Answering Due Diligence Questions
Written by Edmilson Rodrigues (CEO at Swapy Network)
EDIT: This blog post is now composed by due diligence questions from two different syndicates.
We are very happy with the great interest in our project from angels, funds and syndicates from all over the world.
Every once in a while we receive a list of due diligence questions. It is very useful to share the answers with the whole community, because it can help to solve other people’s doubts.
So, I am answering those questions for C.K.’s syndicate, but it is a pleasure to share the answers with the community. #StrongerTogether
Q1: As part of your use case, Swapy Network will be the facilitator between the investor and the credit company. Do you have a list of credit companies/entities that you have already talked with who are willing to participate in your network?
A: We have been working close with 3 credit companies from Brazil to validate their needs while building our tool. We can not disclose their names because they are not officially our clients yet, but there is a great interest among the new digital lenders to join our network, as we can reduce their cost of funding in half.
Q2: How will Swapy network credit-score the loan applicant? Will this credit scoring be done by swapy or a 3rd party?
A: We adopted an Open Innovation approach. So, Swapy Network will be the way to aggregate and share people´s financial data, but the actual credit scoring for each loan will be done either by the Credit companies lending to the applicants, or by a especialized credit scoring company. We are in advanced talks with one of the biggest Alternative Credit Scoring companies in the world to join the Swapy Network and offer their model for the companies, charging for it in Swapy Tokens.
Q3: How will the financial information uploaded to the swapy network be verified? Are there any safeguards or consequences for submitting false information? (For example, one could over declare his/her income or under declare his/her liabilities).
A: Part of the information will be imported through an API connected to its source. For example, banking statements and government registries (when available online). Other information, such as images of Government IDs and registry of assets will be confirmed through trusted third parties (verifiers) connected to the network which will receive in Swapy tokens for its services. Submiting false information in one´s Financial ID would be detrimental for the individual, since the inconsistency would be identified and registered for ever in his/her Financial ID.
Q4: Who will bear the risk when a loan is defaulted? Will the smart contracts be legally binding?
A: The investors lend money to the credit companies and they, in turn, lend to the individuals according to their thesis and adding their profit margin. So, if an individual defautls, the credit company still has to pay their creditor. All smartcontracts are signed together with a regular online contract. Therefore, the deal is legally binding.
Q5: Will the loans have any collateral requirements? Either with real world assets or with crypto tokens?
A: Yes, the individuals can deposit Swapy Tokens in the smartcontracts as a collateral to get loans. It´s not mandatory, but a loan request with a substantial value deposited as collateral will have a lower interest rate and increase the chances of successful funding.
Q6: The swapy network protocol seems to be based on the ethereum network(Page8). Any plans to expand to other networks or eventually be blockchain agonistic? With Ethereum facing scalability issues (eg: Crypto Kitties) how will swapy network face this challenge?
A: Yes, Swapy Network is based on the Ethereum protocol. We believe in Ethereum in the long run because it has the strongest community and that it will solve its scalability issues. However, we are open to the possibility of changing networks, especially if it is something important to our community.
Q7:(Page 9)Mentions the trade of credit will be pegged to the dollar to avoid volatility. How does Swapy Network intend to achieve this? Do you intend to use a USD backed currency like Tether or jUSD?
A: Yes, we are studying the use of a StableCoin to avoid volatility. However, we do not intend to use Tether or any other centrally controlled coin. We believe in decentralization and in the Open Source movement, so we will do our best to incorporate components in our project who are Decentralized and/or Open Source.
Q8: Other than brazil, what markets are you targeting and how which markets do you intend to expand too? Will Swapy Network eventually be global?
A: Yes, Swapy Network has the ambition of going global and providing Universal Access to Credit. Our strategy to do so is based on helping other teams in different countries to use the Swapy Protocol to onboard Credit companies based in those countries. That way, we have a decentralized and scaleable approach to international expansion. We will start it in Brazil (our home country), and probably the first few countries to expand will be from Latin America because we are very similar regarding culture and language.
Q9: Are there any regulatory/legal hurdles that your project needs to overcome to succeed? Eg: Loan brokerage licenses in any of the countries you are targeting?
