A Boise company that intends to use blockchain technology to fund commercial real estate investing has issued its first loan.
The LendingCoin, which has raised $2 million from friends-and-family investors, is lending $345,000 to David Ngo to refinance his business La Vie Nail Spa, said Mindy Ngo, chief marketing officer for The LendingCoin. La Vie Nail Spa is next door to the The LendingCoin offices, in the Boise Tech Mall, she said. “It makes it easier that we know the owner,” she said. “This is our case study. We didn’t want to spend it all on a huge loan with people we don’t know.” The company expects to issue another commercial loan in two months that she was not yet willing to disclose.
The advantage for the borrower is he gets his loan at 0.25 percent below prime, said Ngo. “With his credit earlier, he was 0.5 percent above prime,” she said. The system is also secure against hacking and is transparent due to its use of blockchain technology, she said.
Blockchain is defined as “a digitized, distributed ledger that immutably records and shares information” by Deloitte. It is used to create, or mine, digital currencies such as bitcoin, but a number of industries are looking at the underlying technology for other purposes.
The LendingCoin itself, which uses the Ethereum blockchain, issues its own digital currency, known as tokens. “The borrower pays a fixed monthly payment in U.S. dollars, and The LendingCoin converts the dollars to tokens to satisfy the debt on the blockchain,” the company explained. “The tokens are used as a repayment medium, leading to continuously renewed demand.”
Real estate is considered to be a prime opportunity for blockchain technology. “Among the core [commercial real estate] processes, leasing and purchase and sale transaction processes are ripe for blockchain adoption, as it can take advantage of its inherent benefits and meets the prerequisites for using the technology,” wrote Deloitte in its 2017 report, Blockchain in commercial real estate: The future is here! The company would not comment on the The LendingCoin offering specifically.
The LendingCoin filed with the Securities and Exchange Commission (SEC) in April of its intent to raise $69.5 million to launch a blockchain-based real estate lending platform. The Reg D 506c filed with the SEC indicated that the company had raised $80,000 from four investors. In addition, the company reportedly installed a bitcoin automated teller machine in the Boise Tech Mall in December, which lets people deposit money and convert it to bitcoin.