lond whitepaper v0.19 due to its attributes such as purpose, currency, return, risk, etc. lenders...

© 2017 LOND Company Pty Ltd, All Rights Reserved

DebtMarketDisintermediationAWhitepaperfortheLONDproject,aBlockchainandP2Psolutiontoissueandtradedebt

Roberto Papa

December 25, 2017.

L NDCOMPANY

of 27 © 2017 LOND Company Pty Ltd, All Rights Reserved

Exclusion and limitations of this Whitepaper

THIS WHITEPAPER IS NOT A PROSPECTUS

The sole purpose of this Whitepaper is to share information about an idea on how debt Markets can be

disintermediated. The concept, described as the LOND Solution and its implementation may need to

change in the future from the description provided in this whitepaper.

The information provided may not be exhaustive and does not imply any elements of a contractual

relationship or promise. The Whitepaper does not constitute an offer or invitation to any person to

subscribe for or purchase shares, rights or any other securities of LOND or any affiliated entity.

Any agreement in relation to the purchase and sale of LOND Tokens shall be governed by a separate

document setting out the terms and conditions (the “Terms and Conditions”) of such agreement, which

shall be made available at lond.company prior to the sale of any tokens. In the event of any inconsistencies

between the Terms and Conditions and this Whitepaper, the Terms and Conditions shall prevail.

All rights reserved LOND Company Pty. Ltd.

No reproduction, whole on in part without approval from LOND Company.


Summary

Lending Disintermediation using Blockchain and P2P technology

Retail debts and loans made to individuals and small companies suffer from significant cost burden through

interest rate margins and fees that profit intermediaries like banks. BOND markets are dominated by over‐

the‐counter transactions which suffer lack of transparency and information. The LOND solution for Loans

and Bonds will use block chain and peer to peer technologies to create a person to person global debt

market allowing tradeable debt assets. An efficient, safe and trustworthy market place for loans and bonds

will save society hundreds of billions per annum in intermediary fees, provide true price discovery for debt

and reduce centralisation of political power in financial institutions. As transactions are done through

crypto currencies, this debt market will be global, transparent and low cost.


CONTENTS

1 LENDING DISINTERMEDIATION USING BLOCKCHAIN AND P2P TECHNOLOGY ........................ 5

1.1 A Global Opportunity .................................................................................................................................. 5

1.2 Solution Overview ....................................................................................................................................... 7

1.2.1 Typical Process Flow .......................................................................................................................................... 7

1.2.2 Solution Components ........................................................................................................................................ 8

1.2.2.1 Ethereum Blockchain with Smart Contracts ............................................................................................. 9

1.2.2.2 Distributed LOND Trading Platform........................................................................................................ 10

1.2.2.3 Rich Content virtual cloud (RCVC) .......................................................................................................... 11

1.2.2.4 Facilitators .............................................................................................................................................. 11

1.2.2.5 Legal Framework .................................................................................................................................... 12

1.2.3 LOND Features and Functions ......................................................................................................................... 12

1.2.3.1 Currencies and LONDS ............................................................................................................................ 14

1.2.4 Solution Development Philosophy .................................................................................................................. 15

1.2.5 Solution Review ............................................................................................................................................... 16

1.2.5.1 Evolution of the LOND Solution .............................................................................................................. 16

1.2.5.2 Examples of LONDS in Action ................................................................................................................. 17

1.2.5.3 Future Opportunities and Options ......................................................................................................... 18

2 LOND BUSINESS MODEL ...................................................................................................... 20

3 IMPLEMENTATION AND ROADMAP..................................................................................... 22

3.1 Solution Roadmap ..................................................................................................................................... 22

3.2 Token Sales and Allocations ....................................................................................................................... 23

3.3 Use of Funds .............................................................................................................................................. 23

3.4 Issues and Challenges ................................................................................................................................ 24

4 GLOSSARY ........................................................................................................................... 27


1 Lending Disintermediation using Blockchain and P2P technology

1.1 A Global Opportunity

Lending is necessary, and when undertaken authentically, good for society. It allows for financial capital to

be allocated to the need where it can be matched up to other forms of capital to fund activities undertaken

by individuals, organisations and communities.

Successful lending requires a match between capital and need, trusting the loan seeker and managing the

risk for repayment. In the current financial system, these elements are addressed by various intermediaries

such as banks, bond markets and various non‐bank lenders. The intermediaries have business models that

rely on fees, interest rate spreads and asymmetric information. In return, intermediaries provide a funding

channel and risk management. Intermediaries have been very profitable demonstrating the large value

they have been able to extract from the lenders and borrowers. Intermediaries have been able to develop

scale, market dominance and political power to avoid true price competition and maintain high

profitability.

The debt markets can be disrupted through disintermediation using decentralised technology that includes

blockchain payment, smart contracts and peer to peer data communications. This will reduce transaction

fees, empower individuals and remove interest rate spreads. This paper proposes a solution and approach

to create a crypto currency based debt origination and market named LONDS (Loans and BONDS). With

LONDS, debt is tokenised onto the blockchain and a decentralised online global marketplace is provided to

raise and trade debt.

Simple overview of how LONDS Work

Borrowers issue LONDS on a decentralised global exchange (LOND platform). Lenders are attracted to a

LOND due to its attributes such as purpose, currency, return, risk, etc. Lenders then purchase the LOND, or

part thereof, and consequently fund the borrower. LOND owners can trade their LONDs on the global

exchange to access their capital. Borrowers make repayments onto the exchange and smart contracts will

distribute the funds to the LOND holders.

