Loon Network A Decentralized Inter-

BlockChain Loan Network

I. Token name: LOON

II. Vision: to build up a better decentralized inter-BlockChain loan network

III. Orientation: to overthrow the traditional loan mortgage routine

IV. Background

1. DeFi: the future space of decentralized finance

Currently, the capitalization of global encrypted digital currency is around 200 billion

dollars, while the peak it ever reached was 830 billion dollars. However, comparing with the off-chain assets, it is a drop in an ocean. Tokenization of off-chain digital assets and real

assets is the vital direction of the BlockChain technology development. We believe that with

the increasing number of assets transferring to BlockChain, the decentralized finance service

(DeFi) will become the mainstream in the future.

At present, referring to the traditional finance, there are new attempts taken in the DeFi

fields, such as the exchanges, loans, bonds, financial derivatives, and quantitative

investment. However, those cases have come shortcomings like weak market competition, poor experience, and difficulty in development. The complexity in BlockChain technology

prevents plenty of potential participants from taking actions.

DeFi is short for “Decentralized Finance”, and it is also called OpenFinance. In fact, it is

referred as the decentralized protocols to build up open financial systems that aim at

enabling everyone in the world to carry on finance activities at anywhere anytime.

Within the current financial system, the financial service is controlled and regulated mainly

by the central system, whatever on the basic cash recycling or transferring, loaning, or

derivatives trading. DeFi hopes to build up an open and transparent, accessible, and inclusive point-to-point financial system through distributed Open Source License to reduce the trust

risk to the lowest and to enable the participants to obtain the financing conveniently.

Comparing with the traditional centralized financial system, the DeFi platform has three major

advantages:

(a). individuals who have needs of assets management do not need to trust any intermediary,

since the trust is rebuilt on machine and code;

(b). everyone will have access to visit, and nobody has the right of central control;

(c). all protocols are open resources, thus anyone could cooperate in constructing new finance

products on protocol and foster financial innovation under the network effect.

DeFi is a general concept, including currency issue, currency transaction, loan, assets

transaction, investment and financing, etc.

We consider the appearance of BTC and other encrypted currencies was the first stage of

DeFi; however, the decentralization of currency issue and storage simply provided a solution to

P2P accounts settlement, and it is far from supporting various financial services; while the

booming decentralized loaning protocols makes it possible of opening the financial system of the

BlockChain’s world for a further step and brings DeFi to the second stage.

Traditional Finance Fintech DeFi

Currency Issue Central Bank POW or POS+

Payment & Transaction

Cash E-cash + centralized networkDigital currency + decentralized network

Loan Bank Internet finance platform Digital currency P2P loan platform

Assets Transaction

Exchanges (eg. the NASDAQ)

Traditional exchanges online platforms

Decentralized on-BlockChain exchange

Investment & Financing

Bank and other financing institutions

Innovation-type platforms for stock rights & creditor’s rights

Tokenized financial products (eg. IXO)

2. Decentralized loan-the most imaginative part of DeFi

From the beginning of 2019, DeFi started to become a hot topic in the BlockChain field. Platforms

and products providing DeFi services started blooming at the same time, among which the

decentralized loan program billows with surprise in the market.

(1). The background of decentralized loan

Previously, the ICO was forbidden in China, while the STO had barriers to enter and was still in the

stage of testing the waters. For companies, new financing tools were needed in the encrypted currency

market. Chao Pan, Head of Marketing in China of MakerDAO, revealed that for MakerDAO, companies

were the major debtors, which showed loaning was used as a financial tool by the owners. For mature

financial market, more abundant financial tools brings higher liquidity in the market; thus, after the

decentralized loan, equity-type products and derived products will come into the public’s sights, and

the decentralized loan is a vital step for leading the encrypted currency into the financial services.

In addition, there was an overall decrease of digital assets prices in the second half of 2018;

currency holders transferred from currency speculation to money management, loan, margin trading or

so to maintain and increase the value of assets. On December 31, 2018, the active loan balance had

reached 71 million dollars; it increased 1083%, comparing with the amount of 6 million dollars on

December 31, 2017, which showed the acceptance of decentralized loan platforms was highly

increased.

