Lendroid: Decentralized Digital Asset Giving Platform
Lendroid's goal is to create a lending market where borrowers can raise funds at a reasonable rate of interest, and enable creditors to make a fair and sustainable return to the funds they are willing to provide.
There is a three-party loan contract that introduces the guarantor, the borrower and the creditor into the loan contract. Guarantor helps to increase the trust of the lender and reduce the burden of collateral on the borrower.
Each loan market defines the type of digital asset and the amount (as the ratio) required as the primary guarantee for the loan issued therein. Guarantor and lender may send offer to the market (signifying their intention to participate in the market) even before loan demand begins to flow. With funded markets, borrowers choose a market that suits them rather than having to negotiate loan terms. This process eliminates the need to agree and manage funds for each loan separately. The market also encourages competition among creditors. As a result, interest rates are lowered. The issued loan has a fixed term of validity. However, the market never ends.
How It Works Lendroid
Lendroid brings together creditors, digital asset borrowers, and guarantor who wants to secure this digital asset loan. A 'borrower' can guarantee a digital asset to borrow another digital asset from a creditor in no time. At the end of the loan period, the borrower has the option to extend the loan by adjusting the locked securities or paying off the loan with accrued interest or losing the collateral. Guarantor may choose to guarantee loans issued by one or more markets that they believe will remain dissolved by locking LSTs that act as a secondary guarantee for the loan.
Guarantor and lender are expected to understand the financial risks they face by participating in the lending market. The Lendroid platform does not guarantee profits for lenders or guarantor, and expects them to do due diligence before deciding to engage in any market.
Lendroid Platform Consists of Two Major Components
Contract market
Three-party loan contract
Anyone who holds LST can create a new lending market. The main task of the market creator is to assess the demand for the different types and levels of collateral borrowed by the borrower to make use of the loan. They must also design a market whose requirements reflect the needs.
Fund Flow Diagram
Borrower:
The borrower has several digital assets (say DGD) that they are ready for collateral and want to borrow some other digital assets (eg ETH). If the borrower fails to repay the loan on a previously agreed date, the borrower will lose the right to the collateral they have transferred. The borrower selects the market from the market list based on the type of collateral they hold and depends on the type of funds needed. The borrower deposits the main mortgage into the loan contract. If the borrower repays the loan with interest payable before the maturity date, they receive the principal collateral they enter in the loan contract. If the borrower fails to repay the loan before the loan expires, the main loan lent is auctioned. If there is any collateral left after fulfilling all the obligations of the lender and the surety, the borrower will withdraw the remaining collateral.
Guarantor:
Guarantor is a third party who has Lendroid support tokens (LSTs) who are ready to do part of the LSTs to support loans under one or more markets. LSTs are committed to serve as secondary collateral for loans. LSTs will only be liquidated if the borrower fails to repay the loan and the funds issued to liquidate a key mortgage locked by the borrower is insufficient to cover the lending obligations to all of its lenders. Some loan markets are created each with different collateral requirements on demand. Lendroid support token holders can survey this market and can choose one or more markets that they want to support. The funds are held in the market and only locked when and when the loan is issued in the market.
Once the Lendroid support token is locked as a secondary guarantee for the loan, the holders of the Lendroid support token become (one) the guarantor of the loan. LST holders can be guarantors for multiple loans in multiple markets simultaneously. But LSTs that are locked in a loan can not be used or transferred until the loan is paid or the loan term expires. When the borrower closes the loan, by paying back the funds with the interest owed, the guarantor receives their Lendroid backing tokens along with a partial interest payment in the form of a refund. The guarantor enjoys an advantage in this case. If the borrower fails to pay and closes the loan with expiration, the loan becomes a failed loan. In this case, the main collector locked by the borrower is auctioned first.
Lender:
The lender has digital assets that the borrower wants to borrow and is willing to lend at a predetermined interest rate. Similar to the guarantor the lender may choose to participate in one or more markets. If the borrower repays and closes the loan prior to the expiration date, the lender recovers the loaned funds and the subdivision of the interest payable. The lender has the first right to repay the loan. If the borrower fails to repay the loan, the main collateral will be liquidated, and the proceeds are paid to the lender. If the proceeds from the liquidation of main collateral are insufficient to cover the obligations, the secondary collateral (LST is locked by the guarantor) will be liquidated, and the lender is paid. After both auctions if there is sufficient funds to remove the obligation, the lender is repaid by lending the funds along with its share of the interest arising or the loss is proportionally distributed in all creditors.
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