🧈Future Collaterals
What Are They?
Future collaterals are NFTs that appreciate in value overtime with respect to a predefined price appreciation curve.
The future collaterals' contract offers multiple channels (each defined by an appreciation curve) for the NFTs it mints and before users are allowed to mint an NFT on a specific channel, they need to be approved by a future collaterals' auditor.
Let's suppose a channel with an appreciation curve that doubles the price of its collaterals every week with the starting price being 1 USD.
A user willing to borrow 100 USD and reimburse after 7 weeks can pay 1 USD to mint an NFT from that channel and use that NFT as a collateral in a 100 USD loan that is due for reimbursement 7 weeks from now.
Since the NFT will double in price every week, its price over the next 12 weeks will be as such:
| After X Weeks | Price in USD |
|---|---|
After 0 Weeks | 1 |
After 1 Week | 2 |
After 2 Weeks | 4 |
After 3 Weeks | 8 |
After 4 Weeks | 16 |
After 5 Weeks | 32 |
After 6 Weeks | 64 |
After 7 Weeks | 128 |
After 8 Weeks | 256 |
After 9 Weeks | 512 |
After 10 Weeks | 1024 |
After 11 Weeks | 2048 |
After 12 Weeks | 4096 |
In other words, the 1 USD collateral the user purchases today will be worth 128 USD after 7 weeks and thus be worth more than the loan's principal when it becomes due.
In the event the user were to default on the loan, the lender can get the future collaterals' contract to reimburse 128 USD for the loan using funds from the treasury. The future collaterals' contract constitutes its treasury from charging for the minting of new collaterals and donations from supporters.
Users that default on their loans cannot mint new collaterals until they reimburse the totality of the current price of their NFT collateral which continues to appreciate in value overtime meaning the more they wait to reimburse the contract, the more they would have to reimburse. This locks bad borrowers out of the system.
Future collaterals cannot be minted outside of loans so they cannot be sold on a secondary market. They are a tentative to solve credit for everyone no matter how rich, no matter how poor.
How Can You Insure The Price Of A Collateral In the Future?
The contract is programmed to follow the price appreciation curve of a collateral's channel when charging for the collateral. The only unknown is the number of users willing to mint a new collateral at the price determined by the contract each week. And as long as users keep minting new collaterals, they will be minted at a price that follows their channel's appreciation curve.
Let's take our previous curve that doubles in price each week, the table below shows the amount of USD the contract will have in its treasury each week to guarantee all loans made with collaterals from the channel if we assume there are 100 new mints every week.
| Week | Price in USD | End of Week Treasury (in USD) |
|---|---|---|
1st Week | 1 | 1 * 100 mints = 100 |
2nd Week | 2 | 2 * 100 mints + 100 = 300 |
3rd Week | 4 | 4 * 100 mints + 300 = 700 |
4th Week | 8 | 8 * 100 mints + 700 = 1500 |
5th Week | 16 | 16 * 100 mints + 1500 = 3100 |
6th Week | 32 | 32 * 100 mints + 3100 = 6300 |
7th Week | 64 | 64 * 100 mints + 6300 = 12700 |
8th Week | 128 | 128 * 100 mints + 12700 = 25500 |
9th Week | 256 | 256 * 100 mints + 25500 = 51100 |
10th Week | 512 | 512 * 100 mints + 51100 = 102300 |
11th Week | 1024 | 1024 * 100 mints + 102300 = 204700 |
12th Week | 2048 | 2048 * 100 mints + 204700 = 409500 |
13th Week | 4096 | 4096 * 100 mints + 409500 = 819100 |
A lender willing to make a loan collateralized by an NFT from this channel, can consider the amount the contract will have in treasury as well as the amount of debt it will have on this channel before making a decision.
Let's suppose a 500 USD loan that will be due at the end of the 10th week for instance. We know the treasury by then will be 102,300 USD (assuming 100 new mints every week) and that our collateral's price will be 512 USD (which is more than our principal of 500 USD).
Let's also suppose the total amount of loans made with collaterals from this channel between now and the end of the 10th week will be 1000,000 USD.
This means there are enough funds in our treasury to cover just 10% of all the loans or in other words, if the borrower were to ever default on the loans, the lender will have 62% chances of being reimbursed by the contract assuming there is a default rate of 25% on all the loans from the channel (which is a reasonable assumption since 25% is the average default rate on loans in the US).
As you can see, lenders still need to do some due diligence before lending money even if those loans are backed by future collaterals.
Future collaterals are meant to alleviate the risks in lending, not completely erase them as that would be close to impossible.
Minting A Future Collateral
The first step is to create a unique profile. You can find a guide to doing that on the page below:
The next step is to create an NFT Bounty. To do so, go to the trustBounties's page and click on the Create a Bounty button
Fill in the collateral address with the address of the future collaterals' contract
Set the Claimable By field to the zero address. Also, you need to lock your collateral for one week longer than the duration of your loan.