The LOND fees would be for the:

‐ Borrower to pay for relevant setup services such as legal services and insurances.

‐ Users of the LOND platform to pay for trading: the buying and selling of LONDS.

Benefits for Borrowers

The main advantage for borrowers is lower costs and more flexible loan terms. Traditional borrower

options for loan products usually add 1‐5% on the cost of funds due to intermediary’s interest rate margins

plus fees. Comparatively, the target for the initial once off LOND setup fees would be 0.1‐0.5%.

Other benefits relate to broader access to funding, such as:

‐ Access to global market enabling more opportunity to match borrower and lenders.

‐ Multiple peer to peer lenders for same debt: higher chance of small loans from multiple lenders

compared large loan from one lender.


‐ No counter party risk – lenders cannot call in debts that are not in default.

‐ Transparency for fees and debt pricing.

Benefits for Lenders

Lenders gain benefit through improved rates of return, pricing transparency, opportunity to support other

people directly anywhere in the world and ability to directly manage their own risk and setup their own

portfolio as it fits their circumstances.

Compared to other person to person or private lending the LOND solution allows supports lenders with the

ability to:

‐ Trade and sell LONDS,

‐ Partially fund a LOND ‐ LONDs are divisible and support multiple lenders,

‐ Focus lending on attributes (e.g. geography, purpose, collateral, ratings) to build portfolios, and

‐ Follow process for debt recourse as part of default management.

There are additional platform functions to aggregate LONDS and provide automation on LOND selection

and management.

The solution provides a standardisation for debt to support easy LOND trading and a range of other services

to manage safety and risk including real world contracts, independent review of borrower and collateral as

well as ratings using external sources and LOND market behaviour such as payment, defaults and feedback.

Benefits for Society

Annual retail lending and small commercial lending in the US (depending on specific classification and year)

is approx. $3T USD. Extending this globally, commercial lending could reasonably be estimated at $10T

USD. Assuming 2% interest rate margin1, financial institutions are annually profiting to the order of $200B

plus fees2. The LOND solution is targeting to reduce the cost of the retail debt market by 90% thereby

saving society $180B per annum of intermediary costs. This excludes losses through the various direct and

indirect costs such as government bail‐outs and bail‐ins of the larger intermediaries, which in the US alone

is in the trillions.

The LOND solution empowers the individual lender to make decisions on how, when and why to fund. This

is likely to result in funding more real‐world outcomes that will improve quality of life rather than

speculative financial instruments.

Additionally, the LOND solution allows for LONDs with negative returns allowing charities and other types

of organisations to source funding globally without requiring other types of intermediaries.

1 2% is a conservative figure – US banks had 3.1% net interest rate margin Q1 2017, Ref https://www.investopedia.com/ask/answers/061715/what‐net‐interest‐margin‐typical‐bank.asp 2 This is a conservative amount as just Bank profits are typically 1‐3% of GDP for the major economies.


1.2 Solution Overview

The LOND solution is a combination of technology, legal framework and the facilitator network. The result

supports the tokenisation of debt to allow a range of globally accessible digital services for the creation,

trading and repayment of debt that is transparent, resilient and can, to an extent, act independently of

governments and geo politics. The ‘real‐world’ or non‐technical components are necessary to manage risk

through data verification and debt recourse and are designed to be low cost and scalable in line with

technology.

A detailed description and design of the LOND solution is beyond the scope of this whitepaper however the

process flow, high‐level architecture, major components and key functions are described in this section.

1.2.1 Typical Process Flow

The LOND solution provides a borrower a facility to issue a LOND (think BOND on the blockchain) with a

range of LOND attributes such as duration and interest rate. To support their LOND and make it more

attractive for lenders, the borrower can utilise services of facilitators (e.g. buying loan insurance) and

provide rich content related to the LOND (e.g. company profile, prospectus, picture of intended car, etc).

The borrower enters into a legally binding real‐world standard LOND contract to issue the LOND. The LOND

market would review and assess the LOND to buy it based on key attributes, borrower reputation and other

content provided by the borrower. The borrower would repay through the platform using a range of crypto

currencies. The LOND platform automatically manages the contract transactions such as adjust loan

amount, reputation, etc based on repayments and trigger default management actions.

The following diagrams summarise the actions and experiences for the borrowers, lenders and facilitators

over the life of a LOND.

Figure 1, Borrower Actions and Experience

Borrowerwants funds to…

Buy a house, car, holiday, expand business, etc

Create LOND

Defines LOND with

information

Enters LOND attributes & other content onto

platform

Requests Facilitator Support & Review

Pays for range of facilitator services as

required.

Signs Real World

Contract

Contract aligned with LOND platform and jurisdiction.

Liens, collateral and guarantees included.

Launch LOND

Pre‐conditions

met

Required information loaded

and vetted.

Initial sale period

commenced

Smart contract holds funds and returns them if minimum not reached within

sale period.

Makes Regular

Repayments

Deposits are distributed to LOND holders

by smart contract.

LOND and Borrower attributes and updated for

reputation and status

Delays and Defaults

Staged default management

process

Platform processes (reputation, LOND status) then real world actions.

