19
ICOrating TOKENLEND Rating Review (https://tokenlend.io) ICO dates (26.03.2018 – 10.05.2018) Web: icorating.com Email: [email protected] Twitter: @IcoRating
ICOrating
TOKENLEND Rating Review (https://tokenlend.io)
ICO dates (26.03.2018 – 10.05.2018)
Web: icorating.com
Email: [email protected]
Twitter: @IcoRating
1. Ratings 3
2. General Information about the Project and ICO 4
3. Description of the Services and Scope of the Project 7
4. Market Review 10
5. Team and Stakeholders 13
6. Token Analysis 16
7. Analysis of Factors Affecting the Future Value of the Token 17
8. Investment Risk Analysis 19
1. Rating
We assign the TokenLend project a "Stable" rating.
Penetration of cryptotechnologies into lending and the building of p2p business models
for various types of loan has increased in recent years. The TokenLend team is
planning to develop a lending marketplace platform, combining the primary and
secondary markets and providing security, transparency and low cost via the use of
Ethereum smart contracts and LPN virtual securities.
Given the obvious advantages of p2p, cryptocurrency and blockchain over traditional
loan issuance and securitization schemes, TokenLend’s solutions seem fresh and
attractive. If the team is able to create a system secure for investors, where risks in
investing will be similar to ones associated with traditional lending, the platform will
receive its share of market demand.
In addition to an original idea, TokenLend’s assets include the professionalism and
experience of its team. All the listed team members have a direct relation to the
DAEMON Tools project, which we consider to be a good example of the development of
a major IT business. Therefore, we see no reason to doubt the competence of the team
or their ability to implement proposed functionality.
The project's liability is its early stage of development. There is no MVP; platform
development is planned to commence after the ICO. However, it is too early to talk
about the creation of a loan portfolio or about any work in this direction, since the team
is focused on development.
Another feature of the project is the configuration of the ICO token, TLN. Despite the
possibility of using the token for payment transactions or as the currency for a loan,
platform participants have no direct motivation to pursue it. Taking into account currency
risks and the volatility of cryptoassets, which could deter users from using TLN as loan
currency, we cannot say that TLN is a traditional utility token. Instead, TLN involve
payments of platform profits, making it a security token similarly to a dividend share.
It is important to understand that on the one hand this model looks good in the long
term, as it aligns the motivation of the team and investors. At the same time, it increases
token risks due to heightened attention from regulators, entailing possible problems with
listing on exchanges. Also, in this regard the team gives approximate calculations for
TLN token profit in the first year of operation, however these seem currently superficial,
providing only a general idea of the prospects and any correlation between payments
and business growth.
2. General Information about the Project and ICO
TokenLend is a project aiming to create a platform for P2P lending, as well as a
secondary market for loans with the use of cryptocurrency and blockchain technologies.
The team is planning to create primary and secondary markets for lending in its own
ecosystem which will operate on the basis of fiat and cryptocurrencies, as well as a
Loan Participation Note validating the right to request a loan (LPN).
The scheme of the platform uses a model of lending via LPN as a financial instrument,
where the financing of the company through a mediator is undertaken by a wide range
of investors in exchange for issued shares. Such papers have a value in the future like
any asset, and can circulate in the secondary market. By adding cryptocurrency and
smart contracts to this scheme, one can draw an analogy between TokenLend and this
scheme.
A characteristic feature of the project is its focus on reliable secured loans (for legal
entities and individuals), as well as involving third parties in the process of granting a
loan to guarantee the legal purity of a transaction and be responsible for claiming debts.
Thus unlike many projects in the lending market, emphasis is placed on large capital
and compliance.
In terms of technical architecture and innovation, TokenLend is developing a centralized
platform that uses Ethereum smart contracts to create loans and issue LPN. The
secondary market is also centralized; its transparency is ensured by the Ethereum
blockchain due to the transactional transparency.
From a legal point of view, the project is represented by DT Soft Ltd., registered in
Belize. The business model focuses on Eastern Europe: first of all on Estonia and
Latvia, the two European jurisdictions most accepting of cryptocurrency; in the future,
platform activities are planned to be expanded to include other large countries.
The project is led by a strong team headed by Sergei Naiden; the team's portfolio
includes some known projects such as DAEMON Tools. A number of consultants from
different jurisdictions with specialized experience have also been engaged.
The TokenLend ICO is being staged in two phases: A presale, and the crowdsale itself.
Presale participants are offered a special discount, as well as exclusive rights to access
the beta platform testing. TLN tokens sold in the course of the ICO are security tokens;
the basic mechanism of internal value creation is the distribution of a portion of
TokenLend’s net profit among tokenholders.
