QUESTION 1: BASIC’s staking and interest rate functions are supported by exchanges and other third-party wallets. For BASIC to give interest, it must 1. Make profit from trading 2. Lend at a higher interest rate 3. Generate profit solely from the platform. Besides the three cases, are there other revenue models of BASIC to provide interest?

ANSWER:

Thank you for your question. Here is my response referring to the feedback we have received from users that are participating in the current private beta stage. According to them, there are two differentiating points of using the BASIC platform.

Firstly, it is a hybrid of centralized & P2P processes in both deposit and lending functions, allowing for a transparent process. Currently, BASIC’s loan facility executes the loan initially, and then the loan’s bond is broken down (partly or fully) into smaller units to open deposit products. Users were satisfied as the processes of where their interest was coming from was clear & transparent, whereas from the company’s perspective it contributed to managing the utilization ratio more effectively.

Secondly, the automatic minting of CREDIT tokens. CREDIT tokens are automatically minted when 1. Interest is repaid 2. Deposit interest is paid. BASIC Oracle manages the % of minted CREDIT tokens depending on the repaid/paid amount. 1 CREDIT token is equal to the value of 1 USD. Even if you do not borrow, simply depositing will also mint CREDIT tokens, which can later be used for unsecured borrowing.

QUESTION 2: I have two questions: 1. What is the VIP Portal on the website? What makes a user qualified to access the VIP Portal? 2. The homepage is only in English, making it hard for Korean users to access the website. Also, there is no information on the team. Especially as a project that deals with borrowing, I think that trust matters, but so far I do not see those trust factors.

ANSWER

Currently we are at private beta stage with select users that are providing us with feedback for troubleshooting and product improvement. Cooperation with these select users are happening both directly & indirectly, as sales are already ongoing it did not require specific conditions regarding the VIP Portal. For example, I am already visiting our users each week to receive feedback and provide assistance.

For your second question, each day we are improving our platform and product, and that is why we have decided to stick with English for now. When the system is more stabilized and ready for open beta (targeted in Q2) to more users, we will add Chinese & Korean. While we have the translated documents in place, as there are ongoing modifications we have not made any of them public. You can check details of our team on https://basic.finance/about (subsection: Team) or our whitepaper.

QUESTION 3: When users want to borrow on BASIC, they have to deposit a maximum of 2 times the value of the borrowed amount in cryptocurrency. In this case: Will users actually follow this rule? and why is it that you have to deposit 2 times the value? If users cannot repay the loan then the platform automatically sells the cryptocurrency. However, because cryptocurrencies are highly volatile, is it possible to “automatically” sell them? and how would you manage the volatility risk?

ANSWER

According to Graychain’s Cryptocurrency Loan Market report, there has been a total of 244,000 loan cases across 114,000 wallet addresses from the period of 18 months preceding to 2019 Q2. This is just the on-chain records that can be tracked. All these loans were done on various lending platforms with collateral from 150% to 400%, amounting to a total of $4.7B. Crypto asset lending platforms (e.g centralized platforms like Nexo, Celsius) have loaned USD, which was mainly used by borrowers for 1. Leverage 2. Arbitrage 3. Tax deferment purposes. For your question on volatility risk, volatility is managed in this way. Assets that are collateral/loaned and their prices are tracked real-time on 6 exchanges (Coinbase, Bitfinex, Binance, Huobi, Bitstamp, Kraken) and updated every minute to calculate real-time LTV(Loan-to-Value) ratio. BASIC’s LTV management (or risk management) is automated under the smart risk manager. For example:

65% (Early warning) > 75% (Margin Notification) > 85% (Margin Liquidation)

When LTV reaches 65%, the APP, SMS, and Email will notify the user When LTV reaches 75%, a request to add additional collateral is made to the user to protect the collateral value in rapid price decreases When LTV reaches 85%, the system automatically sells the collateral to the point in which LTV is lowered to 75%.

We have a liquidation engine that calculates how much assets can be automatically liquidated without slippage. We use BitGo’s internal liquidation engine as well as QCP Capital’s (also a user of BitGo) OTC order book. This is important as exchanges usually cannot support mass volume orders under fixed prices (leading to slippage), whereas our system allows real-time order streaming to liquidate a large volume of assets under a fixed price.

QUESTION 4: Out of 3,500,000,000 BASIC(35% of Total Supply), 1,826,258,166.69 BASIC (52.18% of sale allocation) was sold, I hear that the unsold amount of 1,673,741,833.31 BASIC (47.82%) will be burned. Is this information true? and if it is can you show us the address of the token burn?

