SmartCredit.io x Satoshi Club AMA Recap from 27th of December
Welcome to another episode of our AMA series. Today we are glad to tell you about the AMA session with our friends from SmartCredit.io. The AMA took place on December 27 and our guests were Martin Ploom (co-founder CEO) and Tarmo Ploom (Co-founder CTO).
The total reward pool was 3000$ and was divided into three parts. In this AMA Recap we will try to summarize some of the most interesting points for you.
PART 1, INTRODUCTION AND COMMUNITY QUESTIONS
D. | Satoshi Club: Hello Satoshi club!
today we are welcoming our guests from Smartcredit.io!
Martin Ploom | SmartCredit.io: Hello All, I’m very happy to be here tonight! And my past — I worked 10 years for Credit Suisse as a Vice President in Zurich. Before this I launched 4 successful software products and now SmartCredit.io!
Tarmo: 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 worked for ten years as Vice President in Credit Suisse Global Architecture.
D. | Satoshi Club: Awesome! thank you! can you tell as briefly about your project?
Martin Ploom | SmartCredit.io: What we are doing is DeFi lending/borrowing, but it’s quite different from the money-market-funds like Aave and Compound are.
Our focus is on:
- Fixed Income funds
Why is this important? It’s because the fixed-income-funds are 10x of money-market-funds in the traditional finance, but fixed-income-funds are missing in DeFi. So, we add them.
D. | Satoshi Club: So you are first who did this?
Martin Ploom | SmartCredit.io: Yes, we are the first ones doing the fixed-income-funds. The DeFi is based so far on the money-market-funds. We add the alternative — the fixed-income-funds. The money-market-funds have high flexibility, but high collateral ratios and fluctuating interest rates, the fixed-income-funds will have less flexibility, but lower collateral ratios and stable interest rates. So, every user can choose.
Tarmo: Fixed income funds help to reduce volatility and make outcome predictable for lenders and borrowers. In this way it can increase crypto adoption as volatility of outcome is reduced.
Q1 from Telegram user @sajay999
The first phrase I see on the website is the you provide defi lending solutions from Swiss bankers. Please elaborate on your background as Swiss bankers. In what banks are you working or have you worked and are they endorsing your activities related to blockchain?
Martin Ploom | SmartCredit.io: I worked 10 years for Credit-Suisse Private Banking as Vice President in Zurich. We are CFA’s — Chartered Financial Analysts, we are MBA’s — everyhing what you need in the bank.
Regarding Credit-Suisse and blockchain. Unfortunately they are not supporting blockchain. It’s just because they are very dependent from the SNB (Swiss National Bank — the central bank) and they try to read the central banks mind all the time
Tarmo: I was 10 years VP at Credit Suisse Global Architecture, after that 2 and half years Chief Architect of Finnova. I know banking and Swiss banking inside out.
With SmartCredit.io we dont just build superior product we replicate brand values of Swiss Banking into DeFi:
- Superior service
D. | Satoshi Club: Okay, and what about your crypto experience? how long are you in crypto world?
Martin Ploom | SmartCredit.io: So, we have the know-how inside out of the banking systems, credit-systems — and we just transfer this into the blockchain. We started in 2012.
Tarmo convinced me to do some Bitcoin transactions and when we saw how this is working, then we became the CONVERTS. We published our first Bitcoin price forecast in 2014 January in the Swiss CFA magazine and the second one in the December 2017 in the Swiss CFA magazine.
Tarmo: Yes, with some mining
I didn’t have to heat my apartment in Zurich
D. | Satoshi Club: I think stability it’s what more and more people are looking in DeFi and in crypto in general, sometimes.
Martin Ploom | SmartCredit.io: Zurich was that time very good place to be — there were 2 core developers in Zurich and they spent a lot of time with people and of course, we discussed for days with them!
Martin Ploom | SmartCredit.io: So, our viewpoint is that Decentral Autonomous Banks will emerge. That the capabilities of traditional banks will be transferred into the blockchain. Well, then people started to use the word “DeFi” and then we switched to the “DeFi” word too.
Tarmo: Decentral Autonomous Banks would replicate current 30 000 banks into Blockchain.