LOND Completion

Final payment

System status updated, contract

terminated. Reputation updated.


Figure 2, Lender Actions and Experience

Figure 3, Facilitator Actions and Experience

The processes are supported through the solution components in the following section.

1.2.2 Solution Components

The main components of the solution are shown in the following conceptual architecture and expanded in

the following subsections.

Lenderwants interest return on funds and/or…

Help others in their needs

Review LOND

Find LOND

Automation support: search, notifications, bot filtering and LOND

aggregation

Investment Assessment

Review online information on borrower, LOND and facilitators.

Purchase LOND

Initial Sale

Accepts price and purchases desired qty. Receives LOND

token on sale completion.

Normal Trading

Accept open order or raise new order.

Automation through bots.

Receive Regular

Repayments

Payments distributed via

smart contracts

Repayment status and history console

Delays and Defaults

Console for Default

Management

Actions to wait, communicate with

borrower and escalation, etc

LOND Completion

LOND final payment

received and is closed.

LOND no longer tradeable

Facilitatorwants revenue through fees supporting LONDs

Create LOND

Provide Services for fees to borrower

Range of legal and commercial services.

Validate LOND Information

Facilitator reputation tied to services and LOND

data quality.

Purchase LOND

Initial Sale

Supports pre‐conditions

Normal Trading

LOND quality relatable to facilitator.

Delays and Defaults

Debt Management Support services for fees from LOND

owners

Issue warnings, debt collection, repossession of collateral, etc.

LOND Completion

Completion of services to borrower

System updates reputation.


Figure 4, Solution Components

The LOND platform is a distributed application (DAPP) on the Ethereum blockchain and a bespoke

distributed content service to provide off‐blockchain information and rich content related to LONDs. The

platform links blockchain information with the LOND rich content to provide a seamless user experience.

There is no plan at this stage to relate the function of the smart contracts to rich content however that

content may be used by borrowers to provide more information about their LOND for lenders to review

and by facilitators throughout the lifecycle of the LOND. In the future, that content can be used for data

mining.

1.2.2.1 Ethereum Blockchain with Smart Contracts

Ethereum will be used to support all the structured data and smart contracts:

‐ Debt records. All key attributes of a LOND: duration, return, currency, recourse, collateral, debtor,

facilitator(s), summary, brief description, link to rich content, etc.

‐ Identity records, both debtor and facilitators.

‐ Feedback and ratings on LONDs, debtors and facilitators.

‐ LOND lifecycle from creation, launch to completion.

‐ Debt trading.

‐ Transfers and payments.

‐ Transaction records.

‐ Risk rating – generated risk rating based on LOND attributes. Machine learning will be applied to

the ratings algorithm to improve rating performance.

As Ethereum is a leading smart contract platform, this allows for interplay of LONDs with other Ethereum

based smart contracts. An example scenario is to use 3rd party predictive services and related smart

contracts to access LOND data to inform subscribed market participants of trends and future prices.

Another example is to access verified 3rd party Oracles (Ethereum based source of off‐blockchain external

data) as source of debtor credit rating.


1.2.2.2 Distributed LOND Trading Platform

A Web based distributed application suite to facilitate access to all LONDS functions for borrowers, lenders

and facilitators.

The LOND platform is abstracted from the underlying Ethereum network to facilitate co‐working with or

migration to other platforms in the future as required. This design goal makes LOND flexible and

extendable across to other platforms ensuring platform risks are minimised and to support multi‐currency

exchange when 3rd party solutions are not available.

Functions of the LOND platform include:

LOND Trading

The trading functions support selling and buying LONDS. It also allows for searching and reviewing LONDS,

bidding, transfer of payments and exploration of rich content. Typical functions would include:

‐ Ability to find and search for LONDs both those for sale and others for analysis. Search is based on

text and/or by specific field values

‐ Submit bids on LONDs for sale.

‐ Buy and transfer a LOND.

‐ Review transaction history including repayment

‐ Buyers posting LOND requirement allows LOND buyers to place effectively a buy order for LONDs

based on required attribute values. This may be a nonbinding bid, effectively an expression of

interest, or a binding bid where a smart contract will take the funding to automatically match up

with new LOND that meet the requirements. Buyers can cancel or time limit such orders.

LOND Management

These functions related to initiating a LOND, receiving fund and repayments. Facilitators will also use these

functions to provide certain confirmations and information such as contracts, collateral, insurances,

identity, etc.

LOND Aggregation

Anyone can re‐package and aggregate LONDS into a new aggregated LOND with enhanced attributes. As a

LOND portfolio, an aggregated LOND may have a lower risk profile.

Reputation System, Ratings, Rankings and Social

The reputation function will be an important element to support trust in the LOND market. The reputation

system will be applied to borrowers and facilitators with anyone in the system being able to provide

feedback rating. The system itself will automatically assign positive and negative reputation points based

on LOND performance such as on time payments, defaults, etc.

Additional external sources of ratings will be used where technically and commercially practical.

For some LOND issuers, such as larger borrowers, they may want to provide the market with interactive

Q&A. The application will support messaging and during the sale period that would be recorded.


1.2.2.3 Rich Content virtual cloud (RCVC)

The RCVC is a peer to peer synchronised decentralised service to support the storage and presentation of

rich content (e.g. websites with text, document and pictures). Such content has high storage requirements

and is not suitable or necessary to store on the blockchain itself. This content is intended to be public

viewable.