Pre-sale
Start: 1 March 2018
End: 11 March 2018
Hard cap: $3,010,000
Minimum investment: 1 ETH
ICO
Start: 26 March 2018
End: 10 May 2018
Soft Cap: $4,300,000
Hard cap: $35,000,000
Price: 2500 TLN = 1 ETH
Minimum investment: 0.0004 ETH
Token: TLN, ERC-20 standard
Accepted currencies:
Total issue: 130,411,585 TLN
Allocation of funds:
75% — Tokensale
14% — Team
7% — Pre-sale
1% — Bounty
For sale: 93,750,000 TLN
TLN tokens received by contributors will be transferable 7 days after the end
of the Initial Coin Offering campaign
All unsold tokens will be burned
Core Budget is 800 ETH, the amount of funding needed to develop, launch
and promote the lending platform.
Partner tokens will be frozen for 12 months after the ICO
50% of the team's tokens will be locked for 24 months after the ICO, the
remaining 50% will be locked for 48 months.
The ICO involves bonus tiers depending on the purchase total as well as on the sale’s
progress. Depending on purchase total, the bonus tiers range from 20% (less than 5
ETH) to 25% (more than 80 ETH). Depending on sale progress, bonus tiers start at 10%
(tier 1) and decreases to 3% (tier 4).
3. Description of the Services and Scope of the Project
TokenLend is developing a p2p lending platform with three main components:
Loan Marketplace — the primary p2p lending market where borrowers are
businesses, and lenders (investors) are platform users.
Loan Participation Note (LPN) market — a secondary market for p2p lending
where users can trade ongoing investments for immediate liquidity.
Payment gateway — a service that enables users to deposit and withdraw funds
from the platform.
It would be prudent to carefully review all the mentioned services; however, the Loan
Marketplace is the basis of TokenLend.
Strictly speaking, the description of platform services in the documentation is not
particularly comprehensive, but the general picture is given: The marketplace will be
filled by intermediaries (third-party licensed firms which are loan originators) and
borrowers (investors). Lenders will participate in the process only through loan
originators (legal entities and individuals that provide secured loans). According to the
logic of the project, the emphasis is placed on real estate-secured loans — reliable
mortgage loans. This will allow it to create an ecosystem with a low probability of
borrower default in the first stages of platform development.
Loan originators are licensed intermediaries who have a legal relationship with both the
borrower and TokenLend. In the case of any problems with a loan, loan originators risk
all assets on the platform, and they are obliged to compensate for all delays and
defaults before further debt collection.
TokenLend illustrates an example of the loan lifecycle in its white paper; the example
uses TLN tokens, but the scheme is valid for any supported currency (fiat and
cryptocurrencies):
1. The loan originator adds a new loan to the system via the Dashboard, fills out all
necessary forms and submits the documentation. After the loan details are
validated and successfully verified by the system and by TokenLend, the loan
smart contract is created with all the relevant parameters.
2. Users (investors) acquire the LPN by transferring TLN tokens to the smart
contract address. Then the loan smart contract generates the LPN contract with
loan repayment terms and a schedule.
3. Tokens collected from investors are sent to the loan originator, and each LPN is
linked to the user's ETH wallet address for transfer of the interest and loan
principal.
4. In accordance with the loan smart contract schedule, the loan originator makes
interest payments and principal repayments; funds are transferred to the LPN
contract from the loan smart contract. The LPN contract sends the funds to the
investor's wallet.
5. After the last transaction on the loan, the loan is closed, the address of the wallet
is removed from the LPN, and the LPN contract is considered to be fully
executed.
If there is any delay, default or other extraordinary event, the mechanism and actions of
platform participants are not specified. Given references to the legally pure relationship
between the end borrower and loan originator, it should be considered that it is the
intermediary that will be responsible for debt recovery or bankruptcy of the borrower. At
the same time, it is difficult to predict how this mechanism will be executed in reality
since the legal scheme is ambiguous.
Even based on the description, the financial flows for lending services are still unclear to
us. Despite the fact that LPN can be issued and sold in different currencies, when using
TLN the end borrower or the end lender must convert funds, which entails currency risk.
It is not quite clear to us who will carry these risks because the conversion process is
not detailed; logically, the risk falls on the investor, but in this case, they have an
opportunity to use fiat for platform operations.
There is no process for creation of interest rates or of default loan realization on the
platform; this mechanism will be an intermediary's responsibility. However, if the interest
rate against the quality of the borrower does not satisfy the market, funds will not be
raised, which will not benefit the marketplace.
