This text demonstrates the second part for new ideas for a massive adoption of BCH among retail merchants around the world. This new solution is based on increasing BCH's payment services, for not only cash services, but also credit services. Have you ever imagined splitting your payments with BCH? The idea of this text is exactly that, a way of making purchases on credit using BCH.
Anyone who has read the previous text knows that I commented on the two alternatives that marketers use in order to increase sales. The first alternative is the discount, and the second is credit. With credit, the economy heats up, exchanges take place with greater fluidity.
The importance of credit
Although there are many criticisms about the harms of excessive credit, both for the economic mainstream in the figure of thinkers like Minsky, as well as for the Austrian School of economics, and their theory of economic cycles, both show that the central problem is disconnection between the real economy and financial. Minsky speaks of an endogenous process of financial crises through excess credit, and high leverage of the financial market, while the Austrian school cites the market failures that result from the monopoly of banks and currency. So the problem is not necessarily the credit, as some people say, the problem is how it is used and who uses it.
Credit is not a villain as long as it occurs in a free, competitive and transparent environment, so to have healthy credit, one solution would be to run on Satoshi's blockchain. Do not be prejudiced with credit, as it is part of the market, being something that you cannot prevent, and that has an important role for the economy. Imagine yourself in the situation of a job interview, but you do not have the suit that was required for the meeting, and at the moment, you do not have the full money to buy it, you will have to borrow, as this is an unavoidable opportunity. You will take credit, and see how it can change your life, credit is definitely very important.
How it works?
Through a token, in which the holder is worthy of obtaining credit for the magnitude of the tokens he owns. The consumer who wants to obtain credit could buy that token with BitcoinCash (BCH), then start their reputation in the market, making purchases, and thus spending that token and getting the token back for every payment made on time.
For simplicity we will call these tokens CredCash (CCH). To obtain CCH, BCH must be sent. These sent BCHs will be signed for a scheduled transaction, however if the consumer wanted to redeem their BCHs before the period specified in the subscription contract, they must make a transaction by sending the CCHs back, thus a large part CCH cannot be dumped on the market without having a BCH counterpart, which is valued for a period of time. And all transactions and values can be audited by anyone, through the blockchain.
Suppose that for a 10-year contract, it is possible to redeem the same amount of CCH per BCH, that is, 1/1. Thus, for a transaction valued for 5 years, 0.5 CCH will be given for 1 BCH, that is, ½. And so on ... Up to a minimum limit of 90 days, which with 1 BCH hoarded in that period, will give the consumer only 0.0246 CCH.
The consumer can then freeze some BCH coins, and receive a CCH amount to use as a credit, assuming he has chosen to hoard for 90 days with 0.5 BCH he will receive 0.0123 CCH. That way you could go to the market and give CCH coins as a guarantee to the shopkeeper. The shopkeeper, in turn, will only deliver the exact amount of coins back after the correct payment of the installments of his product using BCH. Note that over time the consumer will increase his credit amount, as long as he pays his installments on the correct date.
If many people are good payers, the risk decreases, and the amount of coins on credit increases, so CCH credit will naturally inflate. Solving Minsky's problem. So the tendency is for the shopkeeper to ask for more CCH coins to offer him a product, therefore, although at the beginning CCH and BCH have the same 1/1 parity, after the years the trend is for this relationship to vary according to the market's will. No general basic interest in the economy, but the free market in action. If many people start to delay payments or even default, the shopkeeper will be obliged to use the CCH received from the consumer to redeem part of the frozen BCH, or to sell the credits to the market, at the price practiced in the market. By doing this, CCH coins become scarcer, since most of them return to the original address when redeeming the BCH and the credit is highly valued.
The shopkeeper can benefit from CCH to increase sales at his establishment, simply by accepting, but also if he wishes, he can offer additional CCH for payments on time, or even offer CCH without consideration, just for receiving on time. For the shopkeeper to acquire CCH, he must also freeze some bitcoins, as consumers do, the difference is that in his case, this strategy it will be to differentiate yourself from your competitors.
Illustration and examples
An illustrated example is a good way to understand how “CredCash” would work.
The consumer wants to buy with credit, so he must send BCH which will be frozen for a period, and receive CredCash coins. After that you can buy products in a store using the credits received.
The shopkeeper only has to return CCH tokens, if payments occur within the agreed period. We can imagine three types of shopkeepers, the conservative, the moderate and the bold:
Following the previous example, the conservative shopkeeper will only return the exact value of the tokens for each payment made on the correct day. Being three monthly installments of 0.0041 BCH, let's say that on every 10th, then when the consumer pays 0.0041 BCH on the 10th of January, he will receive 0.0041CCH that were with the shopkeeper. Let's say that the consumer delayed the payment on February 10, paying only on the 25th, then the shopkeeper decides to return 0.00205 CCH to him, and not the 0.0041 due to the delay. Suppose then, that the consumer wanting to continue with his credits, decides to pay the last installment in advance, then paying on February 28 instead of March 10, so the shopkeeper decides to return the credits in full, in this case 0.00615 CCH, in this last payment. All these rules being freely pre-agreed between the shopkeeper and the consumer.
A moderate shopkeeper will encourage the consumer by offering a bonus to each installment, suppose that 1%, then the consumer who pays the installments on time will receive 0.004141CCH instead of 0.0041CCH. All of these rules being freely pre-agreed between the shopkeeper and the consumer.
The shopkeeper with a bold profile will simply not require any CCH as a guarantee, and offer the sale of their products in installments, and offering CCH to the consumer who pays in days, for example: A product that costs 0.01BCH he divides into 4 installments monthly payments of 0.0025, and if the consumer pays on time, he will earn a 2% discount on credits. So when paying 0.0025BCH the consumer will receive 0.00005CCH of bonus. All of these rules being freely pre-agreed between the shopkeeper and the consumer.
Conclusion:
The CCH would be a way to offer credit payments using the security of Satoshi Nakamoto's blockchain network. Credit is a sales driver and can offer retailers a competitive advantage, and leverage BitcoinCash's payment service function, enabling yet another path to mass adoption.
Credit cannot be seen as a villain in the economy, being a very natural resource, however it is necessary that it occurs in a free, competitive, secure and mainly transparent environment, with all these characteristics existing in the BitcoinCash network. In this way, the CCH can open a new horizon for the physical agents of the real economy, this is economically more comprehensive than the current DeFi.
Shopkeepers and merchants can freely adapt to the CCH mechanism, and place the rules according to the wishes of both, the mechanism allows simplicity and a lot of security, being adaptable to the profile of several tenants. The entire CCH feature is already available in the current BCH protocols, but it can certainly be improved with the operation of SmartBCH, as well as, if miners can have a bigger role in the decisions of token validation.
Also read the first and third part
Noise
BCH - Brazil
I hope you liked the text. Be sure to comment what you think. This text may have several grammatical flaws, since English is not my native language. I would be grateful for any corrections, grammatical or methodological.
Peace be on you.
Hello there, Can't you do this already on platforms like Blockfi? I mean, you ask for loans and give up a collateral of crypto, which may well be BCH. What am I missing here? Cheers