Bringing Lendroid to a close
After 5 years of operations, Lendroid Foundation will be ceasing all operations with immediate effect. The foundation had experimented with new possibilities on the blockchain, and has tried to weather the innumerable storms and crashes that the crypto industry was subject to. At the inception of Lendroid itself, the foundation was meant to be a non-profit, non-rent seeking entity, to deliver decentralised financial tools, and not to become a centralised business. This had made it inevitable that the foundation would have to come to a close at some point — and we are now at that point.
In the past 5 years of Lendroid’s operations, we’ve been able to participate in the evolution of the crypto industry and witness its growth. We’re fortunate to have been a participant and not just observers, helping us to gain those insights that you only get when you get your hands dirty.
Before we sign off for good, we would like to take you on a trip through our early days to where we are right now. This journey has had a lot of ups and downs, as we explore the challenges and successes that made this a meaningful exercise. Let’s get into it.
Early Days
When we started out in 2017, Bitcoin was reigning supreme, and Ethereum was seen as an afterthought. Nowadays, Ethereum and coding are inextricably linked, but back then it was unheard of. This was the climate in which we believed in the power of crypto to remove the middleman to enable trustless transactions.
Optimising the insurance model
The basis of all this was financial engineering through smart contracts and risk management. The world around us is fraught with risk, and we can set forth and do business confidently only because we’ve devised ways of managing this risk — that’s what the massive insurance industry does. They take responsibility for any risk you might face, provide a safety net and charge you a premium for it. But there are problems in this model. The insurance issuer is still the middleman, and there is not enough transparency into how risk pricing is calculated. To some extent, this is regulated through competition, but the fact that they are profit-driven is still some source of distrust.
At that point, we saw Ethereum Smart Contracts as a beacon of transparency. A piece of code that can guarantee transparency and fair pricing. We were enamoured with this concept because we believed that code is incapable of duplicity and that it can be trusted to do what it says.
The necessity to start Lendroid
Even before the concept of DeFi was recognised, we started Lendroid. As financial primitives, we want to make risk pricing transparent, and the simplest place to get started with it was lending. by getting the protocol to assume the risk of loan defaults. Way before the NFT era, the concept of lending with digital asset collateral was unheard of. We pioneered lending against ENS, by answering the crucial questions of who the lenders should be, the risk involved, and whose responsibility it is if the borrower defaults.
Rethinking lending and borrowing
The existing systems leave the borrower at the mercy of the lender. The borrower has to worry if their pledged collateral is safe, if they are paying a fair price, and if they get a fair deal on repossession if they have to default. Thus, the system was ripe for an overhaul. It is at this juncture that we’ve ideated on Reloanr, a peer-to-peer lending platform. By pioneering the concept of taking loans based on pledged crypto assets, and taking a loan from a consortium of lenders. Since there is no single lender, the interest rate would be fixed, and would be the same for the entire ecosystem. The safety of the collateral is guaranteed through the autonomous protocol, which ensures that the collateral can be liquidated to compensate the lenders in case of a default, and also ensures that the borrower’s asset is only liquidated with the amount commensurate to his liability.
The development of this protocol coincided with the bear market, which got us thinking about possible Black Swan events. The existing financial systems are not built for these occurrences. In case of a massive default, the ones running the systems have a backup, but it’s the common man who’d have to bear the brunt — the risk he has paid to mitigate will fall back on himself.
Experiments with anti-fragility
As an antidote to this, Deluze was the attempt to build an anti-fragile system. Our anti-fragility mechanism was lending based on shorter-timeframe loans, where we can understand and plan for risk better. We split the loan into two tokens, one for the asset’s intrinsic value and one for its time value. The borrower with the time token can access the core token for that timeframe. The separate pricing mechanism for the time token. Globally, at the time of release, governments were taking a conservative stance by imposing blanket regulations on the crypto industry as a whole, and this project fell under the ambit, with something as trivial as the UI holding us back.
Pathway to NFTs
Restless to take the next step, we started ideating on design and solutions to build something of value that did not violate government regulations, which is when NFTs came into the picture. All the experiments that we sought to run earlier, the learnings we had — we wanted to apply all that to an area which was still nascent, and something that was not subject to crippling regulations. We could continue on our quest to make risk transparent, price it accordingly, and get a much more holistic understanding of risk. Virtual land was the perfect sandbox for this. We explored the possibilities of “renting” pieces of virtual land for specified timeframes. We were able to apply the concepts that we were tweaking before, such as repurposing the time token as an access token to the virtual lands using Rightshare.
The pitfalls of complete compliance
There were blanket regulations put in place as a reaction to what was going wrong in the industry as a whole, and we understood where they were coming from.
Rightshare, Whalestreet and DeFi were all systems to understand risk better, and we’ve gained a lot of context into the intricacies of how financial engineering systems work. But navigating the complexities brought on by regulations affect the design at a fundamental level.
It was a major challenge to stay on track to reach our goal while spending so much time and energy to ensure complete compliance. We have had to contend with perceptions that we might be a malicious actor, in spite of putting in every effort to ensure that we can bring in some transparency and order in a chaotic world.
The Final Word
We have now spent more time adapting our protocol than improving it, and the volatility has been a challenge to manage. Constantly dealing with a changing environment could lead us to stumble and make mistakes and further complicate an already precarious situation.
Our intent was to see this through to the very end. The question we started with was “how can risk be managed”. That question has now changed to “where is value being created”. While this is an understandable progression, it is a massive deviation from our original goal.
This baggage of 5 years has made this untenable and not sustainable, and the effort required to keep it going has far outstripped the diminishing benefits. We are proud of remaining a non-profit foundation in an extremely volatile environment, while basing all of our decisions on being fully compliant with the law and regulations.
In this situation, our perseverance would work against us and the community itself, which leads us to the logical but unfortunate conclusion of bringing this journey to a close.
We are thankful for the support the community has showered on us thus far, and we hope we get the same at the final juncture of our journey. Throughout the foundation’s existence, we’ve been fully compliant with stringent Singapore law, with diligent accounting and external audits, and we thank our consultants for their support. We’ve managed to weather an extremely volatile and challenging environment while remaining ethically and financially prudent.
The Lendroid Support Tokens will continue to exist on Ethereum. You can follow the instructions here to directly interact with the vesting smart contracts to withdraw your tokens. After claiming, you can access the token smart contract using this ABI.
The culmination of 5 years of research and results of the work we’ve done is now publicly available. We hope the community is able to use the open-source code and modules as a starting point to explore new possibilities. For any technical queries you can reach out to us at technical@lendroid.com.