‐ Virtual cloud made by decentralised p2p servers with auto synchronisation.

o Torrent based data distribution and synchronisation.

o Data distribution algorithms driven by redundancy and read demand. For example, data is

divided into data blocks, each block stored in multiple locations. Popular content, such as a

new LOND with high demand load for content viewing, would be stored in more locations

relevant to location where audience is.

o Virtual cloud servers would provide a web server function with an internal service to find,

obtain and collate data blocks into a cohesive response for request.

o All stored data is encrypted in local storage to eliminate opportunity for direct local editing;

content can only be changed through editing browser by authenticated access.

‐ Each content element would be controlled by a specific key to permit for update by the owner.

‐ As LOND content is commercially relevant, RCVC will only allow content to be added. Previously

loaded content cannot be removed or modified and will be retained for historical records. The

system would support full and transparent versioning to allow viewers to see any past

modifications.

o Moderation. Inappropriate content would be flagged and removed from display, but still

retained. Such content can be flagged by owner or by viewers. As no content would be

removable, it would still be viewable or obtainable however it will be made difficult to

access, for example: require several manual steps, pictures obfuscated (fuzzied), content

emailed to requestor instead of directly viewed through browser, application of small fees,

etc.

o Retention. By default, content will be deleted 7 years after LOND is completed or

terminated. Editors have the option of extending content lifespan to address local

retention requirements or for other reasons with additional fees.

‐ Content is viewable by any standard browser and the latest version of the content is presented by

default. Users can easily see previous versions, their timings and update comments.

‐ All content would be public viewable however link would be non‐human friendly driven from

blockchain data related to a LOND.

1.2.2.4 Facilitators

LONDS are made to people and organisations and to ensure the debt obligations are legally recognised in

the various jurisdictions and to undertake due diligence and risk management, several types of facilitators

are required. These may be advisors, solicitors/lawyers, insurance providers, asset assessors, escrow,

guarantors, etc.

Facilitators would play a key role and the LOND Company will identify and engage relevant people and

organisations. The incentive for facilitators to participate would be related to new revenue streams. The


facilitator reputation system, combined with local in country contracts are used to safeguard against fraud

or collusion between facilitators and loan seekers.

LOND Company would engage, review and approve facilitators to provide various services. Depending on

specific jurisdictions, facilitators would be external partners rather than employees of LOND Company.

This is to minimise costs, increase the broader LOND network and hasten the speed of deployment to new

geographies.

1.2.2.5 Legal Framework

The interplay between paper and smart contracts is a key element of the solution. The physical contracts

will be kept by facilitating lawyers and LOND Company – depending on jurisdiction. The physical contracts

will be related and linked to the digital LONDS both on the contract and in the LOND data (on blockchain).

As this will include liens and rights on collateral, then the collateral, which would be physical world assets,

would also represented on blockchain through the LOND.

Depending on default rates for collateralised LONDs and the preferences of LOND holders, there is a

potential to digitise these assets specifically and allow these to be traded on the platform.

1.2.3 LOND Features and Functions

LONDS will be categorised and standardised for effective trading, automation, analysis etc. Therefore, bespoke loans, loans with data restrictions (private, confidential, commercial in confidence, etc), complex covenants or other attributes falling outside the standard types would need to be managed externally to LONDS until a suitable use case can be determined where LONDS can add value3. In simple terms, a LOND lifecycle would include the following major phases: 1. Definition and Issue. This is where a borrower, usually with the assistance of a facilitator would define and issue a bond. The initial sale of the LOND would be supported by a smart contract that collects deposits until the LOND value is realised. If that is not reached within a certain time, deposits will be returned to their sources. Potentially, the issuer may add a bounty (an amount of tokens) in the LOND issuance to attract lenders by providing an immediate return to lenders if a LOND is not successful (i.e. insufficient funds raised within certain time). 2. Initial LOND sale. The new LOND would be raised and depending on user preferences advertised to potential lenders/investors. Depending on LOND attributes, smart contracts may also find LONDs for automatic investment and/or aggregation functions. 3. LOND tradeable. When the LOND issuance requirements are met, the LOND will be live and tradeable. 4. LOND repayments. Repayments are made by the borrower through transfer into a smart contract that will distribute the amounts to the LOND holders (at specified time/frequency established at issuance). Repayments affecting principle would reduce the total LOND amount – in proportion to the current LOND holders – reducing the face value of the LOND. On time repayments would add to ratings; late and defaulted re‐payments would reduce ratings. 5. LOND Completion. Final repayments made to LOND holders would trigger completion of LOND, archival of LOND information, return of over payments, notice to LOND holders and improvement to rating.

3 When LONDs market place liquid then LONDs would be a competitive alternative to many bespoke loans.


6. LOND Default. Triggers such as delayed repayment(s) would result in launch of the default process. This would be a staged process of escalation utilising standard set of practices such as described in the following table: Step Action

1. Rating reduction 2. Notice to borrower 3. Notice to guarantor 4. Insurance claim 5. Minor Legal engagement (e.g. letter of demand, etc) 6. Acquisition of Collateral 7. LOND Holder engagement/decision 8. Debt collection agency 9. Major legal engagement (e.g. court) LOND Attributes There will be various attributes for a LOND and this list is indicative and not comprehensive.

