Introduction to eCoinomic.net III

Why we did not choose P2P model? The Reserve explained.

It is common knowledge that 80% of global wealth is under control of just 1% of the world’s population. This might be a controversial and exaggerating statement — but it reflects the reality. We are living in the world of high inequality, and the monthly entertainment budget for the Valley dweller can be higher than average household income in some Sub-Saharan country.

And the blockchain can change it, right?

Probably, yes. But only if we use it in a right way — and to do so, we need to stop applying trendy concepts where they don’t belong.

Decentralisation is one of such concepts. Ever since the crypto rush started, we’ve seen hundreds of projects that were trying to apply decentralization to every possible field, effectively changing its perception from a promising idea to a senseless buzzword. Needless to say, most of these projects failed.

The blockchain is not panacea, and the same stands for the decentralization. Especially when it comes to the financial field.

So why do we believe it is not exactly right to rely on a strict P2P model in crypto-lending?

There are legal restrictions and regulations that create barriers an individual who wants to become an investor (lender) in the P2P platform. In the USA and some countries, only ‘accredited investors’ can provide their funds for lending via a P2P platform — and only 8,25% of the US population meet the hefty criteria to be qualified as an ‘accredited investor’. While this regulation does not exist in most countries, there are other limitations — for instance, international investments are heavily regulated and an individual lender can provide funds for P2P lending just in their country. So, investor base for the global lending is quite limited, which means limited lending funds. And the limited lending funds, in turn, reduce the opportunities for business scalability.

And what is the point of creating a tokenized platform that can’t be neither scalable nor international?

We believe that reliance upon institutional investors as lenders is a much more reliable way to grow a sustainable business.

But how do we ensure their participation in the crypto-related business — still legally ambiguous and very volatile space?

It is time to explain the Reserve.

To involve institutional investors it is mandatory to provide them with a guarantee that they do not invest directly into cryptocurrencies and that their money is secured.

The first guarantee is provided by the fact that eCoinomic.net is an intermediate between lenders and borrowers from the cryptosphere, thus Institutional investors will not directly interact with cryptocurrencies.

The Reserve is needed for providing the second guarantee — the monetary one.

eCoinomic.net will cover all of the lending funds attracted from institutional investors with an equitable amount of funds raised during the final stage of the Pre-Sale. These funds, or the Reserve, will be held on escrow bank accounts and will not be spent in any case other than to compensate the institutional investors for any loss should there be problems with loan repayment.

This is why our Hardcap is so huge: only $25 million out of $106 million can be spent, the rest will be locked as a guarantee for the lenders and even the team will not be able to access it since it will be held in escrow.

Confidence and trust are essential in Big Finance, just as it is in crypto. And creating the Reserve is a necessary step towards it.