ICO Spotlight: Income Locker Looks To Collateralize Cryptocurrencybr>
INCOME LOCKER (INLOCK) is a platform where licensed lenders can compete for borrowers who want to use their cryptocurrency as collateral for loans>
The company is now in its whitelist registration for an upcoming token sale on September 15. INLOCK’s founders seek to design a secure and transparent marketplace to serve as a gateway for institutional investors to the booming cryptocurrency market. The potential risk for crypto backed loans from the lender’s perspective is almost identical to that of a bank deposit, but with higher profit potential. The lending model eliminates the need for additional credit assessment because the borrower provides the collateral in the form of crypto assets. This system offers rapid and flexible convertibility and uses smart contracts to ensure a level playing field between borrowers and lenders.
Borrowers can choose the most competitive offers from lenders without having to sell their cryptocurrency to finance a temporary liquidity problem. Excluding interest payments, INLOCK platform users will pay every cost in ILK tokens – platform usage costs are not deducted from their collateral, thus they are able to preserve the full value of their crypto upon repaying the loan.
The ILK Token (ERC20) will govern the relationship between lenders and crypto holders, with 4.4 Billion tokens available for purchase at a rate of $1 for 100 ILK.
Csaba Csabai, CEO and co-founder of INLOCK, talked with Block Tribune about the product.
BLOCK TRIBUNE: Walk me through how this works. I need a quick $2,000. What do I do?
CSABA CSABAI: once you register on the INLOCK platform, you can set the initial parameters (i.e. what type of crypto you wish to use as collateral: BTC/BCH/ETH/LTC; and the required FIAT currency). In your case that will be the US dollar. All loans have to be 105%+ collateralized at all times, which means at minimum you will need to place at least $2,120 worth of crypto to initiate a loan.
The platform indicates the forecast of ILK cost for the loan, calculated based on the value of the collateral at the rate of 0.25%.
For instance: At current rates for a $2,000 loan using BTC as collateral, with a safe 50% overcollaterization rate (the borrower chooses between 6% and 200%), you are required to place 0.391 BTC (or appoximately $3,000 USD). The platform usage fee would be 750 ILK tokens ($7,5). At this point the borrower is provided with lenders’ offers, where they can select what’s best for them according to their preferences (lowest APR%, fastest delivery time, currency type, etc.).
BLOCK TRIBUNE: Do I have to convert your tokens to fiat? What are the fees for that?
CSABA CSABAI: No. ILK tokens can be purchased on the platform, or on exchanges in the future.
BLOCK TRIBUNE: How do you make money?
CSABA CSABAI: All platform usage fees are paid with ILK tokens proportional to the value of the collateral. This is the only source of income on the platform. The fiat loans are coming from traditional financial institutions; where it can appreciate through interest. This is independent from the platform.
BLOCK TRIBUNE: Is there a loan limit for first-time transactions?
CSABA CSABAI: There is no reason to limit anything, even for first-timers, since they their own assets – overcollateralized.
BLOCK TRIBUNE: How are price fluctuations handled?
CSABA CSABAI: The borrower assumes the risk of a negative price change, which is why it is important to select a safe zone on the overcollaterization rate. Although you can start a loan with 6% overcollaterization, that will probably be terminated shortly. We’ve run extensive simulations based on historical data to determine such a safe zone, and we are committed to developing a prediction system capable of guiding borrowers on the loan duration, and what’s considered “safe”. When there are positive price changes, the loan contract gets more collateralized. In the first example, if that loan contract is running and BTC price doubles, the worth of collateral changes to $6,000 USD, which means the overcollaterization rate also changes. In that case the borrower is able to withdraw from his collateral to the point the contract was formed.
BLOCK TRIBUNE: How are repayments handled?
CSABA CSABAI: While the contract is between the borrower and the lender, INLOCK has the technical ability to use PSD2 to prove repayment. In that case, the borrower’s collateral is unlocked and transferred back automatically.
BLOCK TRIBUNE: How do you envision most customers using this service – will it be small timers, or businesses, or…?
CSABA CSABAI: We have use cases for all types of cryptocurrency holders. For example: If you have crypto assets and failed to sell them during the last rally (December, 2017), HODLing and watching the price slowly go down from $20K to sub $6K, you might think this is the perfect time to invest. We have reached the bottom. In this scenario, which is quite common, the average crypto holder may not have any more FIAT to buy Bitcoin. However, what they can do is use their existing crypto to take out a FIAT loan. This way they can preserve the crypto they already have, and still buy into the next bull run!