The secondary LPN market will operate similarly to an exchange, where users can
make requests for buying and selling as well as satisfy counter requests. Transactions
will be carried out by transferring LPN from one Ethereum address to another in
exchange for cryptocurrency or fiat. If the platform becomes popular and in demand with
private investors, this will significantly reduce lending risks as it will enable the project to
provide liquidity for LPN.
With regard to the business model, TokenLend does not provide approximate
calculations on interest rates within the platform, but instead gives the average rates in
Latvia and Estonia and justifies the expediency of such a model for all parties in the
ecosystem. According to information from the white paper, loans secured by real estate
are offered on the market at rates of 10–14%, and attraction of investment carries rates
of 5–8%. This raises questions, because the currency of loans is not specified,
however, considering that Latvia and Estonia are part of the Euro zone, the given rates
look unrealistic for this currency. No data source was provided for this information.
Regarding the structure of fees, three types of fee will be established within the
ecosystem: A loan listing fee for loan originators — 0.5%–1% from the loan principal; an
LPN sales fee for users - this fee is to be collected from users for every successful trade
of LPN on a secondary market — 1–5% of the market price; and a withdrawal fee (for
fiat currency only) at 1% of transaction volume.
4. Market Review
Peer-to-peer lending has evolved relatively recently; after the international financial
crisis of 2007-2008 it started to actively gain popularity. The erosion of the banking
system’s credibility led to a surge of ideas for the elimination of intermediaries in
financial services. The first ideas for fintech startups on blockchain also exploited this
topic for PR purposes. However, even without blockchain, infrastructure platforms for
p2p lending are developing at a high rate.
According to a study by Transparency Market Research, the global p2p market will
show a CAGR of 48.2% during the period of 2016–20241. The volume of the market by
2024 will amount to about $900 billion, compared to $26.16 billion in 2015. These
figures are certainly very impressive.
Other marketing studies also place the prospects of this market at a high level. The
Research and Markets agency predicts that the p2p lending market will grow at a rate of
53.06% in the period of 2016–20202.
The history of peer-to-peer lending services started long before blockchain’s invention.
Interestingly enough, this direction originated in the UK rather than in the US. The first
p2p lending service was Zopa, founded in 2005. Since then, this service has issued
2.85 billion GBP worth of loans.
Americans followed, and in 2006 two startups appeared in San Francisco — Prosper
and Lending Club. Surprisingly, both projects still exist; moreover, Lending Club is the
world's largest p2p lending marketplace, with a current volume of issued loans
exceeding $7.6 billion3.
The evolution of these services began after the global financial crisis of 2008, when
banks began to drastically reduce limits, and many borrowers were forced to look for
alternative sources. Currently, p2p marketplaces allow them to find acceptable loan
conditions without intermediaries, and lenders receive an opportunity for profits higher
than that from bank deposits. Notwithstanding the fact that such platforms do not enter
into obligations themselves, but only provide an infrastructure for transactions, the
business resembles brokerage more than banking. Clients borrow, clients "place
deposits", there are scoring rating models for borrowers, etc.
With developments in technology, many fintech start-ups ventured into the p2p lending
market. Currently there are a number of fairly well-known projects that have been
operating in this segment for quite some time.
1 https://globenewswire.com/news-release/2016/08/31/868470/0/en/Increasing-Small-Business-Units-to-Act-as-Building-Blocks-for-Peer-to-Peer-Lending-Market.html 2 https://www.researchandmarkets.com/research/mvbrkw/global 3 http://peer-to-peer-lending.credio.com/
Project Summary
ETHLend is a fully decentralized p2p lending
platform, where Ether is used as collateral.
The platform supports any ERC20 tokens. All
lending on the platform is facilitated by smart
contracts on the Ethereum blockchain.
A platform for lending and borrowing,
accepting cryptocurrencies as collateral.
Everything is simple: security deposit in
cryptocurrency; loans in fiat.
Lendoit — a decentralized p2p lending
platform. Ethereum smart contracts are used
to connect borrowers and lenders. Loans can
be provided in any ERC20 currency.
This list is not exhaustive; there are already many projects in the market. The three
projects presented above demonstrate the variety of services offered. Thus it is possible
to borrow in fiat with cryptocurrency as a collateral; it is possible to borrow in
cryptocurrency with cryptocurrency as collateral, and finally, it is possible to borrow in
cryptocurrency without any collateral at all (e.g. Lendoit). In a sense, the TokenLend
project has gone further and added the possibility of investing in loans secured by real
assets, using TLN tokens.
TokenLend did not choose Eastern Europe at random. Currently, this region is the most
active in p2p lending market development4. Cambridge University in conjunction with
KPMG published an interesting study on the alternative finance industry in Europe5.
