User:Aditya Kalla/sandbox

Polytrade

The Polytrade platform is a decentralized, blockchain-based platform that aims to transform receivables financing. It aims to connect buyers, sellers, insurers, and investors for a seamless receivables financing experience.

3.1 Platform Design

'''3.1.1 Key Components

1. Porting Existing Infrastructure to L2 Blockchain Networks: '''The first component in this platform is that of migrating existing trade finance ecosystem into an L2 blockchain network. L2 is critical as the business transactions need both speed and low cost of transaction. There are Ethereum compatible L2 networks today that are hugely customizable. This allows freedom to migrate systems from CeFi to DeFi while being connected to the main Ethereum network. '''2. Asset Evaluation:

'''One of the key challenges in trade finance is identifying the quality of the underlying asset. This would mean understanding the financial strength of the buyer using financial data points and other market checks. These data points and the history of payments will be maintained on-chain. The protocol will algorithmically decide the rating of each asset and that would weigh in the collateralization of the asset and interest rates against that asset.

'''3. Borrower Evaluation:

'''Similar to asset evaluation borrower evaluation standards will be defined by the protocol. While in normal trade transactions the risk is limited on 21 borrower but their activity on chain, profile building, submitting financial documents will lead to an algorithmic borrower rating. This rating will also be a factor in the interest rates at which they are able to borrow. '''4. Smart Products:

'''With both borrower and asset evaluation in place, a borrower can decrease their cost of borrowing by multiple means like giving additional collateral (BTC, ETH, Stable Coins), borrowing in TRADE Coins, providing validation services, and so on.

'''5. Exposure Risk:

'''One of the key parts of risk management in trade finance is to not over expose the protocol to a single asset or single entity. This would again be algorithmically adjusted that when a certain % of lending is hit against a single entity or asset then a hard stop will be placed until the existing margins are liquidated. Similarly on the borrower side rules will be built that protocol is not exposed to single borrower risks.

'''3.1.2 Core Concepts

'''Supplying Assets Any user who has a collateral in the form of an underlying invoice can come to the platform as a supplier of the asset. These assets which are in CeFi will be tokenized with details of the asset and then made available to the liquidity pool.

Borrowing against Assets The supplier of the asset will have the ability to borrow against these tokenized assets. The interest rates will be a function of the asset quality, borrower track record, currency of borrowing.

Collateral Value Collateral Value will be pegged against a stablecoin after being tokenized. This ensures that there isn’t a significant gap between the collateral value in fiat and crypto.

Interest Rate Model The borrowing interest rate model will be an algorithmically determined model and will depend upon the underlying asset rating, and borrower rating. The liquidity provider’s interest rate model will be a function of borrowing rates, protocol costs and the liquidity in the pool.

Liquidity Pools Unlike P2P lending modules where borrowers are matched with lenders, here borrowers will be funded using the liquidity pool managed by the governance. These borrowers pay an interest fee for seeking liquidity against assets and lenders are rewarded for providing liquidity to the pool. The cost incurred to borrowers is incentivized by liquidity providers allowing them to have incentive to provide constant liquidity. Credit Delegation The protocol needs to have a very tight control on risk management. For that purpose the protocol will appoint validators who apart from the rating assigned by the protocol can further provide information about both the asset and the borrower. The validators would get a share from the borrowing costs as they provide necessary validation for an asset to be approved by the governance.

Proof of Reputation Contracts for Both Borrower and Asset As discussed earlier the protocol will put data on-chain about both the borrower and the asset. It will also algorithmically assign a rating to both entities. External validators can then use the same data and their own data points to further provide information about both borrower and assets. Risk Management The protocol through its governance council will maintain limits of lending on each asset, aggregate limits on underlying asset providers and individual borrowers.

Governance On-chain governance model allows for reaching consensus among different network participants through a direct voting mechanism. The voting will use staked weighted mechanisms meaning that higher stakes get greater voting rights. The governance team will define rules on collateralization, interest rates, risk management, validator staking, protocol fees, etc.