Repayment interval

Repayment type (reducing principal or not)

Collateral

Issuer Rating

LOND rating

Facilitators

Currency

Category

Amount

Max issuance Level

Min issuance Level

Geography/Legal Jurisdiction

Insurer

Purpose

Issuer Name/Alias

Face value

Last trade Date, Qty and price/value.

Default Process

Guarantor

Collateral evaluation/Verification

Escrow

Risk Rating

LOND Categorisation To facilitate trading, LONDs are catagorised and the following table indicates the nature of the categories.

Type Amount Collateral Insurance/guarantor

1 <$1,000 No or Yes No


2 <$10,000 No or Yes No

3 <$100,000 Yes No or Yes

4 <$1,000,000 Yes Yes

5 <$10,000,000 Yes Yes

6 >$10,000,000 Yes Yes

LOND Aggregation

The aggregation feature allows a market participant to pool LONDs and create new aggregated LONDs easily. This addresses the analysis effort to find loans that match investor needs while diversifying and creating a portfolio. For the LOND market, aggregated LONDS provide a way to simplify LOND search and to improve net risk/reward. LOND aggregation provides the capability for portfolio management of LONDS and simplification of LOND selection and evaluation. The creator of an aggregate LOND may charge fees for the value‐added service in the form of a new blended rate or participation fee. The market can decide if the rate of return or the fee of the aggregated LOND is of value, based on the performance of the aggregated LOND for quality, risk and return. An aggregated LOND would be owned and managed by a LOND portfolio manager (LPM). An aggregated LOND would be formed by the LPM manually adding LONDS to the portfolio or through bots that find and, optionally, buy LONDs matching the LPM’s criteria. Aggregated LONDS are traded like any other LOND. Aggregated LONDs have other features and functions including sub‐accounts which are maintained by smart contracts for specific purposes such as:

To hold funds for purchase of more underlying LONDS

To pool repayments coming in in different schedules prior to distributions of the aggregate LOND.

To buffer in case of defaults in some of the underlying LONDs. The LPM can also use trading bots to automatically sell underlying LONDs and swap to a new preferred LOND. This would allow an LPM to have a self‐optimising aggregated LOND. Where an LPM provides direct surety on repayments, those would be supported by real‐world contracts. LOND Company will also create aggregated LONDS, usually focusing on the simpler aggregations, to provide easy entry for new participants. These types of simple aggregated LONDS would be based on currency, geography, loan purpose, lender rating etc.

1.2.3.1 Currencies and LONDS

LONDs and the LOND platform will be able to support a broad range of crypto and fiat currencies4. Initially,

this means:

‐ The borrower determines the currency of their debt and repayments which will be used for pricing.

‐ Money transfers on the platform will be via crypto currencies, initially with Ether.

4 Fiat currency is currency that has been declared by a Government to be legal tender without backing of a physical commodity.


‐ The LOND token would be a fee applied to trade LONDs on the platform.

To support the multi‐currency, the LOND platform will use 3rd party sources for currency pricing as

appropriate. Over time, 3rd party crypto currency trading/swapping will be integrated into the platform to

allow users to directly pay or receive in the currency of their choice.

With fiat, the exchange process would be undertaken by users through exchanges. As the platform and

network grows, integration to external services such as banks, debit card and exchanges may be

implemented.

The roadmap includes broadening the network beyond the crypto community with a web façade for fiat

based use of the LOND system. It is still to be determined if LOND Company will use local exchanges to

support fiat to crypto exchange or undertake the exchange function itself. The approach may change by

geography.

1.2.4 Solution Development Philosophy

The core elements of LOND solution is trading standardised legally enforceable debt supported by

blockchain and a service eco system of facilitators.

Use of New Technology

The crypto world is rapidly growing, developing and evolving with new technologies and approaches that

will create new innovative services. For example, there are services in various stages of planning,

development and release for identity management, credit rating, data storage, web hosting and distributed

computing. Depending on specific features and functionality these technologies will be flexibly used by

LOND Company to support the core elements of the solution.

Security and Safety

Security and safety is a focus of all development efforts.

To support this, in addition to the usual development practices:

‐ Developed code will be professionally reviewed and penetration tested.

‐ Quality processes throughout the development lifecycle will ensure positive confirmation that all

code is reviewed, tested and configuration controlled.

‐ Solution monitoring will also be utilised to track system and data changes to identify unusual

events.

‐ In memory data related to people, accounts or wallets will be encrypted.

‐ The code base will be made open source.

Community Engagement

LOND Company will proactively engage user and market participants for input and feedback on the solution

and providing transparency. In addition to supporting a co‐design with users in the solution development,

the global community will be expanded through the creation of the facilitator network and engaging

development capability globally.

Ease of Use


From a technical perspective, usability, effective UI and simplicity will be a focus of product design. This is

important when the solution will be at scale with large numbers of LONDs that can be traded.

From a commercial perspective, standardisation and automation will be used to create a low cost and high‐

quality service.

1.2.5 Solution Review

The LOND solution provides key features to create an effective market for LONDS including the provision of

different forms of information, standardisation of LONDS, Global 24x7 operation and usage of multiple

currencies. Many of these elements support effective development of trust necessary for person to person

loans. Additionally, to support trust,

‐ Participant Ratings

‐ Trusted and contractually engaged facilitators

‐ Public contracts

‐ Un‐mutable rich content

‐ Use of blockchain

‐ LONDs are tradeable and divisible

‐ Safe and secure trading system

‐ Facilitators with system managed reputations and ratings

The LOND solution removes costs related intermediaries and reduces sector costs related to debt

transactions, sales & marketing.

LOND empowers individuals through global access to diverse funders and provides a sense of community

including the ability to support charities and micro loans.

A successful LOND solution will be characterised by:

‐ A LOND market with millions of LONDs traded daily.

‐ Technology that is resilient, safe and easy to use.

‐ Facilitator network that is globally available, trusted and inexpensive/high value.

1.2.5.1 Evolution of the LOND Solution

When the LOND market reaches appropriate liquidity, it is anticipated that aggregated LONDs can

substitute for classic bank accounts – without the bank thus yielding lower risk and better rates of return.

The services related to the LOND bank account can then be extended with the use of additional solutions

and services such as integrations to credit/debit cards.


1.2.5.2 Examples of LONDS in Action

Adam needs a US$1000 loan to start a business importing plastic from China. As a “small” LOND, Adam can issue a LOND without collateral for 2 years. Adam needs his identity reviewed by one of the local facilitators and pays a fee $20 (determined by facilitator) who documents the loan on a standard contract. This specific facilitator is empowered to act as contract custodian and to confirm identity on LOND system. Once Adam’s identity has been confirmed, his contract is recorded and he and the facilitator create a LOND on the system completing all the necessary details such as duration, rate, etc. People see the request and some decide to loan Adam money. One person loans $100 worth of Ether, and several others provide the balance through bitcoin. Adam converts to $US and starts up business and repays loan back through the LOND system. When the loan is repaid the system acknowledges repayment and this adds to the credit rating for Adam. This would assist Adam for future loans, for instance to expand his business.

Judy, in Australia, is seeking a loan for a holiday to the UK and wants to borrow AUD$2000. This is a common holiday for many young adults in Australia and while she has little credit history, her mother will act as guarantor. Judy engages a facilitator and creates a LOND. Somewhere else in the world, Juan sees the LOND Judy created and notices there are many similar LONDs. Juan creates an aggregated LOND for “Aussies Holiday UK” and proposes his new aggregated LOND to UK tourist board to provide additional funding.

Henry wants to buy a new car for US$40k and issues a 5 year LOND to raise the funds with the car as collateral. He raises the US$40k, purchases the vehicle and makes repayments. A year later Henry has lost his job and is unable to make repayments and defaults. The default clause of the contract is exercised and the vehicle is reclaimed. The vehicle is sold and the LOND holders are repaid from the proceeds. Henry’s rating is reduced and the LOND is completed.

Kevin wants to help people, in particularly economically disadvantaged people in central Africa. Kevin searches for a LOND related to the location and finds an appropriate LOND. Unfortunately, the LOND is not currently for sale and so he makes an order offer for part of the LOND for $50, the amount he is willing to commit. To make it attractive, he is bidding above previous traded value which would provide an improved rate of return to the current owners. The current LOND owners will be notified as per their configuration. As Kevin waits to see if his bid is taken up, he thinks that it may be better to help on a new LOND rather than buy a previously funded one. He withdraws his bid and commissions a bot to publish his request and search the LOND market for new LONDs matching his criteria and then to fund the LOND automatically. Later an appropriate LOND is created by a small African business, the bot automatically purchases the LOND and Kevin is notified.


Melissa wants a home loan for an extension to her house in Australia. Melissa can borrow from a Bank at 4% and is considered a low risk due to her government income. As Melissa earns in AUD, she wants to borrow in AUD. She sees around the world that home loan rates in other countries are much lower than Australia and was hoping to be able to borrow at 0.5% which she thinks would be a reasonable rate in Japan. Melissa creates a LOND and attempts to sell it. Unfortunately, only 25% of the LOND is sold and not having reached the minimum funding requirement within the sale period, the funds are returned. From the questions and feedback from the initial LOND, Melissa thinks that she did not offer enough return on the LOND. She adjusts the interest rate to 1% and initiates the sale period again. A consortium of commercial lenders in Japan work out that they can manage the Yen/AUD currency fluctuation and still make greater return than alternative loans so proceed to purchase the new re‐priced LOND. The lenders exchange their yen for Eth, transfer the Eth to Melissa’s LOND contract. Melissa extracts the Eth and exchanges for AUD to extend her property. Melissa makes regular payments in AUD by converting to Eth and depositing it her LOND contract. The smart contract distributes the payment to the LOND holders. Some of the LOND holders, like the Japanese consortium exchange their Eth to Yen. Other holders have decided to keep their payments in Eth to purchase new loans to just as part of their individual portfolio financial strategy.

The company, ACME PTY LTD, wants to borrow capital to fund market expansion. Adopting a standard LOND contract enabled them to readily and easily access the LOND market to issue their debt. Due to the standardisation of LONDs, the fee structure was lower than traditional methods and they were able to reach a global market to raise funds. They included information about ACME including products and plans as part of their debt issuance and this resulted in an increase in their web traffic and business opportunities.

1.2.5.3 Future Opportunities and Options

Corporate and Treasury bonds.