Martin Ploom | SmartCredit.io: Let’s think, that the finance is 5000 years old. The banks as we know them are 100 years old. Our approach is just to replicate the earlier approaches (before the banks era) into the blockchain.
Gold Rocket | Satoshi Club: This is very impressive. So is Zurich today a crypto banking center too?
Martin Ploom | SmartCredit.io: The Swiss regulator is very perfectionistic. They try to regulate everything. The result is rather over-regulation and the startups have very though time there.
Tarmo: Current banks are running on Web 0.0 (Mainframe) or Web 1.0 technology. Banks haven’t managed transformation to Web 2.0 technology. As such there is not much future for current Web 0.0 or Web 1.0 based banks.
Issue with Web 0.0 or Web 1.0 based banks is there cost basis. They are not competitive with Web 3.0 technology (Blockchain). Blockchain based banking is at least 6 times cheaper as old technology based banking
Martin Ploom | SmartCredit.io: However, the crypto banks are emerging — like SEBA and Sygnum. They have their banking licenses now too. But let’s think — there are 251 banking licenses in CH and ca 4 to 6 of them are focusing on crypto or are doing some crypto services.
Q2 from Telegram user @iulya_i
Personal Fixed-Income-Fund will be your new feature in the next release. What exactly does it and how will I benefit from it?
Martin Ploom | SmartCredit.io:In the traditional finance we have the concept of the money-market-funds and fixed-income-funds.
The money-market-funds are very flexible instrument, the borrower and lender both have very high flexibility. But this comes on cost. First, there are high collateral requirements for the borrowers’s because one doesn’t know the loan maturities. Second, there are fluctuating interest rates for both sides. Both sides can have advantage or disadvantage from this.
Therefore the traditional finance has implemented fixed-income-funds, which give less flexibility, but more stability. The borrower’s and lender’s will get stable interest rates and the borrowers will have less collateral requirements than the money market funds and Personal Fixed Income Funds — they invest rules based into the borrowers fixed-term-loans. They are personal (i.e. no pooling of the assets), but they are _personal. Regarding pooling of the assets — like the money-market-funds are doing this — pooling and offering investment return on the pool is regulated activity. And it requires licenses earlier or later.
Tarmo: Yes at least two lisences:
- Fund management company
- Fund lisence
Are needed for it.
Martin Ploom | SmartCredit.io: However, if one stays pure P2P — like we are doing this or MakerDAO — then the pooling regulations do not apply. So, Personal Fixed Income Funds offer regulatory security and the stable income for the lenders. Our website: https://smartcredit.io
Q3 from Telegram user @b_dima
I like that you have many sections with information on your website. You can basically find everything there. But why not make it simpler? To lend ETH in 2 clicks for example. I searched about this on your website and there are many steps to do and to read. In order to get more adoption, I suggest you try to simplify all these steps. Let us know what do you think.
Martin Ploom | SmartCredit.io:Definitively — agreed. Our first version is the Release 1.0 — several simplifications can be done. One of the features that we add is crypto-credit-score. It’s optional to the borrowers, however borrowers who do the credit-score will have better collateral and interest rate requirements.
So, the system needs to be from one side easy to use. And from other side — we have this extra functionality, which should be available too. But credit-score is more for the borrowers. The fixed-income-funds will be introduced with the Release 1.1 and then the lenders will have really easy life
- Choose the asset
- Define the rules (or use the default rules)
- Transfer the asset
Q4 from Telegram user @wicksterr
The mobile version is a joke and basically it’s impossible to use. When do you plan to finish the design and development of a fully operational mobile version? In our days this can make or break the ux of a project.
Martin Ploom | SmartCredit.io: Yes, we have focussed on the desktop version and the mobile version has some shortcomings. However, our growth strategy is the integration into other wallets. It will take some time, but we will be integrated into the Web3 wallets and then everything is getting even simpler. This onboarding process is really outdated. We are just deploying a new version of the onboarding process into the Production, it looks the same as the main application. Will be there in max 7 days.
Q5 from Telegram user @sato_nakamo
What is the formula of credit score creation and how much time does it take to create a good credit score?