'''3.1.3 Key Considerations

'''Seamless CeFi to DeFi Interface Our end users are small businesses who would have limited understanding of crypto ecosystem. Therefore a key consideration for our solution is to abstract out the DeFi part for the small business owner. For them the platform would complement their existing business flows. They submit assets in fiat and they are able to borrow in fiat or stablecoin backed by fiat. Transaction Speed The protocol will focus significantly on being fast especially on validators and ratings. If these are slow then its an opportunity cost for borrower and interest rate loss for liquidity providers. Low Transaction Costs The transactions have to be low cost so that the borrowing costs for the end users is significantly lower than fiat. This would mean constantly exploring L2 solutions.

Blockchain interoperability We envisage that as trade finance gets digitized underlying assets would themselves be also start getting tokenized on various chains. A supplier of asset therefore should have the ability to move these assets from one chain to another. Governance Since the defining function of governance is to manage risk and interest rates which are direct monetary functions. This means that the governance will be staking based.

'''3.2 How It Works

3.2.1 Harnessing Stablecoin Liquidity'''

The platform aims to harness a vast pool of stablecoin liquidity and make it available for SMEs in need of receivables financing. With the platform, borrowers will get faster and cheaper access to trade finance with fewer KYC compliancerelated rules. Investors will get access to a unique investment opportunity that is largely available only to banks and financial institutions. The platform offers a high level of security to investors while allowing them to earn attractive returns. As opposed to peer-to-peer lending, where investors funds are matched with individual invoices, the Polytrade platform aggregates the supply of funds from various investors. As investors supply their assets to the platform, funds get added to the combined liquidity pool. Once the validators approve an invoice, the invoice gets funded automatically. Investors don’t have to worry about the nitty-gritty’s of each invoice. Investors get returns based on the time their assets are deployed towards funding invoices. They can withdraw their funds anytime irrespective of the maturity of the invoices funded. This approach results in greater liquidity compared to peer-to-peer lending. It also gives investors greater flexibility.

3.2.2 In-Built Reward System

The Polytrade platform aims to benefit both sellers (borrowers) and investors. The platform has an in-built reward system that uses TRADE coins to incentivize every successful transaction. Post a completed transaction, every stakeholder gets rewarded with TRADE coins. A set of rules, managed on a fully distributed ledger, govern the execution of transactions and the flow of funds. A panel of professional validators will verify all invoices. The platform will not release funds to the buyers unless the invoices are verified.

'''3.2.3 Smart Contracts '''The platform will feature smart contracts running on the Ethereum blockchain. Smart contracts are self-executing contracts that automatically perform certain 24