(2). Features of the decentralized loan

Decentralized loan mean that through matching by the decentralized loan protocols, the debtor and

the creditor’s action of immediate transferring assets and finishing loaning after re-confirmation of

mortgage and pledge.

The decentralized loan protocol provides standard and interoperable technology foundation to

platforms, and it take effect as safety management in the loan process. Comparing with traditional loan

mode, the decentralized loan mode has features as following:

(a). combination of legal tender loaning and digital assets loaning (stable coin mode could be

considered as a combination of legal tender and digital assets)

(b). mortgage based on digital assets;

(c). using real-time trading settlement to reduce actual cost;

(d). using over-collateralization to replace credit vetting, which means it is able to provide services to

groups that cannot enjoy traditional services;

(e). the most frequently used “mortgage loan” mode of the decentralized loan platforms: debtors

should use assets that values higher than the loan as mortgage to ensure the creditors could acquire

the mortgage if the debtor had no ability to repay the debt.

(3). Target population of decentralized loan

Who are the debtors and creditors of the digital currency?

Debtors: including quantitative transaction platforms, encrypted currency hedge fund, BlockChain

project owners, BlockChain mine etc., who hope to acquire cash flow by mortgaging digital assets or

hedging risk by loaning.

Creditors: including assets managers, family offices, high net worth individuals etc., who hope to

acquire extra earnings by utilizing their own assets and housing.

(4). Three modes of current decentralized loan

The four most famous decentralized loan protocols are Compound, Dharma, dYdX, and MakerDAO.

We can conclude them to three modes:

(a). P2P matching mode

Dharma and dYdX are both P2P protocols that match the debtors and creditors. Thus, debtors and

creditors are equal on amount based on those two protocols.

For example, in Dharma, the smart contract acts as the guarantee and evaluates the debtors’ assets

price and risk. Based on the “guarantee’s” evaluation result, the creditors decide if they should loan to

the debtors; at the same time, when the debtors cannot repay on time, the “guarantee” starts the

liquidation procedure automatically. The longest loan period is 90 days on the Dharma platform, and the

loan interest is fixed. Fund of the creditors is locked while loaning and starts to earn interest after being

matched with debtors.

The dXdY protocol also belongs to P2P mode; however, its major difference from other loan platform

is that dYdX supports other transactions besides debt and credit, such as futures trading. When open

position, traders borrow cash deposit and reach agreement with creditors on terms and conditions

through the platform and proceed deposit transaction. Thus the dYdX’s target clients are deposit

traders. The interest of the dYdX platform is not fixed, and there is no locked or maximum period for

users to loan on dYdX.

(b). Stable coin mode

MakerDao is a typical representative of this mode. The biggest difference of this mode from others is

there is only debtors in the system, no creditors, and the exclusive asset for loaning is the DAI. Debtors

creates new DAI by mortgaging digital assets (currently as ETH). DAI is the stable coin released by the

MakerDao platform and pegs with USD. Rate of pledged assets and loan must be remained above

150%. Its interest is global and decided by voting of the MKR holders. Its interest is not stable, which

ever raised from 2.5% to 19.5% within a month.

(c). Liquidity pool transaction

Taking the Compound as example, debtors and creditors trade through the liquidity pool rather than

being matched with the counterparty. Rate of interest of each debt and credit action is decided by the

liquidity of the pool, which means it changes with the rate of creditors’ monetary aggregates by the

debtors’ quantity demanded. Compound doesn’t set up certain loan deadlines, creditors can save the

fund in the loan pool to earn interest continuously and withdraw at any time. Debtors has unlimited

contract period.

4. Current technical obstacles in decentralized loan

There is a giant gap between the promising future of the decentralized loan development and the

immaturity of BlockChain Technology resolutions. To be concrete, the decentralized loan network has

technical problems as follows:

(a). Comparing with traditional mortgage loan, the speed of the current decentralized loan is as slow

as snail’s.

(b). There are conflicts between privacy protection verses data sharing.

(c). Inter-BlockChain circulation of digital assets cannot be realized.

(d). Rules of finance products are complicated, and there are difficulties in building contracts.

(e). Reliable oracle machines that can get through the on and off BlockChain data to resource on the

computation is absent.

1. Project overview, core framework, and roadmap

(1). What is LOON?