Most of the language for the LOND solution has been focused on retail loans where the interest rates

spreads are high. The LOND can be used to replace corporate and treasury bonds as well even if these

types of bonds benefit from large bond markets because they still attract significant costs in fees (e.g. agent

fees 1‐5%, matching fees 0.2‐0.06%), charges and hidden mark ups. When the LOND network develops and

has enough liquidity, the solution would be better placed to support larger capital requirements.

Tokenisation of Assets

Liquidation of assets on defaulted loans can be undertaken through the LOND Market and thus creating a

path for asset tokenisation.

Charities

LONDs can be issued as a loan without repayments or interest to be a gift. Facilitation of such gifts will help

donations reach on the ground organisations without the intermediaries. Tax deductions for such gifts


could also be supported. Technical elements would be supported in early stages with the legal and

facilitation support to be developed in response to demand.

Crowd‐funding

The LOND platform could support crowd‐funding with options for consideration such as right to purchase,

access to content or other.


2 LOND Business Model

Like all elements of the new crypto world, success will be under‐pinned by user adoption and audience

growth to drive the network benefits. As such the solution and business model are designed to support

and benefit from scale and the network growth.

The business model is related to both the LOND Company which builds, extends and supports the LOND

solution and LOND tokens.

LOND tokens are required, as fees, to use the platform to create, buy or sell LONDs. These fees would be

scaled to trade size, and for the borrower will also be related to data usage such as that required for the

rich content. LOND tokens will be divisible.

All LOND tokens supplied as platform fees will be collected by LOND Company. The LOND Company would

use the LOND tokens to pay for functions such as development, marketing, management, hosting (some

RACV nodes), equipment, office expenses, other technology etc. Until token cashflow is positive, these

expenses would be funded from token sales and may require conversion to relevant fiat currencies. Where

possible, costs will be funded by LOND tokens directly without exchange to intermediary currencies.

Figure 5, LOND Token Flow

The increasing usage of the system will drive demand for the LOND token. The total number of tokens

available will be limited so the increasing demand for the platform and its usage will increase the demand

for the token and appreciate its value. The prices charged for platform usage would need to remain


relevant and competitive so an increasing token value would result in a reduction in LOND platform fees (as

represented in LOND tokens) thereby providing further support for the token value: a token will pay for

more trades as it appreciates. With scale, cost per trade in other currencies will also reduce. These

relationships are highlighted in the following figure.

Figure 6, Token Value to increase with trading volume

LOND tokens held in reserve by LOND Company or by token holders will further reduce the supply of

available tokens promoting more price appreciation.

The LOND Company mission is to build support for the LOND solution to appreciate the value of the LOND

tokens. This includes setting up the legal framework, the facilitator network and the technology. LOND

company will need to be sustainable, develop its staff and promote the platform globally.

The LOND company will not act as an intermediary for LONDs and not take on debt liability on behalf of

LOND issuers.

LOND Platform Trade Volume

Cost Per trade in $US

Cost Per trade (LOND Tokens)

Price of LOND Token

Value


3 Implementation and Roadmap

The implementation will be undertaken in 3 major streams: Technology, Legal & Process and Geography &

Facilitators. The streams are inter‐related and each release would be undertaken as a sub‐project. Each

release incrementally builds the solution and expands the geographies and jurisdictions where debt

contracts can be established and enforced.

The Solution Roadmap (in following section) would commence shortly after the completion of the initial

token sale. The first release is planned for end of 2018 and Releases 2 and 3 at end of Q2 and Q4 2019

respectively. Schedule and scope for Releases 4 and 5 will be determined during Release 3.

The team will be extended globally to attract the capability and to support the solution roadmap.

Coordination functions and leadership for Release 1 will be undertaken in Australia and this may change for

future releases.

3.1 Solution Roadmap

The roadmap covers the development of the LOND solution in the three dimensions: technology, legal &

process and Geography & Facilitators. The dimensions of development are inter‐dependent; for example,

the legal framework will support the technology functions and the growth of the deployment across the

multiple geographies.


3.2 Token Sales and Allocations

A total supply of LOND would be fixed at 1,111,141,110 tokens. The allocation of the LOND tokens will be

as follows:

‐ 45% for the initial token sale. Pricing and other elements for the token sales will be provided in

the sale Terms and Conditions and the lond.company website.

‐ 10% reserved for founders.

‐ 10% reserve for staff. It is anticipated that tokens will be distributed over a 5 year period.

‐ The remaining tokens, including unsold tokens, would be retained and, if required, used to fund

development, RCVC and network expansion while the ‘token cashflow’ from the platform is still

developing. After Release 3, access to the remaining tokens would be limited by smart contract to

10% per annum of the amount remaining at the start of each calendar year. In the scenario where

the ‘token cashflow’ is higher than required to meet needs of LOND Company, tokens retained in

reserve may never enter the broader crypto asset markets.

3.3 Use of Funds

Usage of funds from initial token sale or from platform fees will pay for development and support of the

technical products, the legal and process framework and building the facilitator network. Additional

expenses for marketing to build awareness of the solution and management & admin costs are also

considered. The first 3 Releases will be technology focused while later release will be more focused on

building the geographic footprint. After the major build releases, an ‘ongoing’ state is planned to be

sustainable with ongoing token cashflow. The ongoing state will be replaced by future roadmaps to

consider changing technical, economic and political landscape.

The LOND solution will scale technically and operationally with the minimum viable product achievable

with a small percentage of the initial token sale. Most costs will be made variable or independent of the

LOND company; for instance, the facilitators will be partners that derive their revenue as fees from

borrowers. The core costs to be borne by LOND company on an ongoing state will be maintenance for the

solution including technology, adjustments for legal changes, administration of facilitator network and

marketing.

Ongoing

Release 5

Release 4

Release 3

Release 2

Release 1

LOND Company Expenses per Release

Technology Legal & Process Facilitators & Geography Marketing Management & Admin


It is expected that after the initial 3 releases, further solution enhancements will be identified to extend or

expand the service offerings beyond geographical expansion.

3.4 Issues and Challenges

Every project has risks and issues and for the LOND Solution, some of the key issues are identified below.

Low participation affecting Market liquidity

Initially the LOND environment will have low numbers of users and hence lower liquidity.

To accelerate the speed of the network growth, the plan, besides marketing, is:

‐ Non‐crypto website as a facia to the LOND system to expand the audience of lenders and

borrowers beyond the crypto community.

‐ Engage small specialised lenders such as charities and not‐for‐profits to provide them with a

broader distribution mechanism.

‐ If available, use excess funds from LOND token sales to provide loan liquidity.

‐ Partner with in country P2P lenders to provide underlying technology and broader market

exposure.

Holders of Crypto assets may not lend in Fiat currencies

Crypto speculators and hoddlers who are expecting significant appreciation in their crypto assets may not

see significant financial benefit in funding fiat currency loans. This view would be dependent on individual

circumstances. LONDs could provide opportunity to those seeking to:

‐ Diversify

‐ Minimise their exposure to legacy financial institutions

‐ Support other people

‐ Obtain an improved return compared to alternatives

‐ Or a combination of the above

The LOND solution will a Web Façade and facilitator network to obtain non‐crypto world funding and LOND

company is pursuing partners for other funding sources.

Competing loan providers with cheap funding

In some geographies, there are loan providers with cheap sources of funding, for example: house loans and

some P2P lenders.

To manage this price based competition:

‐ Market differentiators: Global, based on blockchain, anonymous for lenders, tradable debt

commodities and contracts for the borrower without counter party risk e.g. bad banks calling in

debt.

‐ Trading fees would be repriced as required to remain competitive. The incentive for LOND

Company would be to increase trading volume.

Time to build LOND Solution


To improve time to build and deploy, LOND development will utilise available technologies where practical

and engage developers from multiple countries.

To provide the fastest path to build the solution, the initial LOND token sale will seek funds to build the

whole platform and deploy it to most geographies globally.

LOND Company will foster the community to support and extend the LOND solution including support for

open‐source code base and coordination of community developers.

Issues with Securities regulations

The LOND solution will be a challenge for a few jurisdictions however as there are already established P2P

lenders and Bond Markets in most Western countries securities compliance in those regions is expected to

be achievable. The plan is to commence in Australia initially as it is a stable smaller market, local to the core

team, crypto friendly and similar legal framework to other countries. Lessons there will support geographic

expansion to Commonwealth nations and other Western countries prior to South America, Asia and Africa.

LOND tokens, which are effectively ‘tickets’ to use the platform are not securities. The LONDs themselves

may be considered securities, depending on the jurisdiction. A significant component of the funding and

effort to implement the solution will be for LOND company and facilitator network to address and comply

with regulations.

LOND Company Ceases Operation (e.g. Bankruptcy or other)

LOND Company is intended to provide support to the LOND solution and expected to be a long‐lived

organisation however as risk mitigation, software be provided on public github and a community based

governance function is planned to be implemented so that the LOND solution can progress as a DAO

(Decentralized autonomous organization) beyond LOND Company.

After the planned build phase funded by token sales, the LOND Company is planned to enter a solution

sustainment mode of operation. In both phases, LOND Company would not be seeking to make a profit.

Scalability of Ethereum

Current scalability of Ethereum is not expected to support a full LOND implementation and planned usage.

The Ethereum roadmap includes performance improvements and if that is not sufficient, LOND

development will utilise its abstraction to utilise other platforms. In that situation, LOND Company will take

steps to maintain the value of LOND token created on the Ethereum network – for example by collecting

fees on the Ethereum network while executing trades on other platforms.

Currencies pricing and exchange fees

Borrowers and lenders needs to consider currency exchange fees when issuing or purchasing a LOND. The

LOND platform will provide pricing from LOND currency to transaction currency at time of transactions for

LOND sales and repayments. Conversion from transaction currency to LOND currency would be

undertaken by borrowers or lenders on exchanges external to LOND with separate fee structures.

For example, a LOND repayment in USD would be transacted in Eth with pricing at point in time of the

transaction. The borrower would deposit the Eth which would be sent to the lenders in that repayment


transaction with the USD value retained within the LOND transaction. The lender would decide on how to

manage their received Eth – e.g. convert to USD, convert to another or retain in Eth.


4 Glossary

LOND LOND means a loan/bond or tradeable debt obligation LOND Platform The distributed technology and environment to support LOND trading LOND System Another name for LOND Platform LOND Solution LOND Platform plus network of real world facilitators and legal framework

(contracts). LOND Token Crypto asset used as a fee paid by users to perform actions on the LOND

platform LOND Network The user and facilitator community – all the people involved. LOND Company The organisation charged with maintaining the LOND Solution.

lond whitepaper v0.19 due to its attributes such as purpose, currency, return, risk, etc. lenders...

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