The step after that is to find an auditor to add you to a future collateral channel. You can find one on the auditors' page; make sure you search for auditor contracts of category 16 which is the category of future collaterals' auditors.
Your auditor will audit you and pick a channel for you out of all the selection of future collaterals' channels. Each channel appreciates differently and users that have a high creditworthiness will have no issue finding an auditor to put them on the channels that appreciate the fastest.
Once you've been added to a channel, you can mint your collateral. To do so, go to the future collaterals' page and click on the Mint Collateral button
Fill in the form that pops up with the appropriate values. The amount to borrow field is very important as it fixes the contract's expectations on the amount you will be using the minted collateral to borrow. Validate and confirm the transaction.
Congratulations, your token has been minted and sent into your NFT Bounty previously created. You can verify that by checking your NFT Bounty on the trustbounties' page. In the image below, we can see that our collateral with ID 1 has been locked inside our trustBounty.
With your collateral in place, the next step is to create a stake to request for loans and attach your NFT Bounty to it.
Go to the stake market's page
Select the currency you would like to borrow in (in the image above, we selected the usd currency) and click on the Create a Stake button to enter the information on the amount you would like to borrow and a reimbursement plan. In the example in the image below, we are requesting for a non-periodic loan (Period Payable set to 0) of 1000 usd (Amount Payable) on November 10th, 2023 (Start Payable) which we will be reimbursing starting December 9th, 2023 (Start Receivable) with monthly recurring payments (Period Receivable set to 43200 which is the number of minutes in 30 days) of 100 usd (Amount Receivable). Validate the transaction after filling in your own loan information.
This will create and list your request along with other requests from other users. Tick the Mine Only button to only show your requests. If you can't find the newly created request, reload the page and try again.
Once you've found your request, click on the Details button to expand its panel and check for the accuracy of the information in the parameters' section. As you can see in the image below, our information checks out.
Once your request is created, you need to update its terms to provide an explicit description of the lending request along with a contact information like your PayChat handle. You can read more about updating the terms of your stakes/requests on the page below:
After that, you just need to wait for a lender to find your request/stake and contact you. Make sure you've attached your NFT Bounty to your stake so potential lenders can be reassured you have collateral backing your loan request. You can read more about how to apply to requests/stakes, read applications to your requests, and how to accept them on the page below:
Make sure you attach your NFT Bounty to your stake which you can view a guide for on the page below:
How To Become An Auditor?
To be able to add a user to a channel, you need to become an auditor. To become an auditor, you need the following things in place:
Have a unique profile. You can find how to create one on the page below
An Auditor contract that is set up as a Future Collateral Auditor (with the ID 16)
An FT Bounty locking USD tFIAT tokens up for at least a year
The amount of your FT Bounty's balance determines the price of the collaterals you can mint meaning if you have 1000 USD locked up, you can only mint your users, collaterals worth 1000 USD or less
Once you have all that in place, you can start acting in the capacity of an auditor.
How To Add A User To A Channel?
You can only add users with unique profile IDs to channels.
To add a user to a channel, make sure you have everything in place to qualify as an auditor; then follow the steps below:
Partner with the future collaterals' channel so users willing to mint new collaterals can contact you for your services. You should also have an auditor contract registered to category 16 which will also enable users to find you straight from the auditors' page. You can find a guide to partnering with CanCan channels on the page below:
You should also be checking the channel every now and often for new requests/stakes from users that will be listed under the Contracts tab of the future collaterals' channel like in the image below
Once you've found a loan request/stake you are interested in, apply to it and wait for the user to accept your application.
Remember that a future collateral's channel is determined by the appreciation curve of its collateral's price. You shouldn't be adding users to channels where the collateral's price appreciates too much if you don't think the user is creditworthy enough. If for instance, you don't think your user can borrow 1000 USD today and reimburse that in 20 weeks from now, you should not add that user to a channel with an appreciation curve that will value its collaterals at 1000+ USD, 20 weeks from now. Doing so will increase the risk of default on any loan taken by the user using a future collateral and the more users default on their loans, the less the future collaterals' contract will be able to reimburse all the lenders. If you know of any auditor adding users on channels they should not be adding them on, please claim their bounties and get a nice payday from helping to protect the future collaterals' contract.
To add a user to a channel, go to the future collaterals' page and click on the Pick Channel button
In the form that pops up, enter the ID of your user and the channel ID you are willing to add your user to. Validate the transaction and that's it, you've successfully added your user to a channel in the future collaterals' contract. If your user's profile is not unique, this operation will fail.
How To Mint A Future Collateral?
