I have not read anywhere how the team is going to ensure that those that got the money from their platform are going to refund the loan, this is the main issue in program like this, if the default rate is high and there is no way to enforce refund it may impact the project
@housebtc: To thwart bad actors, WeTrust will have four deterrents:
1. Reputation risk/ Reviews: ROSCA groups will be limited to "trusted associates" - family, friends, co-workers, fraternal groups, and professional/ religious organizations. Defaulting on payments could mean social shame and loss of reputation amongst an individual's closest associates. The idea is that for ROSCAs with small enough dollar amount commitments, reputation risk will be sufficient enough to keep participants honest. Reviews may also be left by other members to show how they felt about any participant.
2. Legal risk: ROSCA formation will allow trusted associates to e-sign and bind each other to a legal contract which requires faithful adherence and payment to the ROSCA. Defaulting on payments and stealing could mean legal repercussions. Legal recourse will only be used if individuals are participating in a "high-stakes" ROSCA and legal action would be worthwhile. I've spoken to our legal advisor and she believes it will be possible to create auto-populating templates that will be tailored to each person's ROSCA terms.
3. Collateral risk: Collateral commitments may be required prior to joining a ROSCA. The collateral will be entered into a smart contract which will surrender the property to the ROSCA group if the ROSCA agreement is breached. Collateral can be liquid-cash like assets like Bitcoin or even less liquid assets such as auto/ home titles. Our system will benefit significantly from the ability to accept less liquid assets, since the majority of middle classes’ net worth is locked in real estate. Collateral would allow capital to be used more efficiently.
4. Smart contract bounty (self-enforcement): If a ROSCA participant violates the terms of the ROSCA, the ROSCA group may start a “Bounty” on the retrieval of funds. If the funds are retrieved, the “Bounty” is paid out to the person who enforces the terms of the ROSCA.
These deterrent options will be on an "opt-in" basis and participants will be able to choose the level of security they want.
I will like to ask how you are going to enforce the collateral risk, lets say I demanded for 10BTC what example of collateral would be demanded from me to collect such amount.
I will also like to ask if there is a cap on the amount one can demand for interms of loan, because some people only have capacity for 1BTC leverage and will be demanding for 5BTC in loan