ANSWER

Yes. The following information is true. The token burn will happen on the day of listing. You can check the details on the following smart contract address:

0x06CBFe26a490F6E77D143830Aa73e1B26cE3Fa06

We did not include this in the white paper because of legal reasons, but we plan to use BASIC’s loan fees and deposit/lending margin profits to continuously purchase BASIC on exchanges and burn them. We believe that such profit model can contribute to a long-term price increase of the token.

QUESTION 5: BASIC promotes itself as the next generation digital asset finance platform. Especially as a platform dealing with deposit & lending services, customer trust is very important. On your homepage it says you have received positive external audits, may I ask which auditors have given this review?

ANSWER

Information on this matter will be released before open beta. Currently we are communicating with the Big 4 audit firms and we plan to have them as long-term partners as we prepare for open beta. Regarding your feedback on asset protection, we are working to obtain a Full Banking License as well as cooperate with deposit insurance authorities such as U.S FDIC(Federal Deposit Insurance Corporation). In addition, at the startup phase it is likely that 1. capital strength is low 2. business model is not verified 3. liability issues exist. Therefore, we feel it is necessary to form partnerships with external institutions, in which we have decided to partner with BitGo after talking to several institutions. In the long-term, we wish to step into the traditional finance industry and position ourselves as a Bank, and the relevant responsibilities along with such label. With this we hope to gain trust from our users.

QUESTION 6: #1: Are there any measures to prevent VC allocations from being distributed in the OTC market? #2: BASIC token’s price is decreasing quite a lot on Bithumb, do you have any plans to address the issue? #3: If only a few people use the lending service, how will you distribute interest?

ANSWER

#1: For token sale, we have conducted a private sale on 2019 March to customers and partners that are directly/indirectly related to using the platform. None of these participants received any bonus, as our rationale was that a bonus will only create incentives to sell the token at listing price. Instead, we focused more on providing benefits related to services on the platform.

#2: I do not think there is a “Silver Bullet” on this matter. There is always a group of people on exchanges that manage a large amount of funds, and when a token gets listed to the public no project can really devise a perfect solution to this matter. However, after the initial price-driving forces are over and the token price is stabilized, BASIC can take some measures. As mentioned in the previous questions, we will use our platform fees & deposit/loan margins to generate profits, which will be used to purchase BASIC tokens from exchange and burn them. We believe that such model can create an upward price trend in the long-term.

#3: What we are currently doing is divide a loan’s bond into numerous products and offer them to depositing users, meaning that if there is more demand to loan than to deposit, there will be no deposit product to apply for. In this matter we are emphasizing the CREDIT token, which is automatically minted when interest is repaid or deposit interest is collected. By promoting this advantage we want to 1. increase the amount of loans 2. increase user retention of our platform. In addition, we have allocated 50% of the platform’s revenue (the percentage is flexible) to the Basic Insurance Fund. The purpose of this fund is that because unsecured lending (based on CREDIT tokens) can result in some default cases, we will use the fund to minimize the loss of such defaults. When there is an actual default, the users CREDIT token will automatically be burned entirely, in fact, CREDIT tokens cannot be purchased, transferred, or withdraw. CREDIT token is the only standard of a user’s credit on the platform (e.g higher CREDIT leading to higher deposit rates, lower interest rates). Lastly, we will continue to improve the mechanism of CREDIT token as we start open beta.

QUESTION 7: BASIC uses deposit products, however, this deposit function is actually available in many major cryptocurrency exchanges. I do not find it necessary to move my assets from the exchange wallets to the BASIC application. Especially in an industry where scam activity is frequent, I am not sure whether I can deposit my assets into BASIC, a startup that is not verified in the industry. From both safety & convenience perspectives, isn’t an exchange a much better option?

ANSWER

That is a great question. Allow me to share a case that involves one of our customers using the private beta. This customer only uses reputable firms such as DFW (famous prop desk based in Chicago, has APY of 3%) OR platforms like BASIC that has transparency in providing returns. Like this, we believe there is a market for BASIC depending on the amount of funds and user preference. In addition, unsecured borrowing based on CREDIT tokens can target the public market. According to the Institute of International Finance (IIF), the world’s total debt amount is $257 trillion, and 80% of it is based on credit. However, in the case of digital assets, there is no established credit score system, making it difficult for credit-based borrowing. To address this, we have devised a simple model in which transaction histories (deposit & lending) on the platform accumulate to earn CREDIT token, which serves as credit in our unsecured loans. From a holistic perspective, we believe there is the necessity for more projects to attempt to build credit/unsecured borrowing systems.