Factoring Network


Factoring Network (a placeholder name for now)

Team member names

  • Eric Siu, Ethereum Foundation

  • Alp Ergin, Inverter Network

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


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-scale, proof-of-concept (PoC) in collaboration with a significant non-profit business/trade association. The long-term vision is to deploy the network in multiple geographies with minimum viable interoperability between instances. 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.

We have multiple workstreams including technical, business/administrative, and governance matters that we will pursue in parallel. The focus for SoP though, will be primarily on governance and political economy. Given the high-stakes nature of the project, it will be important for us to establish a policy and governance framework around key mechanisms of the network. For SoP, we aim to draft a policy whitepaper meant to be delivered to NGOs, public institutions such as national governments agencies, ministries, chambers, departments, and other potential public sector stakeholders

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

Workshops and ongoing conversations with relevant industry/public sector leaders.

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 plan to publish the whitepaper and whatever other documentation is available/ready for public comsumption at the end of the summer (as previously noted, we will be pursuing several other workstreams in parallel to the core SoP governance workstream).

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.

1 Like

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: