I’m new to crypto, but not to life, bear with me if this seems to be an old or archaic idea to y’all. Your comments are encouraged, I have thick skin.
My idea here was sparked by the possible Proof-of-Deposit proposal and James Downer’s pilot project that he speaks about here → Real World Use Cases from Around the Globe - YouTube (starts at about the 20 minute mark of the video) and of course on my experience in life and business.
When looking at investing in anything I try to ask, “How’s this business going to keep the lights on and make a profit after the startup funds run dry?”
I really struggle, with just a few exceptions, in trying to see a path that answers that question well for most crypto protocols, and to be fair, that includes Celo right now.
There’s a significant lack of sustainable, customer driven, revenue streams in the whole space.
Now I admit that my idea is not terribly novel, but it can be symbiotic in the Celo ecosystem:
1 - Have Celo’s Reserve rebalance it’s holdings in order to add real world income producing assets as needed.
2 - Create a new ‘locked’ status that Celo’s stable coin owners can choose.
3 - Use a portion of the income from the new class of assets in the Celo reserve to pay interest/rewards on locked stable coin balances.
4 - Use any profit, above and beyond paying the interest/rewards, to keep the lights on (and then some) at Celo in an ongoing manner.
So you ask, how would this fit into Celo’s vision of ‘Prosperity for All’?
Well first, the lending could be preferentially directed toward providing the working capital needed to turn projects like James Downer’s Roda pilot into successful growing Celo based business models. Ideas like his can be adapted to fit anywhere in the world and financed directly by Celo at a profit.
While it would be beneficial to have these internally generated income producing assets in a tokenized form that could be easily liquidated if needed, that would not necessarily be required to start, human labor could be used to gather the contracts from the locals, sell the contracts if needed, and the employees needed for this work could be paid from the revenue of the lending repayments.
This new bias in Celo’s investing strategy might also create an internal Celo ecosystem opportunity for someone to create a tool akin to the tools that Centrifuge/Tinlake are deploying in the Polkadot system.
Speaking of Centrifuge/Tinlake, in the early days of implementing this idea tokenized debt could purchased there or at Goldfinch.
The chatter I’ve heard puts the value of underserved markets for debt in the trillions, it will take some work but there should be plenty of room for Celo succeed there.
Second Adding these real world assets and the income they generate could seriously improve the real world stability of Celo’s Reserve especially in a downturn and the institutional trust in the viability of Celo as a project.
How nice would it be to be able to avoid the crypto crash risks that are currently endemic in the space?
Third, paying rewards/interest to depositors on their locked Celo Stable Coins would create a pull for more depositors to save more on the Celo platform, this should in a reasonable time eliminate the need for new investor sourced funds and the extra money coming in can be invested in more income producing assets.
My idea pays for the cost of interest paid to depositors by investing in income producing assets by using the depositor’s own funds into locked Celo stable coins. That mechanism is a fundamentally different than the funding mechanism the Proof-of-Deposit proposal is suggesting.
Proof-of-Deposit seems to me to be a supply side only mechanism that relies wholly on continued investor/depositor money inflows and expects people to behave rationally in a downturn in order to succeed.
Both Proof-of-Deposit and my idea should have the same effects on the price of the Celo native asset.
Forth, the locked stable coin rewards could be offered in a tiered manner to incentivize holding. Unlocked Celo stable coins would behave as they do now. Tiers might include a 24 hour unlock level that paid 2%, a 30 day unlock period to get 4%, and a 180 day unlock that might pay 6%.
These locks should also encourage more holding. More holding on an average daily basis would allow the reserve to fund more loans internally and buy more external debts from Centrifuge and Goldfinch and others.
Fifth, since the product being offered by Celo to the stable coin holders would simply be an interest/rewards bearing account, there would be no need for the average Celo wallet holder to be an accredited investor. A fair, more democratized trade becomes possible: better investments for the people; a profitable revenue stream for Celo.
There is a wildcard here for both my idea and Proof-of-Deposit in that they both provide interest, to be perfectly legal in say the USA, Celo may need to ‘become a bank’ in say Wyoming. Legal council will need to be consulted. (While outside of the scope of my idea here, becoming a bank may actually be a good idea in terms of encouraging adoption and building trust within the general public.)
Ok, well that is the essence of my idea.
Presenting this idea is meant to start a conversation and show a viable alternative to Proof-of-Deposit for making Celo stable coins pay interest/rewards.
My hope is to show how the ecosystem as a whole might be better off choosing an alternative to Proof-of-Deposit, even if it’s a bit more work and even if it’s an old idea.