LendingRobot is Moving Investment Records to a Public Blockchain
LendingRobot is Moving Investment Records to a Public Blockchain
Alternative lending platform LendingRobot has taken its first step toward moving the assets it currently manages to a blockchain.
As part of its newly launched LendingRobot Series of investment products, the platform – which has $120m worth of assets currently deployed – will begin to post detailed accounts of some of its investments to the public ethereum blockchain.
The investments themselves will still be conducted off-blockchain using the P2P lender’s existing infrastructure. But the process of hashing detailed, anonymized accounting records to a blockchain marks the beginning of a broader plan.
In conversation with CoinDesk, LendingRobot co-founder and CEO Emmanuel Marot explained how moving some of the workload to a blockchain in the future could make the platform more trustworthy, while at the same time providing opportunities for increased revenue.
“We’ve got machine learning to make the selection, we’ve got cloud computing to do the execution, and the reporting is a mix of web interface, mobile application, and the blockchain technology to ensure that we are not lying about anything,” Marot said, adding:
“Moving forward, I would love to be able to make the execution layer itself by smart contracts.”
Currently, LendingRobot uses a machine-learning algorithm to identify lending opportunities made available to non-bank creditors by way of platforms such as Lending Club, Prosper, and Funding Circle. Then, the firm executes those loans using Amazon’s S3 cloud computing platform, reaching 6,500 clients.
With the LendingRobot Series of investments announced today, the data will be hashed on the ethereum blockchain to establish the “proof-of-state” for the entire portfolio.
LendingRobot, which has raised more than $3m in venture funding to date, plans to hash its first data on the ethereum blockchain when the first loan in the series takes place, which the company expects will occur next week.
From there, the startup will publish the anonymized data every week moving forward.
Harder to cheat?
Clients will be able to download a file of the data from the Amazon platform with a record of the hash alongside each file. Investors and auditors can then take the downloaded file, run it through the same hash algorithm the company uses, and verify that the hash matches.
After testing the SHA3_512 hashing algorithms, LendingRobot selected the BLAKE2 algorithm co-developed by Zcash founder Zooko Wilcox to encode its records.
“This is where the blockchain comes in,” said LendingRobot technical lead Kevin Audleman. “When we publish the hash of our ledger, we also perform a blockchain transaction that includes the hash in an easily-verifiable way. This creates a permanent, immutable proof of the state of our ledger.”
For the time being, trust in LendingRobot is still required. But not for long, if Marot gets his way.
Citing concerns highlighted by the ouster of Lending Club co-founder Renaud Laplanche last year, Marot says non-banking lenders need a better way to be able to trust the companies that connect them with borrowers.
In the case of Laplanche, he was accused of falsifying numbers in order to to make a $22m lending opportunity look more advantageous than it likely was.
In order to make P2P lending truly trustless, Marot says two things need to happen. First, the execution of the loan itself needs to move to autonomous code, or smart contracts, run directly on the blockchain.
Second, his counterparties at Lending Club, Prosper, and Funding Circle need to embrace the tech as well.
“I do hope that lending will go to this, the platforms themselves contributing to this,” Marot said. “The way today we are able to do this is painfully old-school.”
Currently, LendingRobot is subject to an annual audit, during which the books are opened, and the auditor hired by the firm does their best to ensure that all the investments actually are where they’re supposed to be.
While customers themselves are able to view the status of individual investment notes at any time via the website or mobile app, they don’t have the accountant’s access to detail.
By moving weekly updates to the ethereum blockchain, Marot believes LendingRobot has taken a step towards making both the official audit and the customer’s verification easier and more granular.
“The good thing about putting it on the blockchain is that the auditing itself will be much simpler for them, so that’s cheaper for us,” said Marot.
“But we have to start with this ugly mix of human interaction and technology.”
A new kind of product
In addition to the blockchain interaction, LendingRobot today announced four new investing opportunities.
Collectively named the LendingRobot Series, the investment opportunities are a way for investors to split their resources between loans to consumers, small businesses and real-estate investors, diversified across the partner ‘peer lending’ platforms.
While the alternative lending platform is already part of a larger fintech movement that seeks to cut banks out of the equation by connecting lenders directly with borrowers, Marot envisions future investment products powered by a blockchain that might even remove him from the equation – for a fee, of course.
Should the day come when the execution phase of his investments ever moves to self-executing code on the ethereum blockchain or another blockchain capable of supporting smart contracts, Marot said he imagines tools with which counterparties could simply choose their preferred terms and truly connect directly.
Instead of being concerned about the potential that his company might one day be largely smart contract-driven, Marot expects potentially new investment opportunities to open up.
“It would be faster for us, it would be faster to distribute, it would be safe, more transparent for everybody, and it will get to a point where even for originators it will be better. Even before issuing a listing, they will be able to know if there is investor appetite,” Marot told CoinDesk, concluding:
“That’s definitely the way we go.”
Article Source: http://www.coindesk.com
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