The Loon Network (abbreviation:LOON) is a long-term conception that aims at building up an inter-

BlockChain decentralized loan network. Task of this network is to provide support to inter-BlockChain

data transmission, credit interflow, and assets interconnection as well as to provide basic network

support.

(2). Pain points of market and solutions

Pain points of market:

(a). Comparing with traditional mortgage loan, the speed of the current decentralized loan is as slow

as snail’s.

(b). Inter-BlockChain circulation of digital assets cannot be realized.

(c). Rules of finance products are complicated, and there are difficulties in building contracts.

(d). Reliable oracle machines that can get through the on and off BlockChain data to resource on the

computation is absent.

(e). Safe, reliable, and high-powered distributed loan service open platforms are absent.

Technical resolutions:

The decentralized inter-BlockChain loan network is based on clients’ decentralized identification,

which is established by combination of the user’s biological identity and social identity. Users’ on-

BlockChain and off-BlockChain credit system is formed base on this identification. By providing

hierarchy relay inter-BlockChain communication protocols, based on which the multi-BlockChains can

develop the access layer of the puclic chains to need the need of on-BlockChain data communication.

To provide contract template in the decentralized loan network, and based on the template, real life

debtor-creditor relationship such as mortgage loan, saving, and P2P loan could be realized.

V. Project introduction

(3). Core framework

The coming LOON Network is composed by three basic parts:

a. Loan App—Loonly Planet-- decentralized loan network portal;

b. Decentralized Loan network—Loon Network--decentralized credit network on interpersonal relationship;

c. New-type protocol for data transmission—Loon Protocal—decentralized inter-BlockChain loan protocol

(4). Product roadmap

Apr. 2020 Launch of the Loon Planet APP

Sept.2020 To release the decentralized loan network core module

test version

Dec. 2020 To open BTC layer, ETH layer and to provide inter-

BlockChain communication protocol

Mar. 2021 Launch of the node program test version

Apr. 2021 Launch of the loan network

Jul. 2021 To release the credit sdk and protocol sdk

2. Loonly Planet

Loonly Planet (in Chinese:极速星球) is the portal APP of the Loon Network, it provides safe, fast, simple,

and efficient loan services to clients. You can find the way to decentralized loan network from here and

become a crucial link of the Loon Network. If you have needs of funds, you can get various kinds of legal

tenders, encrypted currency, and stable coins without selling out your tokens. You can seize the chance to

appreciate the digital assets while obtain liquid funds to expand investment and production to acquire greater

benefits; if you have spare assets, you can safely lend them out with simple operation, and the platform can

help control risk and help to realize assets appreciation without trading.

(1). Loonly Planet debt-credit service mode

The Loonly Planet aims at providing a convenient service platform with low risk and high efficiency, and it

will provide various service modes as following:

a. P2P matching loan

Loan: if you have needs for short-term liquid funds, you can set up detailed debt information and

release the orders on the platform;

Investment: if you have assets could be used for investment, you can release investment orders on the

platform;

Orders matching: speedy matching the information and orders of debtors and investors, facilitating the

deal.

b. Unified distribution by platform

If more speedy service for loan is needed, users can choose the platform loan service directly to enjoy

more convenient and efficient service.

(2). Paths of Loonly Planet major products

a. Debtors:

√ Borrow tokens, pledge mainstream digital currency assets such as the BTC to fix the interest to borrow

various types of legal tenders, encrypted currency and stable coins.

√ Pay interest, after successfully obtain the loan for each time, to pay interest terminally by following the

reminder of the APP; by fixed rate of interest, the LOON amount could be calculated.

√ Repay, both capital and interest should be repaid by the deadline;

√ Interest return, after repay, calculate the whole interest receive-current value of LOON, and return the

excess part of the fixed interest.

b. Investors:

√ Invest, specified interest, loan out spare assets;

√ Charge interest, after being successfully matched, charge interest at fixed time;

√ Collect repayment of capital, when trade is finished, the spare assets loaned out will be collected

automatically.

