The rise of cryptocurrencies has transformed the way capital is raised.
Access to capital is the seed of innovation. Start-ups rely on funding to turn ideas into products and platforms. ICOs have made it possible for any talented, entrepreneurial team to acquire the funds needed to launch the next big thing.
Cryptocurrencies have transformed capital raising, but this should be the mere beginning.
The financial markets are far greater than just venture capital funding. In fact, the greatest portion of the financial sector focuses on the debt markets, which involves the borrowing and lending of money. The debt markets serve everyone and every entity, from everyday people to trillion-dollar enterprises like Apple.
The blockchain can change the way debt markets function.
Decentralizing the Debt Markets
A new blockchain project, Vena Network, aims to decentralize the debt markets, thereby applying the benefits of blockchain technology to the most prominent service in the financial sector.
The key success behind ICOs has been that they enable p2p capital raising. Rather than the masses having to go through VC funds that take high fees, people were able to invest without having to go through a middleman. Vena Network intends to provide a similar benefit in the debt markets by removing the need for middlemen in the lending process.
Vena Network incorporates a number of roles to build a protocol that can enable p2p lending.
To ensure that p2p lending can function, it is imperative that those with important roles in the network have a stake in the success of the platform. Moreover, the lending markets are complex and the everyday person cannot sustain the constant proper analysis needed to maintain a successful debt market. Thus, Vena Network utilizes its own form of a delegated proof of stake for those who intend to manage the loans. This process is handled by Vena Nodes.
Vena Nodes exist as the market-makers. They not only manage the loans, but also provide liquidity in the network. They can even enable transactions, credit evaluations, contract plug-ins, and more.
Vena Nodes are verified participants that must provide proof of knowledge. They must be experienced with the debt markets: having a valid understanding of laws and debt functionalities is a base requirement.
Need for a Jury
While the blockchain community believes the code is king, not everything can be handled by an algorithm.
Typically, Vena Network will require those who want a loan to provide a cryptocurrency collateral. In case the debt receiver defaults, the lender will receive the collateral as compensation--a standard mechanism adopted from the traditional debt markets.
However, on a rare occasion, a case needs judgment from a jury. Vena Network accounts for this situation in an effort to make the blockchain-powered debt market as fault-proof as possible.
To ensure cases in which smart contracts cannot handle a debt resolution scenario, Vena's own Jury will step up to resolve the dilemma. While the current debt resolution juryies have no incentive to make the right decision, Vena Network will force them to make the right decision as the jurors would stake tokens and could lose them in case they are found to make the wrong decision.
To sum up, Vena Network is introducing blockchain to the debt markets and is effectively offering the means to decentralize this portion of the debt markets. It forces its decision-making participants to stake VENA tokens in order to participate, and this ensures the VENA DAO can function without a centralized authority forcing order.
Vena Network is about to being the benefits of decentralization (and blockchain) to the debt markets.