Fixed income and loan smart contracts

Today cryptocurrencies are sadly seen as very high risk volatile income assets. We have way more ppl speculating on exchanges than using cryptos to buy stuff.

One of the issues I see that cause that is that ppl are motivated to hold their cryptos, specially those which are deflationary.

One way I see to solve that would be to separate the main currency of a blockchain platform from tokens aimed for investing. The main currency would have no incentive to be held or stacked, and there would be tokens to simulate investment funds, fixed income contracts, lending, loaning, shares, etc. This could also motivate banks, specially fintechs, to offer financial services over cryptocurrencies.

We already have governance systems that allow token holders to vote, that could be used for companies to tokenize their shares and have great governance.

For loaning, a bank could trade (main currency) money for a smart contract that registers how often, the amount and the tax that he’d have to pay back. I just can’t figure how it would handle warranties, if the address doesn’t have enough funds on the payment moment, and how inadimplence would be handled after that. But if it does, it could be revolutionary.

The lack of lending support on current cryptocurrencies bothers me. That’s very important, as banks get lent money and loan it to other ppl and that makes economy grow faster. Holding just keep the money stuck. It’d be nice to have lending smart contracts, so that we lend our money to a bank and the smart contract allows us to verify how the fixed income value is growing over time, and then on its ending handle the case of the company not having funds to pay the contract.

Banks could also sell tokens for lending money to them, as fixed income assets, and these tokens could be traded as they get more valuable or when the holder needs the money back earlier.

There have also been some services to bring together ppl who wanna loan money to ppl who wanna lend. As there’s no bank on the middle, that’s cheaper for one and more profitable to the other. Having such services executed on smart contracts would be great, and bring A LOT of new users to smart contracts!

I haven’t seen any of that implemented on any blockchain, are there any ideas for it on ADA? Would its smart contract platform support such use cases?

I think we as community should take out the idea of cryptocurrencies as a no man’s land where ppl look for high risk speculation, and show them are tools for all sorts of financial solutions and services.

I hope and belive that it is far mor locked up for developments than in spectacular trade. If or when Ada sucsede we all got well paid for our patient and risk. Look at the it business before the bubble. Ppl waited long time, and a lot went broke, but early investors in alphabet or Microsoft did very well. I belive the crypto community will see an equal development. I guess BTC will be the gold, but the world’s demand for a couple of chains or platforms will take off

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I think I get what you mean. Many companies and cryptocurrencies will perish, as we’re still on the age when a lot of what seems to be great ideas to flourish, but can’t make it profitable and fall.

There’s indeed a lot of issues on cryptocurrences that need solution, in example the high cost of all mining pools to keep BTC running, or the recent high gas price on ETH network as ppl tried to move their money into USDT while all volatile currences were in downfall.

Anyway, just after I had written this text I discovered about DeFi, and it has some solutions I talked about and didn’t know to exist. Tokens like USDN and DAI are descentralized stablecoins that start solving volatility, Fulcrum is a loan and borrow service that trades loaning assets for equivalent tokens, that (should) value as interest is earned from borrowing. There are some nice descentralized exchanges around, and MetaMask wallet allows trading on some of them in parallel from this unique wallet. I still haven’t found a fixed income loan service, and all loan services are relying on collateralization that’s bigger than the borrow.

Still, ETH is an overloaded network. Cardano should fit much better on such services.