The Force Protocol: Financial Technology Reshapes The Lending Market Of Global Assets
“Everyone should have access to the loans they need from anywhere in the world, without excessively depending on traditional lending institutions. With cryptoassets, everyone can truly have ownership and control over their property,” according to Allen An, the co-founder and CEO of The Force Protocol project.
What would you do if you are in urgent need of fiat currency, but only have cryptocurrency? It may not be smart to simply sell it. The cryptocurrency market is constantly changing. When you need money, your cryptocurrency might not be at the peak of its market price. However, you realize that the only option is to sell your cryptocurrency.
Because of this, a large global lending market for cryptocurrency was born. As of February 1, 2019, there are more than 2125 kinds of cryptoassets with trade quotes. The total market capitalization of BTC itself is more than 60 billion USD, yet its trading volume within 24 hours is less than 10% of that. If it’s possible to wake the global market of cryptocurrency with loans, the market volume would exceed tens of trillions.
There are many deficiencies in the decentralized financial service markets. Solving these problems will speed up the further development of the cryptoasset industry. Allen An and his team have a solution. They took the initiative and created The Force Protocol project, a new generation of underlying protocol for decentralized cryptoasset loans.
The Force Protocol is committed to eliminating problems in the traditional lending market like overly complicated procedures and unfair trades. They hope to break the information barriers between different lending platforms, and to meet global loan demands. By using decentralized technology, The Force Protocol provides zero-risk token mortgage lending with a completely open and shared trading book. They even provide capital end to multiple lending platforms (which are partnered with The Force Protocol, the super nodes), as well as offline brokering and online transactions.
Reshape the lending market: financial technology and blockchain.
“Problems that traditional peer-to-peer platforms face usually come from over-centralization. This leads to them occasionally disappearing with user’s capital or investing it without user’s consent. Meanwhile, internet finance companies, such as online credit loan, loan to customers without any mortgage, result in bad loans. These problems could be solved within decentralized loan system, which are based on blockchain technology,” Allen An told the reporter.
The main problem with traditional lending is that it’s hard to prevent and deal with defaulting and bad loans. To lower the default risk, people working in the traditional financial lending industry had to carry out high-labor tasks such as proving assets, asset authenticity verification, due diligence, and price evaluation. This even led to the birth of a sub-industry.
Traditional financial lending requires huge investments in risk control and collections. R&D investment for a risk control system often requires tens of millions, to keep the bad debt rate at a reasonable level. Collection teams consist of as many as 400 or 500 people. Vicious things have been done by third-party collection agencies. And still, many things can go wrong when dealing with mortgage assets when defaulting occurs. Frictional costs from each part of the procedure will eventually be added to the client’s borrowing cost.
At the same time, with centralized lending, there is an inevitable risk of platforms disappearing with the money. From June 1 to July 12, 2018, a total of 108 P2P platforms collapsed in 42 days around China. That is an average of 2.6 platforms collapsing per day. Thus, mistrust towards these platforms have increased dramatically.
Financial technology and blockchain technology can solve those problems efficiently at a relatively lower cost, promoting more efficient and stable growth of the lending industry. Users around the world could have loan services by smart contracts and distributed technologies, trust between lenders and borrowers are no longer necessary. The main features of new model include:
(1) Smart contracts guarantee loan asset’s safety for both borrower and lender parties, and ensure that the process can not be changed.
(2) Shared trading books provide global trade sharing services, increasing the efficiency of the flow of assets.
(3) Auto broker technologies guarantee that the interest demands of both borrower and lender are met to the greatest degree, and are unaffected by any third-party influence.
(4) Virtual mapping techniques for multiple cryptocurrencies grant different public blockchain coins holders access to loan services.
(5) They are based on the stablecoin distribution policy of anchored fiat currency, increasing the liquidity of cryptoassets and meeting the actual demands of users.
(6) Close position insurance design protects the lender’s assets when the market fluctuates drastically.
In 2018, Allen An and the founding team developed The Force Protocol project, the decentralized cryptoasset lending protocol, based on ETH and EOS. The ingenuity of The Force Protocol comes from its protocol layer design, rather than a simple centralized cryptocurrency lending platform.
