In this chapter we will specify the INLOCK token model through a simple loan creation process. It will cover all relevant steps and logical connections. The values we use are for demonstration to show the relation between the collateral, credit and the service fees – these values may be subject to change.
Matching Service: this service is handling the matching of the Borrower’s preferred settings with Lender offers. The number of Matching Service Providers are not limited to one.
Front End: the Inlock.io platform’s front end layer, where the platform users are able to manage user settings, balances, and setup the borrowing requests.
Token Market: represents inlock.io’s own token exchange, users of the platform are able to buy the necessary ILK tokens for the contracts, or sell any excess tokens.
Smart Contract Factory: inlock.io’s control module – responsible for all data transmission between modules.
Payment Provider: this party is the transaction layer for FIAT transfers and payment verifications. The number of Payment providers is not limited to one.
Collateral Manager: locks the collateral for the duration of the loan, and in case of margin call it liquidates the collateral. The number of Collateral Managers are not limited to one.
Internal Blockchain: all parameters of every lending transaction are recorded in the completed smart contracts which are stored on the inlock’s internal blockchain.
E-Wallet Manager: Stores the cryptocurrency balances of the platform users, and transacts with the Smart Contract Factory (for example: temporary lock of the collateral during the loan matching process.)
In this phase platform users prepare themselves to be able to propagate loan requests onto the platform. The following requirements apply:
- Potential borrowers have to deposit the cryptocurrency intended to be used as collateral to the (E-Wallet Manager)
- Potential borrowers have to purchase ILK tokens, which they are able to do in Inlock.io’s own exchange (Token Market – TM). There are forcast indicators which help the users estimate the necessary amount of ILK tokens in correlation to the collateral.
Assuming every requirements are met during the preparation phase, the user is able to proceed to the Loan request phase.
The Loan Request Phase
is where the platform user sets his own conditions which consists of the following:
- Size of the collater to be used
- Preferred currency for payment (it is possible to mark GBP as preferred currency, but the best offer will contain USD)
- Margin call: that is the treshold value when the collateral will be liquiadated by the Collateral Manager – in case of the collateral’s exchange rate indeed reaches the margin call limit – however the Borrower is able to increase the collateral amount any time. Setting of the margin call affects the amount of loan that can be requested.
- Repayment due date, this parameter is also freely adjustable by the Borrower
- Forecast of ILK requirement: the platform is able to forecast the amount of ILK tokens necessary to complete the contract with the preset parameters, the ILK cost calculation is based upon the 0.1 % of the collateral’s value in ILK tokens.
- When the borrower confirms the settings, and the forecast, the proposal is transferred to the Offer Management Phase.
Offer Management Phase: Contract proposals approved by the Borrower arrive to the Smart Contract Factory which is essentially the Backend layer of Inlock platform. It is important to note, that before forwarding any of these proposals to the Matchmaking Phase the collateral and the forecasted ILK tokens are in temporary lock. This temporary lock is in effect until a matched offer is found or the Borrower revokes his lending request.
Matchmaking phase: Potential Lenders browse the proposed lending requests and are able to make offers. It is important to note, that Lenders are free to offer slightly different terms – market competition is in place – the best offer will be selected by the Borrower. The best offer does not necessarily means the cheapest, it is entirely up to the Borrower’s own preferences. In the above example the (#2) offer is significantly more expensive than the selected (#3) offer but, the (#2) offer promises near-instant payment, which is possibly an important factor for Borrowers looking for fast payouts. When the Borrower agrees to the offer terms, the result of the Matchmaking phase is transferred back to the Offer Management Phase once more to prepare the condition set to be recorded in a smart contract.
Contract Preparation: the agreed terms of the Lending contract are prepared to be recorded in a smart contract, the collateral is still in temporary lock, however at this stage the actual platform usage fees are calculated and deducted from the Borrower’s ILK balance.
Verification & contract execution
- The collateral for the contract in preparation is sent to the Collateral Manager
- The Payment Provider verifies the Lender’s payout to the Borrower
- The Payment Provider verifies that the Borrower indeed received the requested credit.
- The total platform usage cost (in the above example 39,5 ILK) is divided between the Inlock Platform the Collateral Manager and the Matching Service, 60%, 30%, 10% respectively. As it was mentioned before, the Collateral Manager and Matching Service Provider can be anyone who is eligible to the technical and legal requirements. These connections can be established through API as well.
- At the end of the process the smart contract is done, and it is recorded on the Internal Blockchain.