LSX. One exchange to unite them all
LSX is the world’s first invoice exchange built on the blockchain. Invoices bought from alternative finance marketplaces around the world will be traded on this secondary exchange. LSX allows trading in fiat and cryptocurrency, including bitcoins and ethers, and is due for public release in late 2018.
The US$90B cryptocurrency opportunity
Today, alternative finance is worth US$90B per annum. The majority of the financial assets that underpin these investments cannot be sold once bought and they can be traded in fiat currency only. This is about to change.
LSX behaves like a stock exchange, where investors from all walks of life can trade any cryptoassets backed by an invoice, in fiat and cryptocurrency. LSX will provide investors with greater liquidity, and grant bitcoin investors greater access to alternative finance investments that previously were traded in solely fiat currency.
“The LendingStar Crowdsale provides an opportunity for a broader community to access an investment asset class that was previously the reserve of institutions and high net-worth investors.”
– Gakim Solomons, Founder and start-up advisor, Foundry Partners
Our first customer
The third-party marketplace that will become LSX’s first customer will be the LendingStar marketplace, in 2018. Launched in 2017, the LendingStar marketplace is expected to generate US$5M in purchased invoices in 2017 and more than US$150M in 2018, growing annually at an average of 300% in the next five years.
The marketplace and the exchange combined will generate US$380M in transactions in 2018 and nearly US$6B by 2020.
We’ve been busy
US$200K projects funded in the Ukraine market.
Raised US$500K in seed funding.
Pivoted from lending to invoice buying.
Planned LendingStar Marketplace public release.
Planned LSX public release.
LSX built on blockchain technology. Blockchain provides data storage and transaction execution decentralization that make this process transparent and auditable for all involved entities. All user accounts and transactions history are stored in different locationsa and any changes in the database require reaching a concensus. Blockchain keeps all user accounts secure even if ledger is publicly available. Trasparency and privacy: 1. Transaction is processed by users that are directly involved in a transaction 2. Each transaction results to a cryptographically signed confirmation 3. Transaction metadata is available only for entities that are authorized to access it.
Can investors from the US or Singapore buy LST?
Yes, LST is not intended to constitute a security in any jurisdiction.
The crowdsale terms and conditions and any other documents relating to or in connection with the LST and the crowdsale shall not be construed as a solicitation for investment and do not pertain in any way to an offering of securities in any jurisdiction
Does LST give me shares in the company?
No, LST is not connected with shares in the company or any other method of distributing the company’s profits. LST is fuel for the LSX and can be used only in the LSX.
LST is not intended to constitute a security in any jurisdiction.
Of course, LST will be traded on the third-party cryptocurrencies exchanges, but the company cannot guarantee or regulate the price of the LST. We have an expectation for the LST price, as outlined in our business plan. The price of the LST will depend on our business activities and the speculative interest of the market.
Are you regulated by the government?
Lendingstar Marketplace is self-regulated. We are required to take steps to do history checks and verify the identity of both investors and small business owners on our platform. We also conform with the Anti-Money Laundering policies set out by international regulatory bodies. As we roll out to new countries, we expect some governments to impose regulations.
For LSX, a suitable license does not exist yet. Therefore, we are negotiating with the MAS about various options for licensing a similar business. Before the end of the development process of the LSX, all documents and processes will meet the requirements of the MAS.
Can you explain ETRA in one sentence?
ETRA is documentary proof that an investor owns all or part of an invoice, and is held on the marketplace as a PDF, automatically created and signed with an audit trail at the time of the sale. ETRA is awesome.
You call yourselves LendingStar, but you don’t lend.
In mid 2016 we pivoted from lending to invoice buying. We decided to make invoice buying the underlying asset, as it is a safer investment for retail investors. Invoice buying requires little financial knowledge on the part of the investor.
Why will the value of tokens rise?
As the volume of transactions rises, we expect the price of tokens to rise. The larger our market accelerator, the more countries we will enter, and the faster the volume of transactions will grow. As the volume rises, we expect the price of LendingStar tokens LST to rise due to scarcity.
How can you protect my principle investment?
The buyer can elect to add insurance to their shopping cart before checking out. The cost of insurance is very small—a few dollars, calculated against an A grade debtor. We have shortlisted several insurance companies who will offer a worldwide solution. Eventually we will build the insurance directly into the product.