Lenders can easily establish their own lending platforms (super nodes) based on The Force Protocol network. Thus, these lending platforms can jointly maintain trade books with other lending platforms. The aim of the Force Protocol team is to enable anyone to become involved in the global lending system easily and safely at the technical level, and satisfy their lending needs.
The Force Protocol allows institutions to develop global decentralized lending platforms based on shared trading order books. By introducing the dual-token model, The Force Protocol eliminates the barriers between different cryptocurrencies, and also the barriers between cryptocurrency and fiat currency. The super nodes use a similar-to-centralized method to realize cross-chain transactions and transactions between cryptoassets and fiat currency.
Upon the basis of protocol layer development, Allen An and the founding team developed an EOS blockchain system based DApp application platform called Bibidai. Bibidai is a decentralized crypto-token pledge lending platform based on the EOS network. Users could mortgage their own tokens, acquire other types of tokens, and have liquidity without selling their tokens.
Code is law; privacy is freedom; computing is power
“We soon found out that blockchain has inherent advantages in solving traditional financial problems. This technology will profoundly affect the traditional finance industry, and will even rewrite the strategic layout of most financial companies. I think rather than taking the impact of this future technology passively, we should take the initiative to greet it, and start the revolution from within,” said Allen An.
From early 2017 to the end of 2018, The Force Protocol founding team, led by Allen An, invested over 60 ecological projects in the cryptocurrency field. They studied deeply into the lending related subdivision fields of the cryptocurrency industry, and discussed the changes blockchain brings to the lending industry. They also analyzed the current development state of blockchain lending projects and made investments for layout.
After studying the bitcoin whitepaper in detail, the team, using their collective expertise, studied the discussion on bitcoin paper between Satoshi Nakamoto and a number of electronic cash enthusiasts on the Cryptography Mailing list. At the end of October, 2008, Satoshi Nakamoto published an article in the mail group, called “Bitcoin: A Peer-to-Peer Electronic Cash System.” In the article, he introduced a few of bitcoin’s features, such as its peer-to-peer network distributed operations, how the longest chain principle prevents double spending, the lack of dependence on a trusted third party, and generating new coins with a proof-of-work system. This article evoked discussion among people like Hal Finney. They had a very thorough discussion about technical details, how to prevent double spending, how the nodes closed deals, how to prevent malicious attacks, government regulations, privacy, applicability, etc.
“Even now, when I read the discussion between Satoshi Nakamoto and the others, I still see a lot of ideas ahead of our time,” Allen An told the reporter. “In the conversation between Satoshi Nakamoto and Hal Finney, Hal Finney mentioned, in the future, the price of bitcoin may be one of two extremes. It could be worthless or very expensive. The value could even go as high as 10 million US dollars. Satoshi Nakamoto simply replied, he would feel very strange if nobody used cryptocurrency in 10 years. One month after the article was published, Satoshi Nakamoto released the original client and invited everyone to install it and give it a test. On January 3, 2009, the first bitcoin was born.”
While investing for Token Fund, Allen An saw the needs and hurting points which the traditional financial industry faced. He understood that those problems required a lot of manpower and resources, but could be solved by blockchain technology at a very low cost since the technology is decentralized, irrevocable, queryable, and doesn’t need a trust point.
Allen An was an equity investment entrepreneur. He was knowledgeable and experienced due to his previous investment projects. He learned a lot about entrepreneurialism, and knew the potential problems start-up companies could face. He deeply understood the expectations and worries of investors. These advantages helped The Force Protocol capture their users’ needs, as well as investors’ demands. It helped their project develops more steadily. They could satisfy their users’ needs more easily, and attract more investment.
With the slogan “code is law; privacy is freedom; computing is power,” Allen An and his team invested in and covered the complete blockchain lending field, from cryptocurrency lending projects to blockchain lending projects; from underlying public blockchain lending projects to actual DApp projects. They invested in DCC (credit public blockchain), ETHLend (loan application), LBA and some other projects. “I hope my peers who are fighting on other lending projects can stick together during the bear market, keep developing, and contribute to it,” Allen said with a smile.