This study presents a diagram of market distribution by segment:
4 https://tokenlend.io/tokenlend_whitepaper.pdf 5 https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2016/09/sustaining-momentum.pdf
It clearly shows that the leading place is occupied by Peer-to-Peer Consumer Lending
and Peer-to-Peer Business Lending, and these services for business grew with a rate of
131% over the last three years. Moreover, absolute value of the total share of p2p
lending was 578 million EUR (i.e. 57% of the entire European market).
5. Team and Stakeholders
The TokenLend project team is quite experienced in the software market; the founders
already have one well-known product, DAEMON Tools which is a virtual drive and
optical disc authoring program. Many years of experience in the management of large
IT projects (e.g. DAEMON Tools) indicates professionalism on the part of the team,
including its ability to properly organize business processes.
Specified experience of team members does not include work with any other blockchain
projects, but their existing experience should help them implement the technical aspect
to a high level.
We did not find any information to discredit the founders or other team members. Given
their already implemented projects, it is fair to say the team has a good reputation.
Sergei Naiden, Chief Executive Officer
Robert Morris University, USA:
Master of Science, Banking, Corporate, Finance
and Securities Law. Serial entrepreneur with 25+
years experience in managing large enterprises
and 10+ years experience in the ownership and
management of an international IT company.
Developer and vendor of the world famous
software product DAEMON Tools.
More details: Linkedin
Ivan Kovtun, Chief Operating Officer
Business analyst and product manager with 10
years experience in managing international
business operations and 5+ years of experience
in software product ownership and project
management.
More details: Linkedin
Vitaliy Russkih, Chief Technical Officer
Senior developer with 12 years experience in
developing complex systems and 10 years
experience in software team management.
More details: Linkedin
Alexandr Petrov, Blockchain Architect/Lead
Developer
Senior developer with more than 12 years
experience in designing and implementing
enterprise-grade solutions including kernel driver
development and embedded systems
development.
3+ years experience in designing blockchain
solutions for IoT and FinTech.
More details: Linkedin
Maria Viter, Chief Marketing Officer
Industry professional with more than 8 years
experience in software product marketing and 5+
years experience in business development of the
DAEMON Tools product line.
More details: Linkedin
Tanya Chuh, Chief Communications Officer
Senior specialist with more than 5 years
experience in public relations activities,
specialising in building PR and Community
management strategies for companies operating
in stock markets and international software
vendors.
More details: Linkedin
The project has specified four advisors. Judging by their descriptions, all four are
entrepreneurs and have been working successfully in different sectors of the economy
for many years. That being said, these advisors have not provided services for other
blockchain projects in the past. We hope that their expertise will prove valuable to the
TokenLend project.
Advisors
Leo Matveev
CEO and Founder of SearchInform,
Russia
Maksims Matulevics
CEO and Founder of Money Express
Credit, Latvia
Anton Kolomyeytsev
CEO and Co-Founder of StarWind Inc.,
USA
Nikolajs Timofejevs
CVO of MONEY EXPRESS, Estonia
6. Token Analysis
The TLN token has primarily a security function within the TokenLend business model;
however, it also carries some utility functions, as it is also possible to invest in TLN on
the platform.
The fundamental component in the price of TLN is the distribution of TokenLend’s net
profits. However, this mechanism is only valid for tokenholders i.e. investors in the ICO
are offered a kind of "dividend" in return for early participation in the project. According
to information from the documentation, the amount of reward from net profit will be
determined proportionally to number of tokens purchased at the ICO.
The model of the platform's net income breakdown, where ICO investors receive shares
also raises some questions. Firstly, a detailed mechanism, the amount of reward or the
expected financial results after launch of the platform are not disclosed. At the same
time, such a model implies recognition of a token as a security; here it is necessary to
have a clear legal position with regards to regulatory issues and to ensure maximum
possible liquidity, because trading platforms will try to avoid supporting the token.
Another problem for the dividend mechanisms is the lack of a legal basis; investor rights
are not protected by anything. And if in the case of the utility, the internal price is closely
related to business, and any infringement of rights will occur at the expense of the
business, in this case the team’s obligations are independent of the business and the
mechanism is built on trust.
Regardless of legal risks, we positively assess such a mechanism if the team is able to
make it work and comply with obligations. In this case, it is more beneficial to buy the
token during the ICO itself, and even in the case of a further price reduction, the team
will receive the funds needed for development and will be able to implement the
roadmap.
