Ripio Credit Network (“RCN”) is a protocol based on smart contracts and blockchain technology, which brings enhanced transparency and reliability in credit and lending. The protocol enables connections between lenders and borrowers located anywhere in the world, regardless of currency. By reducing the traditional banking brokerage costs and management fees, RCN aims to allow better conditions for both sides, creating a better credit alternative than anything available today. By including an intermediary agent (the “Cosigner”), the RCN seeks to neutralize the lender’s credit risk and, in case of a default, provide an alternative mechanism for managing the debt collection in the borrower’s country of residence.
In 2016, Ripio launched a groundbreaking credit service (called Ripio Credit), reaching the finals at TechCrunch Disrupt, and revealing the innovative service to the world. Ripio Credit currently extends credit to Ripio users, allowing them to finance their online payments in installments, using bitcoin as the transaction vehicle. This alternative credit facility is available to individuals without a credit card or a bank account, and it represents a service that no other Bitcoin wallet company had offered before. Out of an Argentina-based entity, the company loans its own funds to borrowers in Argentina in order to provide the Ripio Credit service. The company works with local counsel to ensure compliance with all appropriate lending, data privacy, and financial services laws, and the company currently provides Ripio Credit services only to borrowers in Argentina.
Although Borrowers and Lenders will likely prefer to denominate credit transactions in a local currency, RCN Tokens will be required to facilitate transactions among the other agents in the RCN, as further described below. RCN Tokens will be required to access the RCN network given that agents' fees and obligations – plus the corresponding distribution expenses within the network – are driven by the use of these tokens. RCN Tokens also act as an incentive to each one of its participant agents to continue to participate in the network.
The “smart contract,” generated by the Wallet Provider and executed when matched by the Credit Exchange, contains the relevant credit terms, Borrower obligations, events of default, and signatures or verifications from each of the other agents, as applicable. RCN Tokens will facilitate interaction with the smart contract among agents within the RCN. Each credit flow starts with the Borrower who makes a credit request. The Borrower performs the request from its Wallet Provider, which has already integrated to the RCN protocol, and then the Borrower waits for an approval. The WalletProvider (i.e., any entity that wants to offer credit services to its users via the RCN) adds information about the Borrower and its credit request, generates a smart contract, and then broadcasts it to the network. Borrowers will only connect with the RCN through a Wallet Provider. As a condition to using any software or services provided by Ripio to the RCN, each Wallet Provider must warrant its compliance with all applicable regulatory frameworks for the jurisdiction(s) in which the Wallet Provider offers its services, including any applicable lending laws. The Oracle provides the service of informing the exchange rate between any given currency used by a Wallet Provider, Credit Exchange, Borrower, or Lender, and RCN Tokens, at any time it is consulted. The Oracle will most frequently be consulted at the time a loan is originated, and during the credit lifetime in order to determine its installments.
An ID Verifier identifies each Borrower and verifies that he/she is who he/she claims to be; this will prevent most fraud or scam attempts and provide the Borrower’s identification information in case of a default. A Scoring Agent then analyzes available information to statistically evaluate the probabilities of a default linked to a certain ID. This same Scoring Agent could eventually gather the transactional information from the RCN blockchain (which is open to anyone on day one) to build a credit ledger and track a Borrower’s instances of default or non-default over time. The Cosigner uses information provided by the ID Verifier and the Scoring Agent to establish the terms under which it will operate on a loan. The default terms, under which the cosigner takes responsibility for the Borrower’s debt, will be clearly specified in the same smart contract. The Cosigner terms will be added to the smart contract, along with the terms provided by the ID Verifier and Scoring Agent, and the smart contract will be then generated and broadcasted by the Wallet Provider. In the event of a default, the Cosigner acts on behalf of the Borrower by taking responsibility for the debt amount as specified in the smart contract. The smart contract also determines if the Cosigner is obliged to make a unique payment to the Lender or if it will continue to bear the expense of the periodic installments under the original conditions.
The cosigned smart contract is then listed by a Credit Exchange, including the information gathered up to this point. That is amount, currency, Borrower ID, Borrower credit score, co-signature insurance options, and any other agent or Borrower input permitted. As a condition to using any software or services provided by Ripio to the RCN, each Credit Exchange must warrant its compliance with all applicable regulatory frameworks for the jurisdiction(s) in which the Credit Exchange offers its services, including any applicable lending laws.
Through the Credit Exchange, a Lender that holds RCN Tokens can create a trading order. When these orders match the conditions on the cosigned smart contract, the loan will take place and the smart contract will execute accordingly. The RCN Tokens involved will be transferred to the corresponding Wallet Provider, who will, in turn, grant credit to the Borrower, upon turning the RCN Tokens into local currency.