Fill the gaps: protocol layer innovation, stablecoin and super nodes
Today, Internet users are able to simply type in a URL and surf the Internet. But not many users know the often-hidden “http”, “Hyper Text Transport Protocol”; or “https”, “Hyper Text Transfer Protocol.” Protocol framework like this is the essential infrastructure of the entire network. The Force Protocol wants to be like the development team behind “http.” They want to play a similar role in distributed financial ecology by building the general protocol for decentralized lending in the crypto field. They want to adapt and systematize the needs related to lending and trust in distributed finance, and provide the lending services in the distributed network with a communication standard, in order to realize the exchange of value between cryptoassets safely and efficiently in a unified framework.
During the study and investing process, Allen An and his team found that blockchain technology could solve the trust issues in financial transactions. The Force Protocol team believes that among blockchain technology applications, the lending industry will be one of the first to mature and make a difference. There is still an important missing piece in lending ecology, which is based on blockchain and cryptocurrency. They still need to figure out how to systematize the lending framework, how to modularize DApp technology, how to revolutionize the traditional centralized operation with distributed ways, and how to reconstruct and upgrade the underlying lending transaction mode and business logic. So, they started to build a decentralized lending protocol, aiming to solve actual problems and build a global decentralized lending network for cryptoassets.
There are currently many lending DApps based on the blockchain network, but none of them can share their orders, so the very limited lending orders are scattered among several platforms. Supply fails to meet demand, preventing the lending market from growing further. Many users (like bitcoin mining farm owners) can’t satisfy their borrowing needs, while many cash users lack safe and effective investing channels.
Lending DApps are the super nodes in The Force Protocol ecology. With the help of The Force Protocol, super nodes can focus on business operations and service improvements, rather than on maintenance of the underlying technical framework at the blcokchain level. The Force Protocol’s shared trading books can facilitate transactions among multiple DApps, and dramatically improve the liquidity of assets in the cryptocurrency market.
As a decentralized lending protocol, The Force Protocol is not in competition with other lending platforms or decentralized lending DApps in the market. It’s more of a competition-cooperation relationship. The Force Protocol can share trading book and even capital end with these lending platforms. Only in this way can the entire cryptoasset ecology be improved gradually and stay active.
Decentralized lending services and stablecoin can cooperate with each other. To eliminate problems with early stablecoin models and take advantages of stablecoin, The Force Protocol team designed a dual-token model, “platform coin+stablecoin.” The Force Protocol launched platform coins with applied value and corresponding stablecoins based on different public blockchains.
The Force Protocol team consulted the operating experience of each stablecoin, and came up with a sustainable complete reserve policy. They used a fiat currency endorsement mode on their stablecoin generative mechanism. Super nodes that are qualified for handling fiat currency generate a certain amount of stablecoins according to the amount of absorbed fiat currency. Then these stablecoins are used inside The Force Protocol’s lending network and flowing through the corresponding public blockchain eco-environment. In The Force Protocol system, third party organizations like trustee banks and auditing institutions were brought in to supervise and regulate the super nodes. By doing so, they dramatically reduced the impact of policy risk towards crypto-stablecoins.
As of now, The Force Protocol has built a complete business circle. Their business covers blockchain industry investment, mining farms, wallets, mining pools, stablecoins and so on. For these businesses to cooperate with one another, they need to be connected by a strong lending service. That’s why The Force Protocol chose the lending market to provide protocol layer service for decentralized cryptoasset lending platforms. Different lending DApps would share trading books to close deals. They even share capital end. The team had stored capital end from their earlier traditional investments and investing in the financial industry. They also have capital end resources from their days in the Internet finance industry. The Force Protocol owns and runs their own mining farm, called The Force Mining. They have laid out and built four mining sites around the globe. BTC from their own miners is also their low-cost capital end. Therefore, The Force Protocol lending ecology forms a closed-loop. Their super nodes can also benefit a lot from this.
The history of the development of finance is all about accelerating capital flow. Blockchain technology speeds up this process. In the near future, maybe tens of trillions of dollars will exist in the form of cryptoassets. A whole new crypto economy society may come to exist.
“We believe there will be more and more cryptoassets in the future. The Force Protocol is willing to be a part of this ecosystem and provide efficient lending services. For you, For Us, For Crypto. May the force be with you!” Allen An told the reporter with a firm smile.