(3). Advantages of the Loonly Planet

a. Debt without credit mortgage

There is no requirement for credit investigation; without complicated credit investigation process, users’

loan needs could be meet within one hour at fastest safely and speedily by mortgaging digital assets such as

the BTC.

b. Repay at any time

Fastest at 1 hour to debt, and repay at any time. Even fixed time debt allows to repay in advance; users

can repay at once and redeem their assets at any time; it’s flexible and able to reduce loss of interest.

c. Win interest while loaning

By unified distribution mode loaning in the Loonly Planet, the platform takes LOON token as loan interest

on the deadline of repayment. The value of LOON token will be calculated at the end of loaning, and if the

value of LOON increases, the extra part of the fixed interest will be refund to users.

d. Spare funds earn interest

Spare funds should not be wasted; the platform helps to control risk. Investors earn interest monthly after

funds have been successfully lent out. Enjoy easy earning with your eyes closed.

3. Loon Network

Loon Network is the decentralized credit network on interpersonal relationship base on loan behaviors. The

network scores and rank on credit for each ID address. Base on the rank, it could be applied in three scenes:

(1). Start credit loan: extend from mortgage loan to credit loan;

(2). Risk pricing: provide different Loan-to-Value Ratio, transfer charge, and credit limit base on the credit

ranks;

(3). Inter-BlockChain credit reference: through the inter-BlockChain protocols, after accredited by users,

credit data can be used by third-parties. As a vital part of decentralized inter-BlockChain loan network, it has

the following effects:

a. To manage on-BlockChain assets, mainly on lock and release of assets. For instance, when a loan

contract is brought forth, it lock the debtor’s mortgage assets, while release the loan assets to the debtor

simultaneously;

b. To manage contracts generated in loaning relationships. There are two types of the contracts:

①. Mortgage loan contract; ② Deposit contract;

c. To manage the capital pool—Loon Pool; to manage the deposit assets of the deposit contracts and

mortgage assets of the mortgage contracts.

d. P2P matching. To match the loan relationship between debtors and deposit, and to produce mortgage

loan contracts;

e. Decentralized identification. Following related laws and regulations, especially the ones on anti-money

laundering and anti-terrorist, to do identity verification;

f. To manage credit system. Break through on-BlockChain and off-BlockChain credit systems and store

users’ off-BlockChain credit data to on-BlockChain; form an integrated credit system by incorporating the on-

BlockChain credit data produced by the decentralized loan network. Base on the different credit scores of

users, the system adjust the Loan-to-Value Ratio of mortgage contract; meanwhile, the third-party platform

can obtain users’ credit status in the case of being accredited by users.

System framework is show in the figure above.

Realization of this integrated system is based on the following technical resolution:

(1). Asset layer. Asset layer users’ control of on-BlockChain assets, mainly on users’ lock and release. To

build up layers on public-chain, and control users’ deposit assets and mortgage assets through multisig

modes;

(2). Core module. Core control module users establish mortgage loan contracts, establish deposit and

interest contracts, supervise contracts’ status, and send assets lock and unlock requests to asset layer;

can obtain users’ credit status in the case of being accredited by users.

(3). Node. Users become node by mortgaging a certain amount of assets, operate core module, accept

mortgage loan contract requests, receive deposit to gain interest contract request, and provide current

exchange rate to core module;

(4). Proxy. Proxy invites users to deposit or loan, and meanwhile proxy could provide current assets

exchange rate to node, and send notifications of deficiency in Loan-to-Value Ratio to users.

4. Loon Protocol

Loon Protocol is made up of three parts: inter-BlockChain communication protocol, assets management

protocol, and node communication protocol.

The inter-BlockChain communication protocol is used in data communication between asset layer and

various public-chains. It controls on-BlockChain assets with methods like multisig, and other controlled on-

BlockChain assets are all able to connect with inter-BlockChain communication.

The assets management protocol is used in system approving assets management data, including capital,

loan, and interest.

The node communication protocol includes contract request protocol, exchange rate request protocol, and

credit data protocol. The contract request protocol is used for requests such as establishment, revision, and

termination of contracts like mortgage loan contract. The exchange rate collection protocol users’ node and

agent submit exchange rate data, and the system collect exchange rate data to finally form reference value on

assets in the contract. The credit data protocol is used in off-BlockChain credit data collection, confirmation,

and revision etc..

