Baseline in DeFi: Invoice Tokenization and Factoring

stefschmidt commented 4 years ago

Proof of Concept for Invoice Tokenization and Factoring by Chainlink, Unibright, Provide and Between.

This epic introduces a PoC by Chainlink, Unibright, Provide and Between. It will be split into sub-tasks during the implementation.

The PoC aims to create the first baselined invoice tokenization case by adding additional off-chain integration steps and zero-knowledge proofs to verify that an invoice is in a tokenizable state. The process of tokenizing the invoice happens automatically within the protocol, at which point the invoice can be considered a financial instrument which can be factored and optionally extended by other functionality or services (i.e., liquidity providers).

In this setup, baselining provides a common ground for adding business value to a transaction between five participants in the network, in a number of steps. After each step, the business transaction is more valuable; this value can be extracted by the various participants in the process for different reasons. The aggregation and incremental extraction of this value is enabled by the Baseline Protocol and zero-knowledge proofs. In detail:

Supplier sends the invoice to the buyer and the buyer verifies the underlying transaction. The base transaction is represented by the invoice and the verification is the added value in this step.
Credit Risk Assessment company verifies the invoice and performs a credit risk assessment for the parties involved. The assessment and tokenization is the added value in this step. Because the invoice is baselined, it can be automatically tokenized upon approval.
Factoring company takes the tokenized invoice and makes it available to its pool of investors for purchase. The offering of the tokenized invoice as a financial instrument for purchase by third-party investors is the added value in this step.
Investors participate in the financing of the invoice and additional services can be added.

Sensitive data can be shared within the steps if that is deemed necessary (e.g. CRA Company must know who the participants are) but is not a must. This enables the chain of value to continue to amplify towards parties that can extract it, without breaking the privacy demands of the participants involved. In our example, a factoring company can tokenize an invoice without knowing any details about the parties involved. The Baseline Protocol enables verification that the transaction happened and that a CRA company has indicated the transaction is suitable for tokenization. The investor only needs to know that his/her money is invested in a rated financial instrument and that the projected returns are sound. The Baseline Protocol enables this process and represents the future of b2b commerce.

The proof of concept includes work by participants Provide, Unibright, Chainlink and Between, including:

extending a generic baselined circuit with metadata indicating which method to call on a token factory contract, with the circuit governing the completion of a transaction between a buyer and supplier, with a baselined invoice being tokenized as a result; and
integration of the supplier’s ERP with a factoring company to request the factoring process; and
integration of an oracle as part of the qualification process to reduce risk and prevent fraud; and
providing the outcome of the oracle integration to the constraint system of the zero-knowledge circuit; and tokenization of the upon verification by the credit risk oracle; and highlighting the opportunity to create additional service to interact with the tokenized invoice and factoring process, such as liquidity.

The project is scheduled for kick-off in August and aims to present its outcome in Q4 2020.

pereta commented 4 years ago

Congratulations to the unibright team, you are doing a fabulous job using blockchain tech with real business cases. This is going to be huge!

stefschmidt commented 4 years ago

@ognjenkurtic assigned your user to the epic

sambacha commented 4 years ago

this falls into what we are doing in https://github.com/ethereum-oasis/baseline/pull/190

UCC integration is a state-by-state issue in the United States, we have an implementation that involves a trusted 3rd party that is the responsible factoring agent as they are the subordinate lienholder against the account

Consianimis commented 4 years ago

I have done the attached to help me understand the high level steps and components involved in that use case. I have just started contributed and it is only based on my current level of understanding. Maybe it can be reviewed and corrected if helpful to the team. Baseline in DeFi - Invoice Tokenization and Factoring.pdf

ognjenkurtic commented 4 years ago

@Consianimis Thanks, this looks good on first glance. I will look into more detail during the week and extend where necessary.

Consianimis commented 4 years ago

Thank you @ognjenkurtic for reviewing. I have attached the updated file if anyone would like to contribute. Baseline Protocol - Invoice Tokenization and Factoring - Shared - V2.xlsx

Consianimis commented 4 years ago

Thank you @ognjenkurtic for reviewing. I have attached the updated file if anyone would like to contribute. Baseline Protocol - Invoice Tokenization and Factoring - Shared - V2.xlsx

The document is available on Gdrive, please let me know if you would like edit access.

Consianimis commented 4 years ago

@JohannEid, @stefschmidt - Assuming that the credit risk score is provided by an offchain CRA provider through its commercial credit API - is it correct to assume that the deployment of a Chainlink node and the deployment of Chainlink contracts (Oracle smart contract, Client contract) are required for Step 2. If so, is this implementation owned and managed by the Supplier or by another actor ? Also, how are the cost of using private API shared between supplier and buyer? It will help @ognjenkurtic and myself update the use case flows.

marsrobertson commented 4 years ago

"Invoice Tokenization and Factoring" - I would also add Trade Financing, especially when we take into consideration "Credit Risk Assessment"...

kthomas commented 4 years ago

See ethereum-oasis/baseline-roadmap#167

danielnorkin commented 3 years ago

@kthomas @marten42 @ognjenkurtic @JohannEid @stefschmidt - as per the SSC call on 2/1/21 I'm checking on the status of this Epic. Let me know if you have any updates. If not, please close this Epic.

bitwiseguy commented 3 years ago

Hey all, since this is not an immediately addressable issue I am going to move it into the roadmap repo. The baseline maintainers team have decided to limit issues in the code repo to tasks that are workable now.

kthomas commented 3 years ago

We have a working impl for this. Flag it as done ✅

On Wed, Apr 7, 2021 at 5:52 PM Samuel Stokes @.***> wrote:

Hey all, since this is not an immediately addressable issue I am going to move it into the roadmap repo. The baseline maintainers team have decided to limit issues in the code repo to tasks that are workable now.

— You are receiving this because you were mentioned. Reply to this email directly, view it on GitHub https://github.com/ethereum-oasis/baseline-roadmap/issues/202#issuecomment-815287854, or unsubscribe https://github.com/notifications/unsubscribe-auth/AABHL3OQORMU7EE4FZQG5TLTHTHZZANCNFSM42RTJG7A .

VipSyntamind commented 3 years ago

Do you have api from distribution (storage mechanism) to nft application? (POS) Architecture of POP (Proof Of Possibility Q2 2023) (2024)?

ethereum-oasis-op / baseline-roadmap

Baseline in DeFi: Invoice Tokenization and Factoring #202