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Blockchain technology, by creating the ability to provide trust between a borrower and a lender, has unleashed the opportunity to make loans accessible to more people, especially the millions of underbanked.

Prior to the blockchain, it was next to impossible to measure the objectivity of loan information without a central authority. But with blockchain technology, it is now possible to conduct financial transactions without having to trust intermediaries.

Gluwa, Inc., a San Francisco based blockchain technology provider, and Aella Credit, a Nigeria-based provider of instant loans via an app, have partnered on Creditcoin, a blockchain agnostic investment protocol that allows investors to lend money in any cryptocurrency, and directly connect lenders and borrowers.

Gluwa currently offers one of the first bitcoin-based platforms designed for everyday use, providing bitcoin’s accessibility in the fiat currency ecosystem. Gluwa links cryptocurrency investors interested in assuming the volatility of cryptocurrency and allows businesses and individuals to use cryptocurrency without the volatility risk.

Aella Credit, which will serve as Creditcoin’s distributor, already provides instant loans to Africans who have a verifiable source of income, thereby providing financial services to the underbanked. The company has the top-ranked financial app in Nigeria, and is expected to acquire 1 million users in 2018.

Where the traditional P2P market took a long time to establish lender/borrower trust, the Creditcoin network has been designed to store fundraisers’ credit history, allowing investors to make independent risk assessments.

Delivering Trust And Access

The project addresses two of the biggest challenges facing the financial services industry: trust and access. Lenders historically have had to use third parties to facilitate lending, and the financially marginalized could not gain access to loans.

Through the creation of its own Creditcoin token, the project also addresses the challenges of slow transaction confirmation, high fees and volatility that cryptocurrency presently faces in the existing financial ecosystem.

Under the Creditcoin project, Gluwa and Aella Credit have teamed to adapt $600 billion of capital that is presently disconnected in separate blockchains.

The project is backed by multiple Silicon Valley investors including Y Combinator, 500 Startups, VY Capital, Zeno Ventures and other notable investors — including Brian Armstrong of Coinbase.

Creditcoin’s blockchain agnostic investment protocol will allow investors to lend in cryptocurrency. An investor, lending in the network, and a fundraiser, a borrower, are able to find one another in the Creditcoin network.

How It Works

The network will match offers from investors with fundraisers. The fundraiser will post the amount they are seeking, the interest rate and the collateral. The fundraiser will also add a certain amount of Creditcoin to the offer. An investor with matching conditions can then agree to the deal. Once the transaction occurs, the system will verify the exchange of collateral and investment, and the Creditcoin is sent to the investor.

Investors can access the credit history of a fundraiser on the blockchain to assess the risk of a potential investor. The fundraisers can provide more information about themselves to gain more favorable terms. They can share credit history without providing personal information.

An investor can pledge new capital by pledging a specific amount and collateral with a specified expiration time.

An investor can also directly request a new repayment order from a fundraiser to receive the investment back to the network, specifying a fee, collateral and interest.

A fundraiser at any time can submit a new bid order.

Creditcoin runs on a proof-of-distribution protocol, where blocks are created by miners that invest capital.

Fundraisers pay Creditcoin tokens to raise funds. Credit miners, in turn, earn tokens by offering an investment. Retrieval miners earn tokens by returning an investment.

The Creditcoin Protocol

The Creditcoin protocol is built on four pillars:

• A decentralized credit network of independent capital providers offering investment and retrieval services.

• Proofs of investment. One proof of investment allows investment providers to prove the fund has been invested in its digital wallet, while another enforces proof-of-spacetime to allow investment providers to prove they have invested over a specific time period.

• Verifiable markets. The investment requests and retrieval requests are modeled as orders in a decentralized, verifiable market. The market ensures payments are performed when a service has been provided.

• Useful proof-of-work is created based on proof-of-spacetime that can be used in consensus protocols. Miners do not waste computer power to mine blocks, but instead, invest capital in the network.

The network verifies the lock is in the valid format, that all transactions are valid, that all orders are valid and all proofs are valid.

Gluwa, Inc. will conduct a public sale, having already completed a private sale and raising enough capital to oversee the technology development.

The lending market represents one of the biggest financial subsectors with a market value estimated to exceed $100 million in 2013.

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