Use Cases of SmartCredit.io
The SmartCredit.io value proposition is to form the first crypto-credit money system in the world. On the one hand, it allows economic actors to utilize peer-to-peer loans and, on the other hand, it creates interest-bearing crypto-credit money. The crypto-credit money will be called Smart Money. It is analogous to today’s electronic credit money that is created by commercial banks during the credit process and dissolves when the credit is repaid.
Let us imagine John from the UK; he is a millennial, 30 years old, and a crypto-fluent male. John is expanding his small crypto-business and he would like to buy an Ethereum domain name for his business. Since he does not currently have enough liquid assets / cryptocurrencies, he will register on the SmartCredit.io platform, enter his KYC (Know Your Client) information and other background details. SmartCredit.io calculates John’s credit score, and he is then able to borrow on SmartCredit.io.
Now let us imagine Peter from Germany, an early crypto adopter. Peter is holding (or “hodling”) Ether and would like to earn some interest by way of short-term lending on his Ether holding. He registers on the SmartCredit.io platform, enters his KYC information and submits his offers to the SmartCredit.io platform. Peter is a risk-averse person and he therefore chooses to lend only to borrowers with high credit scores. However, he still receives more interest than from the traditional banking system.
John accepts Peter’s 3-month lending offer on the SmartCredit.io network and has to pay 25% collateral for this loan. The protection fund protects this loan and receives an upfront payment for this protection from the lender. The better the borrower’s credit score is, the lower the credit protection fee charged.
John receives Ether at his address and is then able to purchase the required domain name.
Peter receives Smart Money tokens that represent this loan contract. The loan contract is protected by the protection fund. If John cannot fulfill his obligations, the protection fund will repay the face value to Peter.
When the loan expires, John pays back the principal and interest on the loan. John is returned his collateral. Since Peter is holding the corresponding Smart Money tokens, it is he who receives the principal and interest payments. Peter’s Smart Money tokens are automatically destroyed after the loan is paid back.
Here, we have a win-win situation for John and Peter.
Alice would like to buy Bitcoin mining equipment, but she does not have enough liquid assets available. She joins the SmartCredit.io platform and Peter also gives her a loan for 25% collateral.
Alice receives a 3-month loan in Ether, which she uses to buy mining equipment. Peter receives Smart Money tokens that represent Alice’s obligation.
Unfortunately, one month later, Peter realizes that he has lent all of his Ether and he has no more funds available to pay his web developer. However, since Peter has Smart Money tokens that are face-value guaranteed, he uses the Smart Money tokens to pay his web developer.
The web developer is happy to receive these Smart Money tokens, which are pegged 1:1 to Ether, because they are interest-bearing as well. This means the principal and interest from Alice now belong to the web developer.
Peter is also satisfied because he does not need to take out a loan to pay his web developer and he can directly monetize Alice’s debt obligation. Peter loses interest on Alice’s loan, but he is still better off than he would have been if he had taken out a new loan, for which he would have had to provide collateral and pay interest.
Before the loan expires, Alice pays back the loan principal and interest, which are automatically transferred to the web developer’s Ether address. Alice is returned her collateral. In turn, the corresponding Smart Money tokens are automatically destroyed.
Here, we have a use case with a win-win-win situation for Alice, Peter, and the web developer.
Alice wants to buy a new items from the online shop, but she does not have enough cryptocurrency available. Online shop sells to Alice on credit.
Alice receives the merchandise and has to repay the loan within one month.
Online shop receives Smart Money tokens that represent Alice’s obligation.
Alice repays the loan by the end of the month; online shop receives the loan principal and interest in Ether, and the Smart Money tokens are automatically destroyed.
Here, we have a win-win situation for Alice and the online shop.
Alice wants to buy a new pair of shoes from the “Beautiful Shoes Online Shop”. She has a good credit score and she can buy a pair of shoes from Beautiful Shoes on credit over two months.
Beautiful Shoes is satisfied because they can sell to their key customer Alice. Additionally, they will be able to use Smart Money tokens representing Alice’s loan in order to pre-order new jeans from the “Italian Design Company”.
The Italian Design Company is satisfied with the pre-order and is happy to receive the Smart Money tokens. A few weeks later, the Italian Design Company uses the Smart Money tokens to pay their freelance designer.
Alice pays back her loan before the expiration date. The freelance designer receives the loan principal and interest at her Ether address, and the corresponding Smart Money tokens are automatically destroyed.
Here, we have a win-win-win-win situation for Alice, Beautiful Shoes, the Italian Design Company, and the freelance designer. The use of SmartCredit.io allows economic transactions that would not have been possible otherwise.
All these exemplary use cases are implemented without the traditional banking system, but instead based on decentrally-created peer-to-peer credit and credit money.
What is SmartCredit.io
The SmartCredit.io vision is to provide the key components of the alternate blockchain-based financial system - the crypto lending/borrowing, the fixed income funds and the integrations.