(1) The node mortgages a certain amount of assets as node credit assets to become available node. When

the node operates to a certain amount, the loan network starts to work;

(2). Users deposit assets through node and gain interest; the interest is released through LOON, and

meanwhile users can send contract termination requests through node;

(3). When node does wrong (for instance, provide exchange rate discrepant from the market) or is

unavailable, it will deduct a certain amount of credit assets base on the situation. When credit asset is lower

than a certain level, the node becomes an unavailable node. The effective debt contracts and deposit

contracts can gain LOON earnings.

(4). When users start mortgage loan contracts, after accept request, the node lock users’ mortgage assets

on asset layer and release users’ loan assets simultaneously. Meanwhile, users can deposit LOON token of

equal-value in the contracts to lock interest ahead of time. On the deadline of the contracts, based on the

LOON value at termination, it calculates the interest.

5. Application of LOON

(1). Application of LOON

The LOON token can not only foster the operation of the eco-system effectively, but also be the self-

government carrier of decentralized organization (DAO). In the Loon Network eco-system, the LOON toke take

effects as following:

a. transfer fee deduction

In the Loon Network eco-system, when it matches the debt and credit orders, intelligent contract will take

out a few amount of escrow token and send to super node of both sides who have submitted orders as

transfer fee of super node service. If the user owns LOON token, the intelligent contract could calculate the

preferential amount by users’ amount of tokens. To prevent the monetary value decrease if the super node has

massive sell-off after charging the LOON transfer fee, the Loon Network system sets up a freezing period after

charge LOON as transfer fees. The super node can only gain the income of transfer fee LOON after the

freezing period.

(2). Super node pledge locked position

Within the Loon Network system, every super node has to pledge a certain amount of LOON token when

launched. This part of tokens will be escrowed by special intelligent contracts. The intelligent contracts will

also scan super node LOON token’s pledge level periodically. If the pledge amount is lower than the minimum

requested by the system, the super node will receive notifications on adding pledge assets. If the node didn’t

add pledge LOON token within the required period, the system would forward the information to the judge

based on preparatory condition to decide if this node could fulfill its function normally. If the result is negative,

the judge will submit to the community governing system proposal for deleting this super node.

(3). Credit data inter-BlockChain reference

Third-parties could obtain credit data with the accreditation of users; the third-parties should pay

LOON token to obtain the credit data.

(4). Reward for submitting credit data

Users will be awarded LOON token if they submit off-BlockChain credit data.

(5) Community governing

LOON is the only tool for Loon Network community members to vote in the community. First of all, for

any important issue that should be submitted to the community governing council for discussion, the

proposer must hold LOON. The proposer can only submit the proposal to the community discussion

board after he or she mortgages a certain amount of LOON. Token holders in the community can submit

revision suggestion of the proposal within a certain period of time, and all revision will become iteration

versions and be recorded by BlockChain. After the certain period of time, LOON token holders will vote

on the proposal content. All of the locked position LOON will not be calculated in the ticket bunker, and

different proposals have to meet concrete number of votes to be approved.

(6). Natural deflation mode

Interest produced by mortgage needs to be deducted with LOON. Which means users need to by

LOON in the market to pay interest. The system has designed a special interest repaying mode: users

could buy LOON that of equal-value with interest in the market to locked position when mortgage, and

when they repay, if the LOON appreciates, the system will give the appreciation part to users (for

example, if the LOON appreciates over 200%, users not only do not need to pay interest for mortgage

loan, but also gain profit); the LOON taken back by the platform is used to pay the costs of funds, and

the rest amount will be disposed to build up a deflation mode that expands with the market size.

(7). Periodical dispose

A certain rate profit of Loonly Planet products will be used to buy-back and dispose LOON token.

(8). Other functions

With the development of the Loon Network, the LOON token will find increasing application scenes,

and endow more practical function and application scenes to the LOON token.

2. LOON token distribution plan

The total amount of LOON token is 2, 100 million and will not be added permanently. Leading by

the LOON launch team, there will be 85% of the all tokens be used in community establishment

and community donation plan, among which 30% will be used in community ecology

establishment, 25% will be used in LOON foundation, and 30% will be used in strategic investors

and community donation. The rest 15% token will be reserved by the LOON starters and launch

team as reward for their contribution at the initial stage of this project and reserve for following new

team members. Token that distributed to the team will be in locked position for 3 years, starting

from launch of the first version application; 30% will be release after 12 months, 30% will be

released after 24 months, and 40% will be released after 36 months.