BMJ Score: 2.9
Quick Summary20 Investors read this
CommentaryThe lending market is ripe for innovation, and Residual’s platform aims to apply blockchain to combat rising interest rates, rising costs of servicing and collecting loans, inadequate protection of personal information, and inefficient processes .While this is a great market space, the competition is heavy, and without a working MVP, Residual does not do much to fully differentiate. This project is in its very early stages, and the team is small. While the two founders have a good amount of industry experience and a track record for success, they do not yet have a dedicated engineering team to propel the project forward. The token economics behind Residual have potential to be successful as the token will serve both as a utility and equity token to help drive demand. Another area of concern we have is the lack of press and marketing for this platform. It is nearly impossible to find information on Residual, and with the lack of a working platform in a heavily saturated market space, we are not confident that this project is mature enough at this time. Hopefully, Residual can grow their team and turn their whitepaper into reality to make us feel otherwise.
- How to invest: The exact terms of the presale have not yet been formally announced until they officially complete the private sale. If you would like to join the presale mailing list, follow the link and sign up.
- Discount: Presale investors will enjoy a ~25% discount.
- Eligibility: Restricted areas include US, China, and Singapore.
- Token Price: Pre-sale tokens will be marketed for $1.15 per token (discount included in price).
- Jurisdiction: United States
- Problem addressed/solved: Borrowers have been cut off from certain avenues because of restrictions put in place by regulators. Lenders have similarly faced higher costs of capital or specific covenants preventing lending to certain restricted classes. As a result, lenders have faced margin compression, and borrowers have faced higher funding costs disproportionate to actual observed defaults.
- Target customers/customer/ segments/verticals: Residual is a platform for qualified borrowers and established lenders to find each other in an easy and transparent manner.
- Value creation: Residual lowers barriers to capital to qualified borrowers and provides a profit incentive for lenders already tooled to originate, fund, service and portfolio loans. Residual’s protocols expand traditional lenders’ existing product lines, optimize its origination processes, and automate servicing capabilities. Built on the blockchain, the system is mostly trustless with the exception of certain assessment protocols and fund transfer activity.
- Competition: Early blockchain adopters have quickly realized the massive impacts that they could have on the lending/borrowing side of finance. A few other platforms that offer similar features to Residual definitely already exist, but Residual believes that their unique lending model separates them from the competition. For more information on the Residual’s competitive advantage, see page 27 of their whitepaper.
- Market size/potential: Residual is certainly entering a niche market of borrowers and lenders who not only feel comfortable using a blockchain application for loans, but also believe in the transfer of digital assets as a legitimate operation. Residual could be a bit ahead of its time, but will likely find more success the longer it operates.
- Regulatory risks: Regulations around digital asset-backed lending have not yet been codified by the government, and thus are subject to comply with existing fiat lending regulations. There are also government regulations around the Know Your Customer (KYC) protocol for borrowers. Security of the contracts themselves will require continuous auditing of blockchain transactions.
- Investor value: The RSDL-L token affords many privileges, including the limited ability to participate in the development and execution of Residual’s business plan via voting rights regardless of the number of tokens one holds. In the future, holders of the Residual-issued (“RSDL”) currency tokens will incur deep discounts for the services offered on the Residual platform.
- Disclosures: Residual has a solid whitepaper that shows the plans for the project until the end of 2019. The whitepaper has some great information, but the organization/visual aspects could definitely use some work. It’s almost unbearable to read more than two pages due to massive paragraphs, no visuals, and a lengthy 66 pages of content. If the team wants to generate more interest, they should have a one-pager or lite paper that can summarize the project in an effective manner.
- Token distribution: 46% residual pool (Usage will be to the discretion of the Founders once unlocked), 17% Residual founders, 15% incentive for consultants and engineering team, 2% bounties, and 20% token sale.
- Caps: Soft cap: $2.5 million USD; Hard cap: $10.5 million USD
- Use of proceeds: 50% development, 20% marketing and growth, 5% security, 20% legal, and 5% hosting & infrastructure.
- Track record: The Residual team might be the smallest of any pre-ICO reviewed by BMJ. The two men holding the group together are Howard Krieger and Ryan Medlin. Krieger specializes in the valuation of complex financial instruments including cryptocurrency loans, interest rate swaps, agency and non-agency mortgage-backed securities (MBS), and collateralized debt obligations (CDOs). Howard has an MBA from Rutgers Business School with a concentration in Quantitative Finance. Medlin is an experience Silicon Valley entrepreneur and technology enthusiast who recently sold his proximity tracking measurement company, Datasnap.io. Although one might immediately write off Residual for having just two core members, the project does have 13 advisors on board. Residual should still look to hire more talent for the core team if they truly want to grow the company.
- Integrity: The Co-Founders of Residual clearly have decorated resumes with experience in finance, tech, lending, VC, and more. Regardless of their past accolades, they must hire more core members to improve aspects such as marketing, operations, and community outreach. It’s not that we question the integrity of either Krieger or Medlin, but rather we question whether they can acquire trust (and funds) from investors when it’s just the two of them.
- Howard Krieger, Co-Founder (LinkedIn)
- Ryan Medlin, Co-Founder (LinkedIn)
- Kumar Sriram, Technical Blockchain Advisor Symantec (LinkedIn)
- MVP: Residual plans to beta test the lending protocols of their Dapp in a closed environment in Q4 of 2018. The Dapp will feature basic collateralized lending protocols and a lending browser-based Dapp using one asset class.
- Token use case: The RSDL token will primarily function as a means of transaction on the platform, giving discounts to those who use the RSDL token. Certain derivatives of the RSDL token will also exist to represent debt assets (RSDL-D), unfunded loans (RSDL-U), failed loans (RSDL-F), escrow/title agent assets (RSDL-E), borrowers (RSDL-B), and lenders (RSDL-R). All mentioned derivatives are non-fungible tokens.
- Value-added: The RSDL token functions as a typical utility token in that it’s used for transactions and the payment of fees on the platform, but it loses some value considering fiat is also an acceptable form of payment. The token does have a unique set of derivatives that differentiate it from competing platforms. The token enables individuals to participate in the development and execution of their business plans wherein the more stake you have, the more rights you gain. Part of the proceeds earned will go to company token holders.
- Decentralization: The Residual ecosystem, and thus the protocols, consists of a combination of decentralized public and private ledgers, centralized systems, and manual processes.
- Token Supply: Max supply of 50 million RSDLL
- Technical difficulty/investment expertise needed: Residual’s concept and mission will likely be easy to understand to anyone who reads their website. They want to create an ecosystem where the gap between traditional fiat and digital asset lending is closed, an ecosystem where lending and borrowing is easy.
- Halo effect: Residual’s partnerships include Acris Solutions, Inc. (Consumer Lending and Systems specialists), Carrington Holding Company, LLC (Escrow Services), and National Title Service Company (Custodian Services). Residual claims they have a detailed process for acquiring partnerships because they want to make sure their partners are in the industry for the long haul. Each partner would come on board though clean protocol design, documentation, example open source code, and automated and decentralized onboarding.
- Buzz: Residual is in the very early stages of their project. They have yet to create a Telegram account, and their Facebook (46) and Twitter (1) account have next to zero followers. They created their social media platforms in May of 2018, so there’s really no reason as to why they have so few followers. It appears they don’t have any marketing members on the team, which may partially account for the lack of followers currently.