LendLedger

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LendLedger is an open, decentralized network connecting Lenders with Data Providers and Borrowers. It expands access to credit and makes lending more efficient.

LendLedger is working with partners and prospective users to source data and connect lenders in India, Indonesia, Kenya, Myanmar, Nigeria, the Philippines, Singapore, the US, and Vietnam. Contact LendLedger to learn more or to kickstart a partnership in a different market.

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Components

Atomic transactions

To ensure transparency and reduce dependence on third party confirmation of activities performed, multiple Stellar - Stellar - Stellar is the blockchain on which the LendLedger network is built. operations are bundled into a single transaction to ensure that the transaction either succeeds or fails without any other intermediate state. The loan contracting process follows a finite state model to ensure that information reconciliation is not an issue when transactions do not go through as expected.

For example, if a loan transaction involving multiple parties fails because of a servicing entity's unauthorised trustline, it would fail for all the contracted parties and no balance would be deducted from the transaction Source account. A fresh transaction would now have to be submitted to go ahead. This WYSIWYG approach ensures the integrity of the process with no partially completed transactions.

Contract signing

All the contracted entities are signatories to the loan account and the loan disbursal is successful only if it meets the required minimum number of signatures. Since loan contracts disbursal concerning multiple entities is shared directly on the account's data entry, it is immediately available for validation. Users may, however, have complex account management strategies in-house and may even authorise third party participants to sign and submit transactions on their behalf.

Credit decision

The Lender's evaluation of the Borrower results in the loan getting released. The decision can be recorded as an entry to the loan account.

Data terms

Fiat payment

LendLedger's users would always prefer to use local currency (fiat, not crypto) to make payments and loan transactions. Credit Nodes - Credit Nodes - Entities that specialize in creating LedgerCredits, by staking LOANtokens. enable this by acting as currency anchors on the platform. They will have access to banking channels to accept payment in fiat and release LedgerCredits - LedgerCredits - LedgerCredit is the protocol’s internal accounting unit. It is denominated in terms of government-issued (fiat) currency and acts as an IOU on the part of the issuer. to users through Stellar callbacks. The on-ramp and off-ramp from fiat to crypto and vice versa takes place in the currencies supported by the Credit Nodes - Credit Nodes - Entities that specialize in creating LedgerCredits, by staking LOANtokens. .

In a fiat-Stellar asset on-ramp scenario, a Lender - Lender - Lenders originate loans using credit data made available by Data Providers. Lenders sign loan contracts with Borrowers and disburse loans to them. looking to disburse a loan would pay a Credit Node in fiat (through bank transfer, ACH etc). The Credit Node would, in turn, release LedgerCredits - LedgerCredits - LedgerCredit is the protocol’s internal accounting unit. It is denominated in terms of government-issued (fiat) currency and acts as an IOU on the part of the issuer. to the Lender - Lender - Lenders originate loans using credit data made available by Data Providers. Lenders sign loan contracts with Borrowers and disburse loans to them. 's account. By subscribing to the event-stream of transactions for their account, the Lender can, in real-time, see their Stellar account balance getting updated with a proportional amount of LedgerCredits - LedgerCredits - LedgerCredit is the protocol’s internal accounting unit. It is denominated in terms of government-issued (fiat) currency and acts as an IOU on the part of the issuer. . They are then able to send those LedgerCredits - LedgerCredits - LedgerCredit is the protocol’s internal accounting unit. It is denominated in terms of government-issued (fiat) currency and acts as an IOU on the part of the issuer. to the Borrower - Borrower - Borrowers acquire their personal or business credit data from Data Providers. Identify loan offers from Lenders and apply for and receive loans. to disburse the loan.

KYC authorization

The Borrower needs to approve the loan servicing agency to use their existing KYC data for loan contracting. While this can be handled off-chain, this information may also be captured as a data entry in the loan account itself.

KYC provision

In some flows, a Data Provider shares the Borrower's identifying information with the Lender. This can be handled off-chain and recorded on-chain as a standard data entry indicating that the activity has happened.

KYC validation

A Lender may use a third-party Identity Verifier - Identity Verifier - Identity Verifiers contract with Lenders to provide verification of Borrowers’ KYC data. to validate the KYC information shared by the Borrower or on behalf of the Borrower by a Data Provider.

In some cases, a Lender may even use the federation services offered by Credit Nodes - Credit Nodes - Entities that specialize in creating LedgerCredits, by staking LOANtokens. to validate Borrower credentials. Establishing on-chain that the validation step has taken place requires another data entry to be created to the loan account.

LedgerCredit payment

All contracted users are paid in the fiat-pegged tokens called LedgerCredits - LedgerCredits - LedgerCredit is the protocol’s internal accounting unit. It is denominated in terms of government-issued (fiat) currency and acts as an IOU on the part of the issuer. or LCs. For details, see Atomic Transactions.