'''functions based on triggering events. These are linear contracts between all parties (buyers, sellers, investors), and no single party can alter the contract terms. Smart contracts will enable the flow of funds and invoice related information between investors, buyers, and sellers. A key feature of smart contracts is that they facilitate the transparency of events along the entire supply chain. Upon the borrower entering the invoicerelated information, the platform will deploy a customized smart contract. It will release funds automatically only after meeting conditions set in the smart contract. The platform will facilitate the feeding of all the invoice terms and conditions into the blockchain. Additional information such as invoice verification status, any advances made, and payments received will also be track on-chain. The information, being stored on a blockchain, is tamper-proof. Example workflow: 1. A seller sells goods with invoice payment due after 90-120 days; 2. Seller uploads invoice and related documents on the platform; 3. Validators validate the invoice and supporting documents on the platform; 4. If invoice conditions are met, the platform releases the funds to the seller from the liquidity pool; 5. Once the payment is due, the buyer will make the payment on the platform; 6. The funds are restored to the liquidity pool; 7. If the transaction is a success, all stakeholders get rewarded with TRADE coins. 25 3.3 Advantages of the Platform Automation and Ease of Use As compared to current manual processes, which are inefficient for all stakeholders, the platform automates receivables financing and provides unparalleled ease of use. For example, let us say the investor and the borrower have entered into a smart contract that 80% of the invoice amount will be released to the borrower once the validators approve an invoice. Once confirmation of validation is entered into the distributed ledger, the smart contract will automatically disburse the buyer. Automated Notifications All parties involved can easily access any relevant information. They will automatically get notified by the platform for relevant events. For example, once an invoice is registered on the distributed ledger, the buyer will get a notification to confirm that it’s due and payable. Once the validators have completed the validation process, investors will get a notification that the invoice is available for funding, and so on. Updating Information in Real-Time Unlike paper-based invoices, which are static, authorized users can update digital invoices at any time. For example, if the seller sells an invoice to an investor in the real world, the investor must write to the buyer and give their bank account details. This procedure helps in updating the buyer on the account to be used for paying the invoice amount. However, on a distributed ledger, the investors will automatically update their bank account details. This feature eliminates the step of physically informing the buyer about the transfer of ownership of the invoice. Lowering the Risk of Manipulation and Fraud A critical risk of paperbased invoices is forging or manipulation by any individual party. However, once an invoice is placed in a smart contract, the information is decentralized and stored in a public ledger accessible by all stakeholders. If any individual tries to alter the invoice, others can see and reject this request. Investors can also be confident about an invoice’s authenticity and that the buyer has not pledged it to other investors. Even supporting documents will be automated and encrypted to prevent any manipulation of data. Seamless Verification o f I nvoices I n t he p hysical world, t he i nvoice verification process is cumbersome and is prone to errors. For example, an investor must manually request the buyer to verify the authenticity of the invoice. Buyers are usually required to sign documents acknowledging the receipt of goods. However, the Polytrade platform automates the verification of invoices and doc-uments. Investors do not have to worry about verifying the invoice. A team of professional validators will validate every invoice on the platform. The buyer’s acknowledgment of delivery will be recorded and stored on the digital ledger. 26 Confidentiality and Privacy Sellers will have complete control over the information related to any invoice. Only they can give access, either full or partial, to any information to any party on the platform. Moreover, personally identifiable information such as business name or business identification number is safely secured and not disclosed to unauthorized parties. The system identifies users through public keys. A public key is a cryptographic system that secures data through encryption and decryption. More than one public key will be issued to registered users to provide them with additional security. Intelligent Search Feature Unlike the real world, where paper-based documents are spread across different locations, all relevant information is accessible on a distributed ledger. Authorized users can easily search for any information related to the transactions. Settlement of Invoices Once the buyer makes the payment, the system will mark invoices as closed and settled on the Polytrade platform. The system will automatically calculate the amount due to each investor and transfer the amount accordingly. For example, let’s say five investors have funded 80% (as an example) of an invoice of $100,000. Upon settlement, the system will automatically calculate the amount to be returned to each investor, including interest. Better Dispute Resolution Due to decentralization and digitization of all