessing a potential borrowers risk. Before a person can become a borrower on our platform they have to have a GN Compass rating. To determine this rating we will use credit scores and credit histories for first time applicants (We use loan repayment history for subsequent loan applications). Also, we screen applicants through a service provided by identity mind global. They use their trademarked TDI, eDNA and WEAVE processes to aggregate an individual’s online and financial behavior to predict the risk level of the individual and create a digital identity which takes into account risky online activities such as identity theft, credit card fraud, terrorist affiliations, money laundering etc. With the digital information they gather from our potential borrowers and investors, they are also able to establish that a person is who they say they are. This will keep us AML and KYC compliant. Then we screen borrowers internally using a specially designed screening algorithm that we created. I always say that you can tell a lot about a person by looking at their bank statement. So from my experience in banking and running a loan company, I have identified different red flags when screening potential borrowers. The screening algorithm will look for red flags like multiple concurrent payday loans, large cash withdrawals at casino’s etc. The algorithm will also look at mobile and social media data to uncover clues of credit worthiness especially in our micro-loan prospective borrowers. This whole process (credit check, Identity mind screen and our algorithm screen) can be completed in minutes. After which the system will assign a GN Compass credit rating. Then an account specialist will review the information and give the final approval.
Gene: How will you handle someone that defaults on the loan?
We first reach out to the borrower and try to determine the reason for the default. We find that most defaults can be attributed to one of three reasons. 1. Job loss. 2. Change in family situation e.g. separation, divorce, death in the family etc. 3. Serious Injury/health related issues. In these situations we will give them a grace period and/or adjust their payments to meet their current situation. If the borrower is still delinquent after the grace period passes and we have adjusted their monthly payment requirement, the investor will receive the GNCT backing their loan. We will then start collection process on the borrower and their GN Compass credit rating will be downgraded as well as their external credit scores with Equifax, Transunion or Experian.
Gene: When are you planning on launching your ICO?
The token sale will start January 29th 2018.
Gene: What is the most interesting crypto project you have ever worked on?
Well of course GN Compass, because it’s such a game changer. I think when people take the time to fully understand what we are trying to do, they will see the value that we bring to our members.
Gene: None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are?
Wow, that’s a good question. Like I’ve already mentioned, I was raised by my Grandparents and if not for their love and guidance I wouldn’t be where I am today. My Grandfather thought me the value of hard work, honesty, being a self-made man and never giving up. My Grandmother thought me to always be caring and kind to everyone, no matter their background, race, tribe, creed because we are all made equal in the eyes of God.
Gene: What is your opinion on bitcoin? Is it still a good buy? What is your prediction on the price of bitcoin in Q4 2018?
Yes, for sure it’s a great buy actually. People need to remember that there are only 21 million bitcoins that will ever exist and close to 17 million are already in circulation, so it’s safe to say that the price will go up. However as more institutional investors get involved in the ecosystem, there will be bigger fluctuations in the price. Folks would need to HODL (hold on for dear life) a lot more often and for a lot longer than we had to before.
Gene: What sort of government regulations do you think we can expect to see in 2018? How will it impact the crypto industry?
I think for sure there will be tighter regulations and the US is leading the way on that. Here in Canada, we are bracing ourselves for the regulations that will hit us soon. There are a lot of mixed opinions in the industry concerning these regulations but I myself personally don’t mind them as long as it doesn’t stifle innovation because bitcoin as well as other cryptocurrencies, blockchain and ICO’s are here to stay. Regulations are simply guidelines on how you are expected to do business, it’s meant to keep the public safe. Yes, its tedious and yes, they are making crypto companies jump through hoops but it’s necessary. As a lending company, we would have to be regulated and compliant anyway in order to operate.
Gene: What are your “5 Tips on Crypto Currency Investing”
- Do your own research on the project you want to invest in: This is super important. Don’t get caught up in the crypto-mania. Do research ask the tough questions, make them earn your trust and investment.
- Do your research on the team: Find out who is on the team, their background, their core competencies. There are so many projects out there that the members of a team have zero experience or expertise in the industry they are trying to go into. For example a project launching an ICO for a remote recruitment service but none of its founders have any HR or recruitment experience or expertise.
- Does the project even require their own cryptocurrency or need to run on a blockchain: Because cryptocurrency and blockchain are such buzz word these days, people are launching ICO’s on projects that don’t even require cryptocurrencies or a blockchain and when asked about it, they usually don’t have good answers to justify their ICO.
- Find out the use case of the coin. Utility or Security: This is also important because you need to know if the coin will be used on the platform or if the coin was just created for crowdfunding. Coins that have a use case on their platform, for example Ether which has a specific use case on the Ethereum platform as gas, tend to have more price/value longevity as supposed to coins that are just created for crowd funding purposes whose value plummet after the ICO ends. These are called pump and dump coins.
- Make sure you invest only what you can afford to lose: Please don’t remortgage your house to buy bitcoins or other altcoins. Please don’t use your life savings to invest. Because the truth is that the cryptocurrency market is very volatile especially if you are investing in ICO’s. Many projects will never complete as the team quickly realize how difficult execution actually is. Some will complete but fail a short time after. The truth is, not every project can survive. There are over 1300 cryptocurrencies out there, not all of them can make it. As the Starks say on Game of Thrones (one of my favorite TV shows) “Winter is Coming” and when it comes it will wipe out many projects that don’t have an actual business model and a solid team behind them.
Gene: If you could spend one day with any person (alive or not), who would it be any why?
Steve Jobs. I honestly think that he is one of the most innovative thinkers of all time. I would ask him questions about business and life. The fact is, I relate to him a lot, from feelings of abandonment by his biological parents to the insane desire for perfection. If I need to make a tough business decision today, I’d literally ask myself “WWSD?” (What would Steve do?). I would learn more in one day with Steve Jobs than in four years of business school at Harvard, Stanford, Yale or any other Ivy league institution.
GN Compass is an innovative new company of which I am an adviser. My interview with Michael is the first in a series of interviews that I will be conducting with cryptocurrency experts from around the globe. If you liked this story, please share it and come back for more great interviews with top CEOs and cryptocurrency thought leaders.