Martin Ploom | SmartCredit.io: Very-very-good question,but we cannot tell this to you — there is just algorithm behind. But here are the key pieces of this algorithm:
- We do blockchain analytics — the analytic like the banks are doing in the credit process.
- There is social media analysis — the user can enable his FB and LinkedIn profiles and we do some analytics there.
- And then there is little psychometric test.
Practically we calculate two parameters:
- Capability to pay
- Willingness to pay (users can have funds, but decide the game the system)
And both these parameters together result in the credit score. Traditional banking has credit-score as a key feature. Every single bank client has credit scores now. It’s possible that bank is not telling this to you, but so it is. In DeFi we do not have the credit-scores — it’s like the approach “One shoe fits all”. The result of this is as well the heavy overcollateralization in several systems.
So, we say — users have the option. Some users choose to stay fully anonymous — they have to pay for this — with more collateral and more interest rate. Some users choose to open up their data — they will have then better requirements, if they get a better score, we just offer to the users a choice. But this is a rational choice, where every user can monetize his data.
Gold Rocket | Satoshi Club: Great answer! Thank you! This means that you work according to banking standards, but you have more opportunity to study the potential of the client.
Martin Ploom | SmartCredit.io: Yes. We use the approaches from the banks. But banks are not doing social media analysis or psychometric tests. Why? It’s because the law is writing what banks need to do for the credit score. So, the banks have the “innovation via the law”
Gold Rocket | Satoshi Club: This means КYC is not necessary. Did I understand you correctly?
Martin Ploom | SmartCredit.io: KYC is not mandatory. However:
1. If the volume in month exceeds 15000 USD, then we will request this.
2. The borrower can always submit his KYC, but it’s not mandatory.
Q6 from Telegram user @batrud
How does the crypto asset management work? Is there a team of professionals that manage this assets, like in the regular finance world? Also, what is the fee for this service and do you provide any insurance regarding the results and the security of the funds?
Martin Ploom | SmartCredit.io: When we say crypto asset management, then we refer to our fixed-income-funds (at the moment). The fixed-income-funds will not have any fees for the lenders (except the gas to create one). The borrower’s however have to pay the platform fee (0.5%) and the Loss Provision Fund fee (which is credit-score dependent).
However, back to crypto asset management, we are thinking about simple scanarios (after the Release 1.1). For example:
1. An investor will take a collateralized loan with lower collateral ratio than the money-market-funds (Aave, Compound).
2. Investor sends the funds into the yield protocols.
Because the step (1) gives higher “capability to borrow” to the investors, then they will have as well higher return via the yield protocol. So, we plan to integrate these functions after the Release 1.1 (Release 1.2). Additionally, we will integrate Fiat on-ramping and Fiat off-ramping into our platform via our partners (but this will require KYC). So, the crypto asset management contains:
- Fiat bridges
- Fixed income funds
- Access to yield protocols
As a summary before the chat:
1. Our project is a multi-year project, with many features there already and many features to come.
2.We just offer choice to the users — for the borrowers, for the lenders, for the integrators.
D. | Satoshi Club: And do you provide any insurance on your platform?
Martin Ploom | SmartCredit.io: We have the Loss Provision Fund in the platform, from every interest payment a piece is going into the Loss Provision Fund. This system is there for the unknown events.
PART 2, TELEGRAM COMMUNITY LIVE QUESTIONS
The chat was open for 120 seconds; a lot of questions were posted by Satoshi Club community. Our guests chose some of them.
Q1 from Telegram User @K2ice
What benefits are on the SmartCredit platform for the following categories of users: (1) An active borrower on the system (2) A lender on the system (3) A partner company, which would integrate the platform’s borrower or lender widgets.
Martin Ploom | SmartCredit.io: Here are the key benefits:
Borrower will get:
- Lower collateral ratio than the money-market-funds
- Stable interest rate
- Can monetize his data via the crypto-credit-score
Lender will get:
- Personal Fixed Income funds
- Stable interest rate
- Higher utilization ratio of the lent money than the money-market-protocols — this means higher real income
Integrators will have:
- We share the revenues with them
- They will receive reward tokens too
Q2 from Telegram User @smelekin
You have a woman in your team. This is very nice to see woman in this market. Can you tell about her to us?
