Credit based asset classes

Description

Stellar currently allows assets to be sent or received via a debit-based system. An account can issue tokens to other accounts and these accounts can then transfer those tokens accordingly.

However, with a credit-based system. An issuer of a token can allow certain accounts to lend the token. This means, that they don't necessarily need to physically hold the token and are issuing tokens on credit. While this implementation could, in theory, be implemented by just issuing a separate asset that is "credit" based on the original asset.

Key features

Credit based lending system

As discussed in the description. The ability for an issuer to allow accounts to lend a certain amount of a token. Regardless if they hold the physical token or not.
The issuer can modify or adjust lending amounts for each respective account. These accounts must also allow trust between the issuer and the token holders.

Interest

If the issuer requires an interest rate for lending to an account. The issuer can specify after n amount of blocks. The interest rate for lending that amount of money is x %. The interest rate could be based on any other asset.

Example

An issuer lends an account 100 gold tokens. The issuer has set an interest rate of 1% in XLM tokens every 100 blocks. After every 100 blocks are mined. The borrower owes the lender 1 XLM.

Collateral

If the issuer requires collateral for lending to an account. The issuer can specify that they need a certain amount of tokens in exchange

Example

An issuer lends an account 100 gold tokens. The issuer requires collateral of 100 XLM tokens in exchange. The borrower must give 100 XLM tokens to receive the gold tokens. Once the borrower returns the gold tokens. They receive their 100 XLM tokens back.

Maturity

Issuers must allow assets to expire. And the asset issued can become worthless or illiquid after a certain period or date.

Example

An issuer lends an account 100 gold tokens. These gold tokens expire after 100 blocks. The account may trade the gold tokens any way they like, but, after 100 blocks. The gold tokens no longer hold value to the issuer.

Key Use Cases

Credit-based asset classes enable developers to use Stellar for additional use cases. This includes:

Interest rate based lending.
Collateral based lending.
Options contracts which have a set maturity date. Where the seller may potentially owe the buyer a certain amount of tokens upon maturity.
Futures contracts which have a set maturity date. Which has similar mechanics to options upon maturity of the contract.
Other useful instruments such as convertible notes and any other vehicles of debt.

Note that there is additional scope required to make sure Options and Futures can function appropriately as an asset on Stellar. But a credit system acts as a foundation.

stellar / stellar-protocol