LENDROID —The Big Lender

Introduction
Lendroid is a trustless, open, peer to peer digital asset lending platform based on the Ethereum blockchain. The Lendroid marketplace enables borrowers to avail instant low-cost digital asset loans and lenders to earn interest on the digital assets they lend. Additionally, Lendroid support token (LST) holders act as guarantors of these loans by locking up their LSTs as secondary collateral. The Lendroid platform is extensible by design and allows the creation of loan markets on any ERC20 token.

What is Lendroid?
Lendroid is a 0x-inspired, non-rent seeking, trust-independent, open protocol enabling decentralized lending, margin trading and short selling on the Ethereum blockchain. It aims to solve the shortcomings of centralized exchanges by creating a global shared lending pool, and a symbiotic off-chain infrastructure supported by incentivized participants — Relayers and Wranglers. Simply put, Lenders contribute their offers to the lending pool through relayers, who then match the offers with appropriate traders. The traders can use the borrowed funds to margin trade, make a profit, and repay the lenders.

What is Margin Trading?
If a trader wishes to monetize his confidence in the price of an asset increasing/decreasing, he would take a position by purchasing/selling the asset. If he is extremely certain, he would build a leveraged position by borrowing additional funds from a lender to magnify his profits.

How Does Lendroid Enable Lending and Margin Trading?
Lending — A borrower pledges digital assets into an escrow account, with specific terms for the loan set in a smart contract. If the lender’s and borrower’s terms match, the smart contract is executed, locking in the collateral and releasing the funds to the borrower funds. If the loan obligations are satisfied by the borrower, his collateral is unlocked automatically. If the borrower defaults or the collateral drops below the agreed loan to value, the collateral is liquidated.

Margin trading — A margin trader starts by depositing collateral. The trader is allowed to borrow up to a certain leverage to the point where the margin level is greater that the initial level (set through community governance). The borrowed funds come from the shared lending pool to which the lenders can submit offers. With the borrowed funds, the trader interacts with order-books to calibrate positions to reflect expectations from future price movements. Once the traders feel it’s time to unwind their position, the trader once again interacts with the order book.

If the trader made a profit, he can repay the lenders and withdraw the profit along with his collateral.
If a loss is incurred, the trader is expected to deposit the difference to compensate for the losses, repay the loans in full and only then withdraw collateral.
If the account reaches liquidation levels, the wranglers step in and take over the account/positions

How Lendroid works?
A loan contract itself is pretty straight forward. But then, who fixes the terms of the loan? How do borrowers find and convince lenders? How do we make sure the borrower has the incentive to repay? What happens if the borrower fails to repay? etc

The Lendroid marketplace allows the creation of several loan markets.

Architecture of the Lendroid platform

Lendroid support tokens(LST) are the native tokens of the Lendroid protocol. Market creators (Lendroid support token holders) propose new markets using a unique set of loan terms (combination of collateral type and ratio).

Market creation and funding

Lenders and guarantors discover, gather and pre-fund markets which offer loan terms they prefer (terms that they believe will keep the loan solvent, protect their investment and enable them to make money). Guarantors are LST holders who choose to extend support to markets that issue loans that they believe will remain solvent and payout properly, in which case they receive a portion of the interest. If the loan becomes insolvent, they stand to lose their deposit. It is a requirement for every loan to hold LSTs whose value is at least 20% of the borrowed value. The LST deposit acts as secondary collateral for the loan.

Loan issuance process

Borrowers show up, choose a market depending on the type of collateral they wish to lock, create a loan contract, deposit collateral as defined by the terms of the loan and receive the loan funds.

Loan repayment process

At the end of the loan period, the borrower has the option to extend the loan by adjusting the collateral locked or repay the loan along with the accrued interest, or stands to lose their collateral.

Loan liquidation process

If the borrower fails to repay the loan, the primary collateral held in the loan in auctioned off. If the funds raised in the auction is insufficient to clear all obligations as much secondary collateral (Lendroid support tokens) is auctioned off to raise additional funds. If even after auctioning off all secondary collateral locked in the loan there are not enough funds to repay all the lenders, the losses get spread proportionately across all lenders, and the lenders are paid out.

The lenders receive two layers of protection for the funds they lend. One from the value of the primary collateral and another from the value of the secondary collateral. This process increases the confidence of lenders and reduces the lender’s market discovery burden.

Roadmap