I’ve seen EOSmicroloan.com and it looks neat, but a little complicated to me. Why introduce more tokens?
Here’s a business idea that I think would be game changing.
- Start a local microloans business
- Raise USD funding from investors who want to hold EOS i.e. source P2P investors / consumers. This could work well for those people sitting on large under-utilised EOS balances.
- Now take the fiat funding and offer loans to local businesses in USD etc. Secured with collateral, usual KYC and responsible lending checks etc.
- The business must however pay back both the principal and interest on the loan in EOS i.e. they will carry a negative (short) EOS balance until they clear their loan with you by paying you back with the original EOS amount plus interest. The initial exchange rate will be fixed at the prevailing EOS:USD rate.
- This of course introduces floating price risk for both yourself and the business. Businesses can eliminate this risk by selling their products in EOS, which of course they should do. Alternatively you can fix the exchange rate in USD terms, or you can ride the risk and hope that EOS becomes more valuable than the loaned USD.
- The consumers / investors who originally provided the funding for the loan, can now buy products from any business that accepts their EOS. Of course they don’t have to buy from the same business that was funded. This separates out the investment risk for the consumer / investor.
- Some businesses will fail and go under. Some will try to take the money and run. You need to be exceptionally careful about who you choose to fund. Keep it local and keep your lending criteria strict.
- Other businesses will do really well and repay their loans and make decent profits. This profit (essentially new money being created) comes from the sweat of the business owner, the bounty of Nature etc. This is like a “proof of production” model where new goods and services being produced will drive the need for more EOS to be sucked into the system i.e. more consumer / investors needing to purchase EOS with their fiat. Maybe you instead choose to charge interest as a share of profit made, instead of a fixed rate.
- If there is not enough EOS in the system it needs to be bought on exchanges, hence driving the price up further. This is great for investors holding EOS, but also fine for consumers holding EOS and using it to purchase goods from funded businesses.
- Of course, when a business repays its loan (plus interest) in EOS, it is up to your business what to do with it. Some will be used to pay operating costs whilst most should be kept aside as investment capital and working capital e.g. to cover other defaulting businesses / fund new ones etc. Some could even be kicked back to the original investors / consumers who provided the initial funding, even though they received their EOS fair and square upfront. Thus, they can now also receive dividends in EOS as well, which basically arise from the interest rate being charged, or the share of profits that you ask for.
This version of P2P funding is to my mind the best way to disintermediate wealthy investors who do nothing but “stake” their wealth for outsized returns. Now every consumer can be an investor too and earn a little more for participating. There’s no need for 3rd party tokens and staking them, NFT’ing them, DEFI’ying them or any other new fad etc. It just provides a simple yet highly effective bridging model to go from fiat to EOS as the dominant currency in the world.
Be interested to hear everyone’s thoughts.
Of course the natural (greed based) intention might be to want to centralise all of this on a massive global platform, and run some kind of global fund. This is kind of what Libra / Diem wanted to do, and earn interest on all the un-utilised fiat currency (sneaky buggers). Of course that would bring huge regulatory oversight, but it would also introduce major issues of not really knowing what businesses the platform would be funding.
There would thus be a trusted layer of local agents required to validate businesses for funding etc. How would you trust them? Maybe ask the community to vote on businesses that should receive funding?
I think instead that this concept would work best by having thousands of small microloan funders out there, each becoming a business angel / funder to trusted local businesses, and getting EOS established in every corner of the world. Much more decentralised, much greater chance of innovations being copied by each. Much greater chance of overall success.
Either way, the flow of fiat into EOS will generally be one way only as more businesses make profits, thus driving the price of EOS up. At the end of the day, everyone wins, except for lazy banks and investors who have in the past taken all the profit, thus driving up prices for consumers, and driving down margins for producers.
P.S. At the end of the day, all business should be funded in EOS. But right now this is not practical. A smallholder farmer for instance, will not be able to buy seeds, equipment etc. with EOS for some time still. So s/he needs USD funding. This P2P funding model provides the bridge to convert from fiat to EOS, until everything runs on EOS.