Tarmo: Woman are necessary for every high performance team. As a result, social intelligence/emotional intelligence improves, decisions are better and team performance improves massively! Our Wunder-Woman is Basak from Turkey. She is Woman in Istanbul Co-Chair. She is brilliant!
Q3 from Telegram User @atillayeni
Can everyone make a loan request from SmartCredit? What’re the requirements for a loan to approve?
Tarmo: Yes, everybody who has registered in the app.smartcredit.io application can make loan requests. Current currencies supported are ETH and DAI. To make loan request you have deposit collateral (currently BAT, ZRX, REP) In Release 1.1 we add two more stablecoins and ten more collaterals.
Q4 from Telegram User @Sangdz
What is your plan for global expansion? At present, which market are you focus on, or is it focused on building and growing to gain customers, users and partners?
Martin Ploom | SmartCredit.io: At the moment we have English speaking community and our application user interface is in English too. We are adding two communities:
So, we have to translate our website and our application into Spanish and Turkish. More communities will follow, but we are just starting with these two at the moment.
Additionally, we focus very much on the partnerships. We have announced two of them (piixpay and cryptotask). The idea is that other platforms can offer our services via the User Interface Widgets or via the API. And we split the revenue with the other platforms. The benefit for us — new users. The benefit for the integrators — more services to their users (plus revenues from the loan origination).
Q5 from Telegram User @HTaraca
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?
Martin Ploom | SmartCredit.io: 1. Our loans are over-collateralized. But our collateral ratio is lower than the collateral ratio in the money-market-funds (Aave, Compound).
2. When the collateral value declines, then the collateral is getting liquidated.
3. And we have the Loss-Provision-Fund for the unknown events — every borrower is paying into the Loss Provision Fund depending on his credit score (when he has not done any credit score, then he will be in the “standard” credit score.
Q6 from Telegram User @hanahho0107
Can you share with us the highlights of the Credit as a service API product? If I am new, where can I find guidance?
Tarmo: We publish all our functionality as an API. As such other banks or websites can easily integrate smartcredit.io and earn additional revenue stream.
Q7 from Telegram User @Emidm37
Is the minimum and maximum limit for borrowing the same for all users? Have you not thought of creating a reputation program where users with higher reputations have higher limits for borrowing?
Tarmo: Minimum is 100 USD equivalent in DAI or in ETH. There is no maximum. However we calculate borrowers credit score. Credit score determines borrowers interest and collateral requirements.
Q8 from Telegram User @BERTA2020
Can you give me 3 or more features with which Smartcredit takes advantage of other similar projects and what outstanding benefits does it offer to users who choose your project and not others?
Martin Ploom | SmartCredit.io: I would says following:
1. The low collateral ratio for the borrowers — having fixed term loans allows us to offer lower collateral ratio to the borrowers than the money-market-funds (Aave, Compound).
2. The personal-fixed-income-funds for the lenders — regulatory compliant (no asset pooling) and offer stable interest rate and exposure to all yield curve to the investors (not just the exposure to the money market funds, but to the all yield curve). As the yield curve is upward sloping, then investors can lock in stable income for the future.
3. Crypto-Credit-Score — this allows separation of the good borrowers and less good borrowers.
4. And let’s add that as we are doing fixed-term-loans, then we have less exposure to the flash-loan-attacks (because the assets are locked).
Q9 from Telegram User @Pannicota
In the Lending/Loans fields of DeFi, I most concerned about the SECURITY problems! Because I saw that even in many BIG PROJECTS, Lending/Loans fields always a “GOOD MEAL” for many HACKERS, Like AKROPOLIS last month , 2 Mil has been STOLEN by HACKER, or even like Harvest Finance, 24 Mil from Lending has been HACKED because of the bug on the smart contracts! So how will you solve this problem?
Tarmo: Current DeFi has two main security issues:
1. Asset pooling
2. Flash loans
As a result hackers fee in 2020 has been 0.84% of total locked value in DeFi. If you take that ETH lending fee is 0.6% then current DeFi has a BIG issue. It shows WRONG SECURITY DESIGN in DEFI.
