This interview is part of our new Blockchain In Lending series, where we interview the world's leading thought leaders on the front lines of the intersections between blockchain and lending.
In this interview we speak with Martin Ploom, CEO and Founder of SmartCredit.io, to understand how his company is using blockchain to transform the lending business, and what the future of the industry holds.
1. What's the story behind SmartCredit.io? Why and how did you begin?
MP: I and my twin brother have been studying P2P systems since Skype. “Thanks” to the Lehman crisis in 2008 we started to research monetary systems, which are by design very much P2P systems as well. We focused especially on the history of the monetary and credit systems.
This allowed us to become early bitcoin enthusiasts. We were initial members of Bitcoin meetup in Zurich, we had many discussions with the Bitcoin core developers; they were talking and we were learning. In parallel, we both worked for Credit Suisse in Zurich for more than 10 years and we knew commercial banking inside out.
We realized that all crypto sector is missing something very essential, which has been there in any monetary system in the last 5'000 years – it’s the credit money, which is created and destroyed in the lending process. Base money (central banking money) is today 3-7% of the total money and credit money (commercial banking money) is 93-97% of the total money.
Crypto sector has only the base money (in the form of Bitcoin, Ether, Litecoin, etc), but no civilization has survived with the base money only. If credit money is missing, then this leads to high wealth concentration, which leads to instability, then to destruction, then to chaos and then hopefully to the re-birth of the civilization.
Our vision is to introduce credit-money in the crypto sector and to enable long-term stability of the crypto-economy. Our vision is to allow crypto to become a full monetary system.
We began writing the whitepaper in fall 2017, then we moved on with prototypes and pilots. The pilot version is publicly accessible and we shall launch our platform in some months.
2. Please describe your use case and how SmartCredit.io uses blockchain:
MP: We are a P2P credit marketplace, but we add a unique feature – we tokenize P2P credit and make it transferable in form of credit-coins. The value of credit-coins is protected with underlying collateral and with the loss provisions. Lenders can pay third parties with their freshly minted credit-coins. Third parties will receive interest and principal of the credit-coins at the end of the loan period.
Commercial banks are creating and destroying credit money in the lending process. The newly created money is transferable and its value protected. That’s how our fiat money works.
We do exactly the same on the blockchain – every lender will have capabilities of a commercial bank, every lender is creating new credit money in the lending process. The newly created credit money will be value protected and transferable.
Most of the monetary history – the first for 4’700 years – the credit money has been P2P money, created in decentral lending transactions. Since 350 years we do have more or less centralized credit money systems. We say – the pendulum is moving back now, we are moving back from centralized credit systems to decentral credit systems, back to the P2P credit money.
There is nothing more natural than to use P2P blockchain for the P2P credit money. That’s what we are doing and that’s why we need blockchain. This system could not be implemented without the blockchain.
3. Could you share a specific customer/user that benefits from what you offer? What has your service done for them?
MP: We are the only ones offering tokenization of the P2P crypto loans. Crypto loans are value protected too. This results in no lending risk for the lender. Every lender is receiving in the lending process the “credit coins”, which represent the underlying loans, and he can use them to pay third parties, who can pay the next parties and so on. The holders of the “credit coins” will receive the principal and interest at the end of the loan period.
So, the lender will lend out his money, but he will still be liquid with the “credit coins”. And every holder will receive interest. We are credit marketplace, but with tokenization and value protection.
Every lender will receive de-facto capabilities of a commercial bank – capabilities to lend money and to create money in the lending process. We will disintermediate commercial banking and money creation with this solution. And we give to every holder the capabilities of the commercial banks too – holders would receive the interest instead of the commercial banks.
So far we are the only ones offering tokenization and transferability of the P2P crypto loans. We hope this idea will become more popular and we get many “copy-cats” doing the same. We need “copy-cats” – this allows to develop crypto-sector into a real economy with real credit capability.
4. What other blockchain lending use cases are you excited about?
MP: We implemented first the P2P lending use case with tokenization and value protection. Then we realized by accident, that we can use our system for the “self-lending”, i.e. for the lending without the counterparty. This was an unplanned feature, but it’s a very nice side-effect of our platform.
The user will just submit the collateral and he will receive the “credit-coins”. User can use the “credit-coins” to pay the next parties, which can pay the next parties and so on. Everything would work exactly as in the P2P lending mode – “credit-coins” are transferable and the holders of these coins will receive the principal and interest on the end.
However, there is no counterparty, there is no lender – there is only the borrower on one side and the blockchain on the other side. It is really “self-lending” – the counterparty is not required; only the borrower is required.
All the process would work just-in-time – there is no delay in receiving the funds. The borrower would receive the “credit-coins” immediately after submission of his collateral and he could use his “credit-coins” immediately to pay next parties. Just imagine going to the commercial bank and receiving a loan plus funds on your accounts immediately. Well, one wouldn’t even dream about this, because this is just not possible. But it’s possible with blockchain now.
P2P lending and tokenization of the loans allow to disintermediate commercial banking. However, “Self-lending” is going even one step further – it will not only disintermediate the commercial banking but as well the counterparty. Every borrower will be able to create new standardized “credit-coins” against his collateral. Every borrower will be able to create new money. Welcome to the age of self-sovereignty.
5. Where will SmartCredit.io be in five years?
MP: Credit Suisse has 2 million clients worldwide, but it took 160 years to build up this client base. 1.3 million clients of them are in Switzerland. We want to reach 1.3 million clients in 5 years:
How do we do this?
- We are at the beginning of the crypto-S-curve, which follows the same S-curve as Facebook or the Internet did it.
- The largest segment of crypto users are millennials. Subset of them are in the crypto-finance and their number is continuously growing. Crypto-finance-millennials are the second S-Curve within the first S-Curve.
- If we succeed to grow with the market, then we will reach 1.3 million users in 5 years.
It’s not about growing faster than the market. It’s about growing with the market.