invoices and related documents, reliable evidence can be made available to courts easily in case of any disputes. The information can be sourced from the ledger instantly, as opposed to a long information disclosure process. Also, many of the terms of the contract, such as penalties for delayed payments, can be enforced through the smart contract. This way, in case of disputes, sellers face fewer hassles and can focus on running their core business. Digitizing Existing Invoices Existing paper-based invoices will be scanned and uploaded on the platform with a digital signature. The paper-based invoice will get registered on the distributed ledger. Any additional information will be added to the scanned invoice digitally. The data from new invoices can be entered digitally, eliminating the need for scanning paper-based invoices. To conclude this chapter, the Polytrade platform can solve all major problems faced by stakeholders in the receivables financing ecosystem. Every stakeholder gains by doing trade on the platform. With superior access to liquidity, intelligent automation, robust security, and greater transparency, the platform has the potential to scale rapidly and capture a large share of the receivables finance market. 27 Chapter 4 TRADE Coins and Tokenomics 4.1 Introduction As we have seen in the earlier chapters, trust plays a vital role in receivables financing. The seller needs to trust the buyer to pay the invoice amount after receiving the goods or services. The investors need to trust the seller to fulfill their commitments and the buyer to repay them. TRADE coins are a mechanism to increase the trust between all parties involved in receivables financing. These tokens are the key payment instrument within the Polytrade platform. TRADE coins will be created on a public ledger and will serve two primary functions: Provide Access to Sellers Sellers will be required to pay a specific amount of TRADE coins each year to access the Polytrade platform. The seller’s financing limit will be determined in multiples of 100 of the value of TRADE coins held by them. For example, if a seller has TRADE coins worth $1,000, their financing limit will be $100,000. Paid access to the platform will serve as a check to ensure genuine sellers get registered on the platform. Reward Usage and Good Behavior TRADE coins aim to reward all platform users - sellers, buyers, investors, validators, and financiers. The coins will help in boosting usage of the platform by incentivizing stakeholders to use the platform. The coins will also help in increasing the level of trust between different parties within the platform. For example, buyers who make timely payments will be rewarded with TRADE coins. Buyers with a higher number of reward coins will imply greater creditworthiness and help investors in their risk assessment. Similarly, sellers will also be rewarded for successfully completing transactions. The number of TRADE coins for sellers would indicate their track record in fulfilling their part of the contract. Likewise, validators with a track record of superior quality checks will earn a higher number of TRADE coins. 28 Investors can see the number of tokens issued to each buyer and seller. The history of all tokens issued to each buyer and seller will be available to investors. 4.2 TRADE Token Coin Utility TRADE token will be used for the following key functions: 1. Governance: TRADE token will enable users to play part in the protocol’s governance. Governance rights are staking based which means that those who stake higher TRADE will have higher ability to control various governance decisions w.r.t. running the protocol; 2. Protocol Incentivization: TRADE will enable users to earn rewards from time to time and provide the community to further develop and strengthen the protocol; 3. Staking Rewards: TRADE token will enable liquidity providers to stake their TRADE tokens to earn rewards for securing the network; 4. Settlement Instrument: TRADE tokens will be used as a settlement in-strument in the various bridges created to share the liquidity with other sidechains and mainnets. 4.3 Legal Aspects In some countries, such as the United States, China, and others, initial coin offerings and cryptocurrencies are not legal. Citizens of such countries cannot participate in the initial coin offering. TRADE coins will help build trust among the stakeholders and give investors confidence about dealing with credible buyers and sellers. Once there is enough traction and users, the coins can grow as an independent cryptocurrency with its own market. 29 Chapter 5 Riqueza History and Roadmap 5.1 Riqueza Capital History • 2014: Riqueza Capital Incorporated in Hong Kong • 2015: Arranged trade finance of USD 18 million • 2016: – Riqueza Capital opened offices in Singapore and India – Arranged trade finance of USD 33 million • 2017: – Riqueza Capital opened offices in UAE – Arranged trade finance of USD 76 million • 2018: Arranged trade finance of USD 102 million • 2019: – Launched our Digital Platform Riqueza Factex enabling end to end digital solutions – Arranged trade finance of USD 105 million • 2020: – Onboarded more than 250 borrowers on Riqueza Factex – 2020: Arrange trade finance of USD 45 million 5.2 Polytrade Platform Roadmap • 2021 – January: Polytrade Platform Idea Formulated 30 – February: ∗ White Paper Drafted ∗ Website Launched – March - April: ∗ Pre ICO Round (first) ∗ Platform Development Phase 1 – May - July: ∗ Pre ICO Round (second) ∗ Platform Development Phase 2 ∗ Beta Testing for Platform (Mobile & Web) ∗ Mobile App & Web Version Launched ∗ First Liquidity Pool to be Created ∗ First Transaction Executed