A: One of the things we are most proud about is how we are obsessed with compliance. We researched the regulatory suitability of our model before we proposed the Swapy Network. In fact, we changed a few key points of our business model as suggested by our legal advice in the US, in Brazil and in Switzerland.
Q10: Can you do a comparison with your business model and other competitors such as Ripio Credit Network?
A: It’s not elegant to talk about other projects. I can just say that Ripio solves the problem of funding for loans in a P2P fashion, while Bloom solves the problem of Credit scoring and portability. Swapy Network solves both the problem of funding and credit scoring/portability with the advantages that we have as a principle to be Open Source and decentralized. Plus, we are the only token project in the world to have two living legends (Tim Draper and Don Tapscott) as advisors in the same Network. #StrongerTogether
Q11: (Page 8)Will the swapy network token have any other use other than for the network fees? (Eg: Staking in a POS style with coins required for masternodes, or as collateral in loans?).
A: The Swapy Token is intended to be a Utility Token and it will be used to: (a) Pay for the individual´s information, (b) pay for services in the network (such as credit scoring) and (c) used as collateral when requesting loans.
Answering Due Dilligence Questions 2:
We are delighted by the increasing interest of potential contributors and crypto-enthusiasts for Swapy Network. We received another set of questions as a due dilligence process, which we answered below.
Q1: What is the actual problem that you are solving?
A: The problem of cost and access to Credit. In countries like Brazil, our home country, credit is extremely expensive. The average loan is 145% interest and 40% of the population do not have access to credit. We want to change that!
Q2: How do you intend on solving it?
A: By solving the 3 biggest problems in the credit industry: (1) the concentration of power in big conglomerates, (2) The lack of good information on the clients and (3) the cost of funding for credit companies to lend. See below how they correlate:
Q3:What is the vision statement of the company? How did your team came to a mutually agreed upon vision statement?
A: Our vision “to use the blockchain technology to make credit cheaper and universally Accessible”. Was formally writen in early 2017, but it has been our guiding start since we incorporated in November 2014, after the angel investment from Tim Draper.
Q4:What kind of resources do you have?
A: Team: We have a team of 8 rockstars, including 4 developers, one UX/UI, 2 economists and one Google and Draper University alumnus.
Network: We count with the combined networks of Tim Draper, Don Tapscott, all our investors and advisors and we are the first token project to be accelerated by one of the biggest accelerators in the world.
Financial Resources: We raised a total of USD$940k in equity investment since inception. Including from the investors below:
Q5: What kind of resources do you need? What is your current goal?
A: We need around $20M to develop the protocol and the D´Apps over 5 years time. We have a total fundraising goal of $30Mi. Any amount over $20Mi will be invested in the development of our community such as supporting the development of new D’Apps, and improvements in our protocol.
Q6: When is success achieved? How do you plan on achieving that?
A: Success if achieved when we grow the network, add value to lenders, borrowers, partners and token holders. Our exact plan can be seen in our roadmap.
Q7: How is your roadmap looking?
A: The roadmap can be seen in our site and in our Whitepaper.
Q8: What are the first, second and third big milestone that you have to tackle?
A: (1) Finish the Token Offer, (2) Launch the Swapy Network and the three D´Apps on the Main Net of Ethereum, (3) populate the network with many borrowers, credit investors, credit companies and service providers.
Q9: What is the current chosen path towards a solution?
A: Please see our whitepaper for our detailed plans.
Q10: What kind of feedback from users did you get so far?
A: We collect users feedback continuously to improve the protocol and the D´Apps. But check out this testemonial from a member of our community:
Q11: What kind of traction in the market do you have?
A: Please see below our latest achievements and short term goals:
Q12: How do you plan on scaling up?
A: Swapy Network has the ambition of going global and providing Universal Access to Credit. Our strategy to do so is based on helping other teams in different countries to use the Swapy Protocol to onboard Credit companies based in those countries. That way, we have a decentralized and scaleable approach to international expansion. We will start it in Brazil (our home country), and probably the first few countries to expand will be from Latin America because our economies are quite similar.
Learn more about Swapy Network:
Website
Telegram (Announcements only)
Telegram (Open chat)