Why is invoice buying safer for investors on the LendingStar marketplace than P2P lending?
There are a few ways to answer this question.
1. Risk. When you loan money, the risk of default is calculated against the small business. Many small businesses have a short trading history, and for the ones that do hold financial records, verifying these records is time consuming, so the interest charge will be high. A better proposition is crowd buying invoices. The risk of buying an invoice is calculated against a multinational company with a better credit history and who is compelled to pay the invoice. We look for A grade invoices to large, well-known multinationals that pose small default risk. The firms have a zero default rate—the equivalent of a government.
2. Ownership. Many invoice marketplaces claim that invoices are bought and sold, but rather invoices are loaned against. A loan is not as strong as ownership. Every country has laws that support the legal transfer of ownership of an invoice. An invoice is treated as an asset on the balance sheet and continues to be treated as such after ownership is transferred. In the past, legal transfer was expensive and time consuming. We created the Exchange Trade Receivables Agreement, or ETRA, to address this problem.
3. Collection. When an invoice is sold to an investor, the small business has no legal claim. The investor becomes the rightful owner. The funds are paid by the customer into the marketplace trust account and settled between the marketplace and investor. In a P2P lending, you are required to wait (and pray) for the individual to settle with you, as the platform takes no responsibility for collection.
Who are your competitors?
Marketplace. Our marketplace theoretically competes with banks, alternative finance like P2P lenders and crowdfunders, and emerging bitcoin lenders. In Malaysia there are no known invoice trading platforms; a few operate in Singapore. There are some big differences from other invoice trading platforms. Our platform permits crowd buying and there is no requirement for supporting documentation other than a copy of the invoice.
LSX. The exchange does not compete with banks and alternative finance like P2P lenders. Instead LSX treats this group as customers. There are no marketplaces to our knowledge that offer an exchange service, despite the fact that companies may call their business an exchange. Once the investor buys the invoice, they are stuck with the invoice to maturity. An exchange implies that an invoice can be bought and resold, but this mechanism does not exist in either a traditional or blockchain build.
What security does your marketplace offer investors and small business?
Security and personal data protection are paramount. The LendingStar platform has been designed to maintain the same confidentiality guarantee as physically segregated ledgers, and also to provide the same data integrity assurances of typical blockchain solutions. This is achieved because the parties involved are physically segregated and locally store confidential personal and contractual information. They only share globally replicated “marks” of the sensitive data.
Why do interest bearing bank accounts return less than 1 percent per annum?
There are many theories. One point of view is that banks are unable to charge fees for ATM transactions and other services, so they offset these expenses by offering little interest.
Do you have a credit scoring algorithm?
No, we do not use automated scoring algorithms. Each customer marked on an invoice sold on the platform will pass an internal credit analysis and an approval process that are part of our underwriting procedures.
Are you a P2P or crowdfunding start-up?
Technically we are neither. We are not a P2P lender, because we permit both individuals and companies to buy invoices, and because we are not a lender. We are not crowdfunding because we do not offer funding. We are better described as crowd buying. That means a crowd of investors can participate in the purchase of a single invoice.
While the earliest lending platforms (e.g., Prosper, LendingClub) began with true “peer-to-peer” models, the majority of lending capital is now provided by institutional investors (hedge funds, insurance companies, and banks). This shift explains why many refer to the space as “marketplace lending,” reflecting the broader lending community.
What is the difference between the marketplace and the exchange?
We are building an invoice marketplace (LSM) and an invoice exchange (LSX). The LendingStar marketplace is built and will be available to the public in late 2017. LSX or LendingStar Exchange will come online in 2018. LSX is the game changer, as it will be the first invoice exchange built on the blockchain. LSX will provide liquidity to investors who buy financial assets either on the LendingStar marketplace or a third-party marketplace.
What is the marketplace accelerator?
LendingStar plans to ensure liquidity by buying up to 30% of invoices listed by small business owners. The marketplace accelerator will stimulate trade, create interest among investors, and help get invoices fully funded. There is a direct relationship between the market accelerator and volume. If we deploy the full market accelerator, we can hit our volume targets. In 2017 we will do US$5M in projects. By the end of 2018 we will have funded US$380M.
Some other marketplaces have taken similar action to stimulate their marketplaces, including SoFi.