7. Analysis of Factors Affecting the Future Value of the
Token
The basis of all the factors affecting the TLN token is its security nature, based on the
model of platform revenue distribution. Despite the technical existence of utility
functions (payments can be made in tokens), they cannot be seriously considered as
increasing market demand, as there are no direct incentives to use the token. At the
same time, the ecosystem enables the token to "work" when it is held in a portfolio by
an investor, that is, to generate additional profits on an equal basis with TokenLend
interest shares.
When considering important factors in the price of of TLN, firstly, we note the early
stage of project development. This generates risks of development and bringing the
product to market; this especially concerns early ICO investors. TokenLend
compensates for such risks with its model of platform profit distribution, that is, investors
are motivated to participate at the time of the ICO rather than later when liquidity and
price may be lower than expected. This additional risk of investment correlates with
further future profitability; this is facilitated by bonuses and discounts.
Contrary to established practice, TokenLend does not offer users a UI or an MVP.
According to the published roadmap, the first development products will become
available in October 2018, and the development itself is scheduled to commence only
by April 2018. The team actually needs the ICO to start developing their own product.
The end of development and the release of the finished platform will be in a year’s time;
there are also a number of milestones for expanding and upgrading the ecosystem.
Given the roadmap, we see no fundamental short- and medium-term triggers for the
price of TLN after the ICO. The prerequisites for increasing fundamental demand for the
token on the open market may arise after the initial loan portfolio of the platform and the
first payments are implemented; reassessment of the risk after these events is likely to
be significant and so the price will grow.
The marketing campaign can be assessed positively, especially regarding the actual
dynamic of interest in the project; however, we recognize that the project is not the
strongest in terms of hype and recognition among the community. If this situation
remains, there would be no reason to expect speculative demand for the token. The
rather high hard cap also mitigates against speculative demand.
Long-term fundamental attractiveness of TLN is supported by the business model. The
higher the turnover of the business, the greater the return on investment will be given.
The white paper provides approximate figures on dependence on payments from the
loan portfolio: From each loan listed on the platform the platform will receive up to 2% in
fees, and up to 5% of operations in the secondary market. As a result, an income of
about 3 million euros is expected for the first year of the platform's operation; a
corresponding scaled calculation is given in the white paper. Depending on the period of
participation in the ICO, an investor will receive 77–89% of annual profit from the token.
Despite the presence of specific figures and forecasts, the current stage of the project
obviously only enables discussion of actual projected tokenholders' ROI with
assumptions. It is also unclear how the company will be accountable to them and on
whatn basis it will determine the share of paid dividends. Again, this will be at least a
year from now, after the launch of the p2p marketplace.
In terms of long-term fundamental analysis of the TLN business itself, the difficulty for
TokenLend is in the need to combine efforts to attract clients from two sides, lender and
borrower, in order to avoid skew either from the demand side or from the supply side.
Otherwise, the impact on the market demand for the token will be scaled according to
turnover on the platform (in the primary and secondary LPN markets).
8. Investment Risk Analysis
The TokenLend project is at an early stage of development, and the majority of
associated risks arise from this fact. The project primarily offers a p2p lending
marketplace, but implementation of the declared functionality will not happen soon, and
as of yet TokenLend has neither an MVP nor strong marketing support. As a result, the
community is still viewing the concept in its "pure" form.
A common issue for p2p lending platforms is the risk of default. It is obvious that any
financial institution has such risks, but in this case the important question is to what
extent the investor will be legally protected. At the moment, enforcement of law
concerning cryptocurrency loans is limited. However, TokenLend customers will have
an advantage over clients of other p2p platforms, as offered loans are analyzed by
experienced counterparty entities (loan originators) that will be responsible for
repayments in cases of default.
We cannot ignore competitive risks either. TokenLend is not the only project in the P2P
lending marketplaces field, and overall success for the project will depend on the
development of competitors who have a temporary advantage.
Questions about the economy of the project remain. On the one hand, implementation
of the project significantly depends on the amount of funds raised during the ICO: the
more funds it is able to raise, the faster the platform will reach "liquidity". On the other
hand, the early development stage inhibits the project’s investment attractiveness in the
medium term, which could prevent it from raising significant funding amounts.
Any participant in the TokenLend ICO also should to take into account the token’s
security nature and all associated risks, including possible problems with exchange
listing.
The information contained in the document is for informational purposes only. The views
expressed in this document are solely personal stance of the ICOrating Team, based on
data from open access and information that developers provided to the team through
Skype, email or other means of communication.
Our goal is to increase the transparency and reliability of the young ICO market and to
minimize the risk of fraud.
We appreciate feedback with constructive comments, suggestions and ideas on how to
make the analysis more comprehensive and informative.