After a channel has been picked for you, click on the Mint Collateral button on the future collaterals' page
Input the wallet address of the auditor, the amount you intend to borrow using the collateral, the NFT Bounty ID where to send the collateral upon minting, your auditor's FT Bounty ID as well as your channel ID. Validate and confirm the transaction.
You can now create a stake using your new collateral as a bounty to borrow money.
Finding Your Collateral
After your collateral has been minted, follow the steps below:
Go to the future collaterals' page and tick the Mint Only button; this will list your collateral like in the image below:
You can view in the parameters' section of your collateral's panel, the price appreciation curve or estimation table that displays the price of the collateral week after week for the first 52 weeks of the year starting from the month the channel was created.
To compute the price at week X with X bigger than 52, you can use the formula:
PRICE AT WEEK (X mod 52) + (PRICE AT WEEK 52) * X / 52
Selling Collaterals
If you've lent funds to borrowers using a future collateral and they've defaulted, you get your loan reimbursed by the future collateral's contract unless there are not enough funds available to reimburse you. You can check whether there are enough funds by checking the Channel Fund parameter in the parameters' section of your borrower's collateral panel.
To get your funds reimbursed, you first need to claim the collateral of the user in the trustbounty's voter. Please check the trustbounties' documentation to learn how to do that.
🖥️TrustBountiesWhen creating your claim, make sure to use the Future Collateral contract as the recipient otherwise, even if you win the claim you will not be able to retrieve the collateral and it will be locked forever.
If your claim is successful and the future collateral has been transferred to the future collateral's contract, you can go to the control panel menu of your borrower's collateral panel and click on the Sell Collateral button
Fill in the form and validate the transaction.
Congratulations !!! Your loan has now been reimbursed by the future collateral's contract. Note that the maximum amount reimbursable by the future collateral's contract is the amount to borrow specified by the borrower when minting the collateral.
Burning Collaterals
If you've minted a collateral and used it as a guarantee to borrow money, you should burn that collateral as soon as you've reimbursed your loan and withdrawn your collateral from its NFT Bounty. Otherwise, you wouldn't be able to mint a new collateral.
When retrieving your collateral from its NFT Bounty, make sure to specify the future collateral contract's address as the recipient otherwise, you will not be able to retrieve the collateral and it will be locked forever.
To burn your previous collateral, go to its control panel's section and select the Burn option
Make sure you've sent the collateral back into the future collateral's contract and validate the transaction.
Congratulations!!! Your previous collateral has now been burnt and you can mint a new one.
Erasing Collaterals Debts
In case you've borrowed some funds using a future collateral as a guarantee and defaulted on that loan, you will need to erase your standing debt with the future collateral's contract before you are able to mint a new collateral.
Keep in mind the amount you have to reimburse goes up with the price of the collateral so the sooner you reimburse your debt, the lower the amount you would have to reimburse. You can view the debt you owe from the parameters' section of your collateral under the Debt Amount parameter
To erase your debt, click on the Control Panel button and select the Erase Debt button
Fill in your address and validate the transaction.
Congratulations!!! Your debt has now been erased and you can mint a new collateral again.
Current Available Channels
New channels are launched every two months, and some old ones are relaunched depending on the proposals and votes of the community in the future collaterals' valuepool available under the Contracts > Valuepools table on the future collaterals' page.
The currently available channels are:
| Channel ID | Description | Weekly Appreciation Curve |
|---|---|---|
1 | Doubles every month | 1, 1, 1, 1, 2, 2, 2, 2, 4, 4, 4, 4, 8, 8, 8, 8, 16, 16, 16, 16, 32, 32, 32, 32, 64, 64, 64, 64, 128, 128, 128, 128, 256, 256, 256, 256, 512, 512, 512, 512, 1024, 1024, 1024, 1024, 2048, 2048, 2048, 2048, 4096, 4096, 4096, 4096 |
2 | 10 USD weekly appreciation | 1, 11, 21, 31, 41, 51, 61, 71, 81, 91, 101, 111, 121, 131, 141, 151, 161, 171, 181, 191, 201, 211, 221, 231, 241, 251, 261, 271, 281, 291, 301, 311, 321, 331, 341, 351, 361, 371, 381, 391, 401, 411, 421, 431, 441, 451, 461, 471, 481, 491, 501, 511 |
3 | 10% weekly appreciation | 10, 11, 13, 15, 17, 19, 21, 24, 27, 30, 33, 37, 41, 46, 51, 57, 63, 70, 77, 85, 94, 104, 115, 127, 140, 154, 170, 188, 207, 228, 251, 277, 305, 336, 370, 408, 449, 494, 544, 599, 659, 725, 798, 878, 966, 1063, 1170, 1287, 1416, 1558, 1714, 1886 |
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