Populous is a new crypto project that aims to build a decentralized trade invoicing platform on Ethereum. The project aims to undergo its ICO in July 2017.
Trade invoicing? Yes – one of the most profitable and underestimated markets in the financial industry. What is it you ask? Well simple – it’s the buying and selling of trade invoices of businesses. The reason it is a huge deal is because it provides liquidity especially to smaller businesses. The idea is to find lenders that will lend to the business not as secured debt against its assets, but rather as debt secured by the invoice.
A Trade Invoicing Example
As an example, think of Mom-n-Pop store in New Orleans. Mom-n-Pop store sells children’s toys to Target. However, Target being the giant corporation, it will not pay Mom-n-Pop before the product is delivered. Indeed, there is a whole accounts payable cycle, which can be as long as 120 days for the business. During the time, Mom-n-Pop will need to foot its own bills to grow business.
Now say Mom-n-Pop got a new offer to sell to Walmart. Great! However, Walmart requires the toys to be created and sent to them well in time for Christmas. However, the previous large invoice from Target is pending, so now Mom-n-Pop has no money to create toys for Walmart. How will to get the liquidity – cash in hand – to create these toys, sell to Walmart, and ensure the children in Connecticut are spoiled rotten a little more for holidays?
Enter trade invoicing. Mom-n-Pop goes to an investor that is looking for some high rates of return. Considering how much your bank pays you, there are lots of them these days. The investor has money to lend to Mom-n-Pop but needs a guarantee that his money will be paid. This happens through invoice financing. The loan from the investor is secured against the invoice. As long as Target pays Mom-n-Pop, the investor will get paid. If Target doesn’t pay, say because it is goes bankrupt before it can pay its suppliers, then the investor loses money. Since there is always a risk, the investor will demand a decent rate of return. Mom-n-Pop can now use the cash from the investor to make toys to sell to Walmart. When Target pays out, the money goes to the investor, and any interest is paid through existing profits or from the Walmart expansion. Everyone’s happy.
So how does Populous work? Glad you asked. Go read the whitepaper. Seriously, never invest in an ICO without reading the whitepaper.
Populous creates a peer-to-peer lending platform that is able to work on the blockchain through ‘stablecoins’ called Pokens. Pokens represent real-world currencies, since that’s the currency most businesses operate in. It provides quantitative information like the Altman Z-score that provides information on probability of bankruptcy, so you know what you’re investing in.
As you’d expect, the system works with a borrower and an investor, but there’s also an administrator. The platform administrator approves and manages clients’ accounts and actions. This is needed to liaise the blockchain with the external world.
Populous is built on Ethereum, and its ICO token is PPT.
Photo Credit: Chiaochi