In SmartCredit.io we avoid both these issues. We dont do asset pooling, we dont do Flash loans. Our approach is security by design.
Q10 from Telegram User @tuvalunia
You provide the “Lowest Collateral Ratio” in the industry. How do you achieve this? Will you afford to keep it for a long time or is it for a temporary promotional period?
Martin Ploom | SmartCredit.io: This is because of the business model:
The money market funds do not know the loan maturity. The borrower can have 1 day or 100 day loans. That’s why they prefer high fixed collateral ratios. The fixed-term-loans, however, know the loan maturity. And this allows to reduce the collateral requirements (of course, you need to do some maths for this).
Additionally, we have the Loss Provision Fund, which would accumulate the unknown events. So, the key driver for the Lower Collateral Ratio is the Business Model Design — not doing the money-market-fund business model, but doing the fixed-income-business model.
Q11 from Telegram User @KeymerS
In all the time I have known about DeFi I have learned that the most reliable and beneficial thing for society is that everything is developed under Blockchain, but it really is not so? With SmartCredit, can you get more benefits and have the same transparency as with the Blockchain? How is it possible?
Tarmo:Customer has to come first. Business model second. Product architecture third. To offer added value to the customer combination of onchain and offchain components is necessary.
DeFi projects who call them blockchain only will always have some offchain components. Key is to find right balance between onchain and offchain components and to put customer experience first!
Q12 from Telegram User @phamtan310
With Smart Credit, Investors can set up their Personal Fixed Income Funds to automatically invest into the borrower’s loan requests. So is its profitability better than other Yield-Farming models? Can users easily control their automated investments?
Martin Ploom | SmartCredit.io: Let’s separate two business models:
1. There is fixed-income-business model, which is low-risk business model and which offers stable interest rates to the passive investors
2. There is yield farming business model, which is not low-risk business model, but more an “arbitrage business model” with high risk profile
Of course, Yield Farming likes to present the returns. But on the essence there are 3 sources of the returns:
- Borrower pays interest rate
- The liquidity pools (Uniswap, etc) give the service fees
- There are reward tokens from several protocols
– We focus on the (1), it’s low risk
– Yield Farming focuses on the combination of the (1), (2) and (3), it’s high risk
Regarding automated investments in the fixed-income-funds — the investments are done automatically. But the lender has of course the possibility to stop the fixed income fund and to retrieve the free funds (or add new funds).
Q13 from Telegram User @Cakelov
Hello Smart Credit, do you have plan to create and launching a card like credit card or visa in the future? So your client easier to use and lend from your platform.
Tarmo: Yes, we have merchant capability already in place. In merchant solution customer can get credit by purchasing goods or services in the Internet like by usual VISA credit card. Difference is that merchants dont have to pay high VISA transaction fees (ca 3.5 .. 5%) per transaction. If merchants use smartcredit.io there margin will grow twice (VISA is very expensive for merchants).
Q14 from Telegram User @Joseunda
The circulating supply of SMARTCREDIT is only 5% of the total supply, the remaining supply will be unblocked in what way or how will its distribution be?
Martin Ploom | SmartCredit.io: At the moment we have 5% of tokens circulating and ca 920000 tokens on the project account. The only way to get them into the circulation is via the marketing activities and the rewards to the borrowers/lenders/integrators (which we will enable with the Release 1.2)
In the years 2, 3, 4 and 5 we will unblock 22.5% tokens in each year. The team tokens will be unblocked 1/4 in the year 2, 3, 4 and 5. So, there are no team tokens in the circulation at the moment. More details about the token model are in the: https://medium.com/smartcredit-io/smartcredit-token-model-1e2243c4c042
Q15 from Telegram User @phamtan310
Vietnam is a developing country with a lot of SMEs, is SmartCredit a smart capital solution compared to traditional banks? Do you have any plan to develop SmartCredit in Vietnam?
Tarmo: SmartCredit.io is a global solution. Customers from every country can use SmartCredit.io lending/borrowing capabilities. Our intention is to bring together lenders and borrowers globally, so that companies from developing countries can borrow funds from lenders from not so fast growing countries (OECD countries).
