What is an ILP (Initial Loan Procurement) and why it will revolutionize finance [Agrello]

There seems to be a lack of awareness around ILPs, despite that one's happening very soon, and a lot of confusion if that. This post will try to explain what ILPs are and their significance to finance.

TL;DR: ILPs (Initial Loan Procurement) disrupt the global debt capital market and has the potential to become bigger than ICOs.

... Here it goes, Blockchain is revolutionizing finance, especially capital markets, which allow companies (and even governments) to raise money from investors globally.

Let me first talk about how companies and governments raised investor money traditionally (and now):

Companies can either sell stakes in the company or equity. This is done by issuing stocks and stockholders share the company’s profits. Likewise company losses are stockholders losses and companies aren’t required to pay the investors back. On the other hand, companies can borrow from investors by issuing corporate bonds. Although bondholders don’t share in the company’s profit, they will be paid back their original investment + interest unless the company goes bankrupt.

Governments can issue government bonds to big investors as well and the logic works the same as corporate bonds. Since the government is deemed less risky, government bonds typically have lower interest rates. Examples are US Treasury bonds.

When companies/governments first issue these financial securities, they are issued in what is called the primary market. The average joe does not participate in this market. The big banks and institutional investors are the usual investors. After this, the already-issued securities are traded in the secondary market which includes retail investors like the average joe. Ex. Stock market

Then there’s the private capital market. All companies start private and once they get big, they might go public and list on one of the stock exchanges. Ex. Uber is currently a private company valued at $70B, and they are supposedly planning an IPO soon. Only then, would the average joe be able to buy Uber stocks and invest in the company. So who invests in these private companies early on? Big institutional investors such as Venture Capital firms (VCs) with lots of money get to invest early on for equity and if the company takes off, they could multiply their investments by orders of magnitudes.

This was how things were done TRADITIONALLY. With Blockchain technologies, modern finance is changing. Initial Coin Offerings provide companies (and governments) with a whole new way of raising capital. It’s easier, faster, and the whole world gets to participate. Although coins are not 100% like stocks, a lot of them behave that way: Many tokens will profit if the issuing blockchain company becomes successful. (For example exchange token holders earning trading commission fees). Like stocks, there is no legal obligation for the company to pay the investors back their original investment. Initial Coin Offerings serve as the primary market and exchanges like Binance serve as the secondary market. This change is happening extremely fast. In 2017, more money was raised with ICOs for blockchain startups than ALL of Venture Capital. Pretty much EVERYONE can participate in these ICOs as well as trade the tokens once they are listed on exchanges.

This is why regulators are going crazy about cryptocurrencies right now. Throughout history, financial market crashes have devastated many lives, and each time regulators stepped in with rules to protect consumers. Let’s not debate the pros and cons of regulation here, but it’s just the way things are. With cryptocurrencies, regulators see more risk than ever for consumers as now regular people are participating not just in this unregulated secondary crypto market, but in primary markets as well through ICOs.

Meanwhile, the global debt capital market has barely been disrupted by blockchain tech. If anything, there are many crypto projects in the works for peer-to-peer lending, but there is only one project that I know of focused on disrupting the public debt capital market: Initial Loan Procurements (ILPs). A fundraising structure developed jointly by Blockhive & Agrello, this has the potential to grow even bigger than ICOs (The world debt market is way bigger than the world equity market). On January 26, 2018, through an ILP, Blockhive will be the first ever company to raise capital by decentralized crowdfunding of debt.

To summarize Blockhive’s ILP: they are attempting to raise 13.5M Euros (in Ethereum) from investors. In this decentralized world, anyone can participate. The loan period is 10 years and the interest is 20% of blockhive’s operating profit. For example, if I lent Blockhive $1,000 through this ILP, I will be repaid this principal in 10 years, and also earn interest over that period (In Blockhive's case, 20% of Blockhive’s operating profit will be distributed across the lenders. Could be different for new ILPs). Furthermore, the ILP structure issues Future Loan Access Tokens (FLAT), which will allow me to sell my loan contract in the secondary market, if I don’t want to wait 10 years to be paid back. Each ILP will have its own FLAT to provide liquidity in the secondary market. Blockhive's FLAT is also called HIVE tokens.

All ILPs are powered by Agrello's legally-binding smart contracts (loan contracts between each creditor/issuer), and digital identity/signature solutions. The token utilized these products is trading on Binance as DLT.

This is HUGE. Instead of issuing traditional bonds, corporations and governments can participate in this decentralized form of crowdfunding loans. It’s fast, easy, and the whole world can participate.

The financial revolution is now just starting.