The Lendroid Deleuze Flywheel

Vii Sundaram

Deleuze is designed to be a perpetual financial engine. These are the three core rules that keep it running. 

Researcher and author Jim Collins first constructed ‘the flywheel’ concept in his book ‘Good to Great’, the culmination of a five-year study on whether good companies can become great companies and if so, how. 

It’s a simple analogy. A flywheel needs significant effort to get started, but beyond a threshold, it becomes self-sustaining. In the context of an organisation, the flywheel is a set of unchanging decisions. The flywheel for Amazon, for instance, is this – great customer experience, which leads to more traffic, which leads to more sellers on the platform, which leads to lower prices of products, which pushes great customer experience. As a concept, it is ubiquitous in corporate literature; it really caught on among eager management looking to define their own flywheel and move from good to great.    

In the case of Lendroid, a foundation, the flywheel is employed not to reach some target of profitability, but to make this Deleuze version of the protocol a perpetual financial engine. This can happen only if the protocol ensures viability, dependability and the possibility of evolution to the participants. 

The Lendroid flywheel is simple. Viability – Stability – Cyclicity. Let’s spend a moment on each.

Viability

A financial protocol must speak the language of viable opportunity. You should be able to make money in a myriad of ways, based on how token-savvy you are, and what kind of a risk appetite you have.

  1. You can be a lender, contribute and make money without risk. Yeah, we mean that. As a lender, you have No exposure to potential black swans or flash crashes. If you’re familiar with how staking works, this is similar. You put in some coin into a liquidity pool, you hold those poolshare tokens, which you can redeem when you want to. If the pool does any business, you get a profit at redemption. If not, you still walk away with what you put in, in the first place.
  2. You can be an underwriter who, unlike a lender, contributes to a liquidity pool that takes on the collateral risk of loans. Because you exist, the pool operators are able to offer interesting collateral ratios and loan terms. Because you exist, a loan is now risk free by design.
  3. You could be a pool operator. This is new. Running interest pools is usually centralised. But here, you can start your own pools, optimise them to determine collateral, collateral ratio, length of loans, by designing new tokens which capture all of these features. Pool Operators are incentivised to craft loan packages that the market wants. In fact, their relevance depends on it.
  4. You could be a number cruncher. Each of the players on the protocol will need solid insights – about pool performance, repayment history, loan risk and so on. Be the one to provide these insights.

Stability

When you’re building on something, like your business or career or your life’s savings, you want to know it’s not all going to crumble beneath your feet one day.  

All the loans on Lendroid are 100% secured. If there is 100 DAI going out, by the end of the expiry, it comes back. Before a loan goes out, it’s secured by collateral, on top of which an underwriter takes up the collateral risk upon herself. So the money never leaves the system. If the system gives out money to somebody, somebody else owes the system in turn. 

For a lender, there really is no risk. For an underwriter, the risk is crystal clear, unambiguous. For the borrower, the cost of the loan is fixed, and paid up front. The risk of collateral is covered by the underwriter, the borrower pays for this too, when purchases ‘shield’ tokens that cover the risk.  

In this system, liability is never carried forward. By the end of every cycle, the liability is 0. We don’t take care of liabilities by having flash auctions or arbitrary liquidation. We don’t need to, because the system is inherently symmetrical.

Stability all through.

Cyclicity

The world is moving towards automation. People would rather have automated processes than deal with other people or institutions. And that’s not just because we can or because it’s convenient. It’s because there is a huge and irreversible trust deficit right. The answer is not to build a system you can trust, but to build one you don’t need to. A trust-independent system.

The system is designed to be stable, but there needs to be a way to settle the accounts, or risk will accumulate. Now, there are advantages to perpetual systems. If the collateral is never liquidated, you never have to take care of your loan. In theory. When it does go down, and you are unable to access your system, it’s a disaster. 

On Lendroid, the expiry date is very obvious and very profound. Until that day, you need not go back to it at all. The person who has given a loan, taken a loan, sells new primitives; everyone will have to come back to take care of business at a designated time. The system is refreshed, and remains young, untethered by the burdens of a previous cycle. 

Because of the cyclical nature of the system, you can set your calendar to your loan’s expiry. The beauty and unbeatable peace that predictability brings.  

So, Viability – Stability – Cyclicity. Test drive the protocol. See if the flywheel works. Tell if it does, tell us where it doesn’t. We built this far for you. We’d like to build further, with you. 

Leave a Reply

Your email address will not be published. Required fields are marked *