Q16 from Telegram User @Arabedans
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?
Martin Ploom | SmartCredit.io: The money-market-funds like Aave and Compound are using the “utilization ratio” parameter, which results then in the quite fluctuating interest rates. We are not using the “utilization parameter”, we have the “yield curve”, which is the basis for the loans. Yield curve defines the interest rate for a give loan maturity. That’s how we get the interest rates — they are “yield curve” based.
Regarding the hacks:
- We order the Security Audit for the Release 1.1
- Fixed-term-loans have much less exposure to the flash-loan-attacks than the money-market-funds. It’s just because the assets are locked, so it makes little sense to attack with the flash-loans the assets, which are locked for example for two months.
Q17 from Telegram User @zaferce
What exactly is SmartCredit’s alternative regulatory safe approach principle and what is the advantage of creating multiple pools for each lender instead of creating a single pool?
Tarmo: SmartCredit.io dont use asset pooling like Aave or Compound. Our solution is truely peer-to-peer, there is contract between lender and borrower and not between pools. Companies which use asset pooling need:
1. Fund management company license.
2. Fund license for each asset pool with corresponding prospect which has to be approved by regulator.
Current DeFi asset pooling solutions don’t have these licenses. As a result, it is question of time till regulator will close down asset pooling DeFi solutions. SmartCredit.io is fully compliant regulatory DeFi solution.
Q18 from Telegram User @Johana0012
Having fixed maturities would imply a fixed maturity CDP; Borrowers would have to close these CDPs before maturity How do I close fixed maturities? Can the compound use fixed maturities?
Martin Ploom | SmartCredit.io: No, the design of Compound is exactly in the way, which does allow only the money-market-funds approach. Let’s go on details:
1. Compound lenders will receive the cTokens — the shares of the money-market-fund.
2. But the money-market-fund shares are not locked, they can be withdrawn at any time (no locking for borrower, no locking for lender).
3. So for Compound to get into the fixed-term they would need to define money-market-funds for each maturity 1,2,3,4,5 …100, 101, etc days and for each asset. This does not make sense — the money-market-concept is not extendable….
4. The money-market-funds and fixed-income-funds are orthogonal concepts — one cannot use one of them to implement the other one.
Q19 from Telegram User @AmitGoyal1444
If you could pick 2 things to change and two things to bring with you from your previous companies, what would they be and why?
Tarmo: First — Customer comes always first. And you have to offer added value to the customer not just a technical solution using coolest new technology.
Second — It is all about high performance teams. In crypto we have tons of high egos. However to be successful our focus has to be to build up emotionally and socially intelligent high performance teams. These teams can change the world!
Third — It is about execution. As long as you have powerpoint customer dont benefit. You have to build solution. You have to get it live. I have built ca 200 applications and carried out 6 very large scale transformations. You just have to do it!
Fourth — Transparency, total transparency to customers, teams, partners. Transparency builds up trust. Trust changes the world!
Q20 from Telegram User @Cryptogeria
Can you briefly explain why you will have more borrowers on the platform?
Martin Ploom | SmartCredit.io: Because we think the borrower’s will follow the rational benefits. If borrower’s will get a loan on lower collateral ratio, then this means, that the borrower’s will be able to borrow more on the same asset basis. This means their “capability to borrow” is higher on the SmartCredit. So, we think the borrowers are driven by the rational goals and these rational goals will drive more borrower’s into SmartCredit. So, it’s about offering more benefits to the borrower’s than the other platforms are doing this. See more about this in the: https://smartcredit.io/low-collateral-ratio-matters-to-the-borrower/
PART 3, QUIZ AND INFO
As usual, for the third part, Satoshi Club Team asked the chat 4 questions about SmartCredit. A link to a Quiz form was sent into the chat. Participants had 10 minutes to answer. 2000$ were distributed between the winners.
For more information and future AMAs, join our Social Media channels:
English Telegram group: https://t.me/Satoshi_club
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Telegram Channel: https://t.me/satoshi_club_channel
SmartCredit.io Community: https://t.me/SmartCredit_Community