Factoring Network


Factoring Network (a placeholder name for now)

Team member names

  • Eric Siu, Ethereum Foundation

  • Philipp Zahn, 20[ ] *(OR ALTERNATIVELY)* Alp Ergin, Inverter Network

Note inviting collaborators if you’re looking for your second team-member

N/A, as we already have a full group of contributors from a wide range of organizations. However, we actively seek collaboration with domain experts in protocol governance, applied cryptography, privacy/security, and mechanism design.

Short summary of your improvement idea

We propose developing a global network for primary capital issuance. We will be initially focused on B2B receivables factoring as part of a national government ministry proof-of-concept (PoC). That said, the ultimate vision is to deploy the network in multiple geographies with minimum viable interoperability between instances (“shards” or “rollups” if you will). Significant open research questions remain spanning protocol architecture, software engineering, applied cryptography, market design, governance, and political economy.

Answers to the following questions. Please structure the body in explicit Q&A form.

What is the existing target protocol you are hoping to improve or enhance? Eg: hand-washing, traffic system, connector standards, carbon trading.

The initial PoC targets a national digital banking debit system. More broadly, the Factoring Network aims to enhance any digital banking system and non-banking institutional markets (e.g., broker-dealer, OTC) for primary capital issuance.

What is the core idea or insight about potential improvement you want to pursue?

The Factoring Network will leverage smart contract composability, trust-minimized privacy (where possible based on the current state of ZK privacy stacks), and recent advances in mechanism design & game theory to enable more transparent and competitive primary capital markets.

What is your discovery methodology for investigating the current state of the target protocol? Eg: field observation, expert interviews, historical data analysis, failure event analysis

All of the above. While full data sharing may be limited by compliance and security considerations, we are committed to open collaboration in our research process and findings.

In what form will you prototype your improvement idea? Eg: Code, reference design implementation, draft proposal shared with experts for feedback, A/B test of ideas with a test audience, prototype hardware, etc.

This summer, we aim to produce a detailed protocol roadmap to guide engineering work slated for late 2024 and early 2025 to deliver the PoC. Pseudocode and a testnet are aspirational stretch goals.

How will you field-test your improvement idea? Eg: run a restricted pilot at an event, simulation, workshop, etc.

We are considering using agent-based modeling informed by Compositional Game Theory for simulations, but the specific approach is to be determined.

Who will be able to judge the quality of your output? Ideally name a few suitable judges.

An ideal panel of judges would comprise experts in finance & banking, development economics, technical auditing (encompassing smart contract, privacy/security pentesting, and economics), and public policy with a focus on financial inclusion & open, competitive markets. Specific individuals have not yet been identified–we are open to recommendations.

How will you publish and evangelize your improvement idea? Eg: Submit proposal to a standards body, publish open-source code, produce and release a software development kit etc.

We have already secured initial support from a national government ministry. Collaboration on open-source code, financial + game theory modeling, and establishment of governance standards will all be essential to the success of the Factoring Network.

What is the success vision for your idea?

By the end of summer 2024, we aim to develop a viable combination of protocol design, cryptographic primitives, and game-theoretic parameters to produce a coherent roadmap guiding the subsequent engineering phase and implementation of the national PoC.

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Are you guys familiar with startups like c2fo that do this in a tradfi? https://c2fo.com/

Also Carta, Stripe, and other big fintech companies wtih privileged view of capital and free cash flows have this kind of financing offering.

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Totally! Would add Toast and Square Capital to that list too, particularly on the brick-and-mortar SME side in US.

C2FO, fintech merchant acquirers / neobank issuers + the various B2B AR/AP automation companies, and legacy FIs are all relevant case studies for us.

And very much appreciate the feedback today :pray: