The name says it all, It is the tokenized version of a liability. Designed to provide more finance opportunities for businesses who would agree to accept the token as a form of payment in their business.

These token would act similar to how gift cards are currently operating for big businesses. Since companies like Apple and Google have a huge reputation, They have the power to sell their potential sales as a form of gift cards, Often with little to no discount. Though there are probably discounted deals done with other businesses.

This is yet another financing mechanism, Where the collateral of the loan is basically the reputation of the business who's issuing these gift cards. With no other formal agreement. One point to make is that this also enables a new form of payment. And in some occasions buyer would be able to get a discount on the gift card they buy, Though this is not common for big tech gift cards. But if you think about it, When the sales of a business slows down, The business itself is willing to give a discount on their goods or services just to keep being in business.

I claim the same would apply to gift cards or in this case liability tokens. Investors who buy these tokens often would like to get a discount on the deal and when they start to think that their capital is at risk. They are willing to give a discount on the tokens just to get their capital back, Or at least part of it.

The initiative, Liability tokens on defi

I believe this could be a great initiative for BCH. It is a perfect match. BCH is accessible with high enough liquidity in most markets. That means it wouldn't that difficult for buyers to acquire BCH if they want to. On the other hand the liability tokens are less liquid and sometimes they might be sold at a discount. This would be great combination to start a game.

1. The investors want opportunities to make money, That would be possible for them if they are willing to take some risk.

2. The buyers would be able to hunt for purchasing items on a discount. Also since the token's liqudity is provided in BCH, It's best for them to purchase with BCH.

3. The merchant will receive financing deals by selling liabiltiy tokens. At the same time it can be a new method for them to acquire new customers.

4. And last one is for Agents who are in the business of onboarding merchants. They would be able to make money by using their connections and reputation to provide the fund raising opportunity for the merchants.

Other than that. Since liability tokens are often acquired at a discount. It can also be used to give interest free loans for those who want to take a loan to buy stuff instead of selling their crypto. Also since the loans are over-collateralized more and more BCH is gonna get locked up as a form of savings.

To me this is the engine cryptocurrencies need for driving adoption. And it can be applied to almost every jurisdiction, Except for those who openly ban use of cryptocurrencies.

What I have described is nothing new, This is already happening in the traditional finance. We need to create processes for simplying these operations at scale.

Of-course there's some amount risk attached to every business, This wouldn't be an exception. I would like to mention some measures we can take to reduce the risks.

Certainly there will be failed businesses and cases of fraud. We need procedures to reduce the damage of these cases.

Risk Management

There's need for a system to help with risk management and decision making. A rating system, An enforceable agreement as an alternative option and more transparency is what I think is needed for this.

Recycling tokens

Since there's low liquidity in these kinds of liabilities. It is important for investors to cycle out of every deal they get into. This can be done by giving discounts over time in an automated fashion.

What I'm trying to get out of this?

This post is only my thoughts on this initiative and how it can be implemented. Since obviously I don't have the power to pull this off. I'm trying to get the word out to those who have the similar concerns.

I believe we should try new models until we find one that works. Up until now use of cryptocurrency as cash hasn't grown as expected. I think this means we haven't found the right strategy yet.

Feel free to share your thoughts on this in the comment section below.