Loan contract

The loan contract is a series of linked transactions emanating from the loan account. The account is a multi-sig Stellar account managed by all contracted entities as well as by the Credit Nodes - Credit Nodes - Entities that specialize in creating LedgerCredits, by staking LOANtokens. . The lender pays a Credit Node - Credit Node - Credit Nodes are actors on the network who stake LOANtokens to issue the fiat-pegged LedgerCredit. They also redeem LedgerCredit for fiat currency. to release LedgerCredits - LedgerCredits - LedgerCredit is the protocol’s internal accounting unit. It is denominated in terms of government-issued (fiat) currency and acts as an IOU on the part of the issuer. to record loans and make servicing payments. All these as well as the repayment information is captured and is audited through the loan escrow. At the end of the loan term, all the signatories are released and the loan account remains as a historical artifact of validated transaction history.

Loan request

Just like loan/data terms, loan requests can be broadcast by adding a data entry to the Borrower's Stellar account. The Borrower would create a transaction and add a new data entry summarizing the requirement. Loan request data entry follows a standard format and Lenders and others on the network would be able to scan the ledger for requests fitting their criteria and respond.

Loan terms

Loan terms can be captured as a loan account data entry. Since all contracted parties have access to the loan account, they would all be able to parse the conditions.

Multi-sig accounts

Loans are disbursed through escrowed loan accounts set up specifically for this purpose. These accounts can be set up by either the Lender or the Borrower and all loan servicing activity happens here. To ensure that Service Providers are confident of getting paid, the escrow account is sufficiently funded and pre-authorised payout transactions are created that release the loan amount (net of fees) and any fees to Service Providers in a single transaction.

Registration

Stellar requires you to create an Anchor organisation to maintain customer accounts. There are two ways to do this. Either you create Stellar accounts on behalf of customers or use the memo field of the transaction to operate on behalf of your customers/users.

The official documentation covers the second method but there is no documentation about the first one. Anchors may even be interested in offering BIP39 compliant HD wallet services to their customers (covered later).

In the LendLedger network, Registration is a combination of creating Stellar accounts, funding these accounts, and then getting whitelisted by a network Anchor. The process requires users (Lenders, Borrowers etc) to fill out a registration form with a Credit Node, and to then create a new Stellar account if they don’t have one. Federation servers give Anchors control over their user ecosystem and allow end-users to trade using easily remembered federation addresses instead of complicated Stellar public keys.

Unlike other Stellar Anchors, Credit Nodes - Credit Nodes - Entities that specialize in creating LedgerCredits, by staking LOANtokens. do not issue their own assets. Instead, they facilitate trade by releasing LedgerCredits - LedgerCredits - LedgerCredit is the protocol’s internal accounting unit. It is denominated in terms of government-issued (fiat) currency and acts as an IOU on the part of the issuer. from the LendLedger base account after staking LOANtokens - LOANtokens - LOANtokens are LendLedger’s digital asset. When staked by a Credit Node, they release LedgerCredit. .

During registration, Anchors (e.g. Credit Nodes - Credit Nodes - Entities that specialize in creating LedgerCredits, by staking LOANtokens. ) establish authorised trustlines with registered users to ensure that only users meeting KYC requirements have access to the ecosystem.

Every Lender, Borrower or other user submits the required documents to the Credit Node - Credit Node - Credit Nodes are actors on the network who stake LOANtokens to issue the fiat-pegged LedgerCredit. They also redeem LedgerCredit for fiat currency. , and after its KYC verification, its system logs an entry to its local database.

The user’s Stellar public key is subsequently required to establish a trustline between the user and LendLedger digital assets i.e. LOANtokens - LOANtokens - LOANtokens are LendLedger’s digital asset. When staked by a Credit Node, they release LedgerCredit. and LedgerCredits - LedgerCredits - LedgerCredit is the protocol’s internal accounting unit. It is denominated in terms of government-issued (fiat) currency and acts as an IOU on the part of the issuer. . At the Credit Node - Credit Node - Credit Nodes are actors on the network who stake LOANtokens to issue the fiat-pegged LedgerCredit. They also redeem LedgerCredit for fiat currency. back-end, the federation servers with access to Stellar Core submit a query to the Stellar Core database for unauthorised trustlines for these LendLedger assets. The results may be cached separately for performance.

The user's public key white-listing is done locally, after which the trustline is authorised. For easier user management, trustline authorisation status may be captured by the federation server while assigning federation addresses.

The actual process may vary according to specific business needs. For example, if ecosystem partners cannot securely manage their own Stellar keys, they could rely on Anchors to do so who would, in turn become signatories to user accounts.

XDR broadcast

When a user creates a transaction, it must broadcast the transaction to other participants to agree (to the terms, for example), and to sign and submit the transaction to the Stellar ledger. To do this, the initiating user creates the escrow account, funds it with a sufficient balance, creates an atomic operation set, signs the resulting XDR output, and appends it to the data entry of the escrow account with a unique Loan ID. Since other participants are signatories to the escrow account, they would now be able to read the data entry and sign the XDR if it satisfied all requirements.