After almost a year of preparing INLOCK, the purpose of which is to have lending services of regional commercial banks compete on an international stage, we are launching at the end of September! After all these posts and articles about the properties and perks of INLOCK It wouldn’t be fair if I wouldn’t compose a little teaser about why I personally like the idea of INLOCK , why I funneled all my personal wealth into its creation. At this point, I would like to emphasize I have no intentions of giving financial advice, I believe everyone can do their own research and we’re grown beyond running after wannabe influencers.
So let’s begin: Every product is worth as much as there is demand for it, and the basis of every demand is the problem it solves. Regarding INLOCK, I have showcased the problem from multiple points of view, so I would rather focus on the use cases now showing a few instances where INLOCK is the solution.
Before we begin, I would like to clarify that these aren’t necessarily everyday problems, moreover these problems could differ between countries and regions. It’s important not to limit our solution to a specific region when developing a World wide product, because it would just only limit us. We are often told that the problem INLOCK solves isn’t real, because in Hungary (where our HQ is) getting a loan is cheap, transfering money is cheap, and that direct payday loans and other fantastic financial instruments are considered innovations…
These are fundamentally all true, given we only think within our own little boundaries and forget that thanks to cryptocurrencies amongst various other factors less developed regions have been catching up in the past few years with lightning speed (pun intended). It’s no accident we wrote the article describing Africa’s situation a few weeks ago, which got me quite a few highfives in part because it helped some saw the need for INLOCK hidden therein, although I had no intention of portraying the situation that way, it feels good to see some of you view my articles from an INLOCK perspective. Let’s not get carried away. The freedom generated by cryptocurrencies is more and more palpable. This is especially apparent when when you try compiling something like an ICO. For example, the INLOCK team is increasingly headed in a multinational direction. We have an Indian CM, who answers questions on our channels 7 days a week helping out our New York based community manager team. We are currently in the process of training a woman from Nigeria, who will soon also be working with us. With the help of this multicultural team we can get a better insight into the demands and financial problems of various regions. What is more important though, is that without Bitcoin and Ethereum it would virtually be impossible to work with these guys, because we’d need to spend about as much every week on transfering money to them as we pay them! We got detoured again, so let’s see concrete example of what INLOCK could be used for: Let the first use case be what brought the idea of INLOCK into reality. I have already mentioned this in the previous post, but it being the basis of this story, it isn’t negligible. From here onwards it’s a completely personal story/experience in which I played a part. There’s a financial situation, a short term liquidity problem that happens to an acquaintance who hits you up to help him out. The trust is present between the parties, but it happens to be that you’re sitting on a large sum a cryptocurrency, so you either lend your bitcoins, or you give fiat you get from selling the crypto. The borrower bears the exchange rate risk in scenario one, because you expect the same amount of bitcoins in return, in the latter case however you run the risk of exchange rate fluctuation by getting the same amount back in fiat, not knowing how much crypto you’ll be able to buy with that. I’ve seen and experienced countless stories of the sort. How does INLOCK fit into the picture here? I think the correlation is evident for most from the example above, but I’ll sum it up in short: INLOCK eliminates extra risk for both parties when handling a short term liquidity problem. As protection against short term exchange rate fluctuations the borrower can take out a loan with adequate (even 100%+) overcollateralization amount through INLOCK, whereby he will have access to fiat (USD, EUR or even HUF) to lend to his friend. After successful loan repayment both parties can close the deal feeling satisfied. Obviously the equation is a little more complicated than this, because using INLOCK isn’t free. These deals have costs that the parties have to pay: first you need tokens to lock collateral, and secondly the lending partner doesn’t provide the loan for free. Lowering the level of risk taking close to zero can be achieved by shortening the contract period and increasing the overcollateralization level. Although this example is a little dry, I find it important to share the origo-issue. Let us now see a lot more imminent example that’s very much crypto related. The first is the “Miners problem” The primary goal of the miners is to turn a profit. This means — in a highly simplified way — that their income has to be greater than their expenses in a given period. In a traditional field of industry both the income and the expenses side can somewhat be planned. Mining crypto though is an odd field. Let’s start with examining the expenses side (we’re going to neglect the initial investment for the sake of the example, we assume the mining rigs are already running well). Expenses involved in continuous production are: consumed energy and internet costs, depreciation related hardware costs and of course the cost of human labour which has to be factored in even if one mines in their own basement. These expenses have to be paid every month to keep their “doors open”, to keep mining. The income side is a little harder to streamline: capacity of the mine (total hashrate), the difficulty of the coin being mined (which is constantly increasing) and of course the exchange rate, the most important factor. Of course these were negligible in the middle of last year’s bull run, but during this bear market the problem is much more prominent: they have to pay the costs of operation while having to sell their hard-earned crypto (that’s getting harder and harder to earn) where the price bottoms out. This might be somehow manageable as a hobby miner, since other sources of cash might be available when the going gets tough while they wait for a better sentiment. So what about the less fortunate ones, who’s primary source of income is mining (mining conglomerates for example)? Their ROI is greatly damaged by this phenomenon. What they can do in such a situation, is to lock their crypto as collateral to get fiat liquidity — without having to actually sell their crypto. This use case fits right into INLOCK’s profile: overcoming short term fiat liquidity problems by using your crypto as collateral. We made a short video that sums up this problem: Miner’s problem
Another use case bears the name “The Traders Dilemma”
Originally published at ico.inlock.io on August 28, 2018.
