Financial management is often a tricky terrain to navigate, where hazards small and large are commonplace. Whether it’s about making payments on time, calculating risk factors or even singling out transactions steeped in fraud, timestamped data is a valuable resource.
Time is money, and businesses run most efficiently when people pay their bills on time. Analog enables the more seamless functioning of markets using time data from a decentralized, trustless network. Through smart contracts, Analog can even support financial applications to facilitate the creation of decentralized lending systems and incentivized staking and liquidity pools.
- Where financial blocks exist we find inefficiencies and process disruptions.
- Late or missed payments can result in decreased profitability through bad debt.
- Majority of risk identification systems failed to flag the 2008 global financial crisis before it was too late.
- Despite an extensive regulatory framework surrounding high-profile or substantive transactions, the legacy financial system remains opaque.
Finance, or the management of money, is a function that underpins our businesses, governments and the smooth running of our lives. The transfer of money equates to a transfer of both time and energy, and as such, it stands that where financial blocks exist we find inefficiencies and process disruptions. Such inefficiencies can be found throughout our financial system, ranging from minor inconveniences at the individual level to major macroeconomic disruptions.
From utilities, to groceries, cable, phone and gas, the average individual is faced with a wide range of expenses each month. These will typically be from multiple vendors and will be received at different times. As a culture, we are moving away from cash towards digital money (in its various forms), and as such, payment of recurring expenses will often involve either credit cards or a direct invoice.
Keeping track of payment requests can be cumbersome and time-consuming. Oversights can result in penalties in the form of fines, or lower credit scores which can reduce opportunities later in life.
Businesses are also affected, in that late or missed payments can result in decreased profitability through bad debt or an increased need for working capital to fund their daily activities. Mitigating these risks means they must invest in credit management teams.
Crypto credit scores
In traditional finance, an individual or business will have a credit score based on an analysis of their financial history, especially timeliness of payments and lack of defaults. This allows lenders to assess the credit risk associated with each loan, thus enabling cheaper rates and greater access to capital for those with a favorable financial history.
Since mid-2019, the popularity of the blockchain-based borrow/lend industry has exploded, with Ethereum’s Aave and Compound protocols alone managing over $19 billion USD in assets. These protocols’ users can borrow crypto assets at fixed or variable rates, collateralized against the value of other crypto assets they have previously deposited. However, due to the anonymous nature of Ethereum addresses, users’ wallets are not currently linked to any individual and as such, protocols do not have access to the user’s credit score. This results in undifferentiated interest rates and collateral requirements for all users, even if their financial history is impeccable.
Macroeconomic failures due to under-explored risk
Macroeconomic and risk analysts must research and compile their information from a wide variety of sources and outlets, and often must work with incomplete or unreconciled datasets.
While this is currently accepted as the norm and is understandable given the volume and variety of data being produced, it is a sub-optimal situation that may give rise to complex or interacting risks being overlooked.
Despite an extensive regulatory framework surrounding high-profile or substantive transactions, the legacy financial system remains opaque. This is true even of the USD transfers, despite being highly regulated and the world’s reserve currency. This makes financial accountability difficult to enforce.
- Analog can use ANLOG rewards to incentivize individuals and third parties to provide time-stamped details of all raised invoices for submission to the Timegraph.
- By its nature, the Timegraph acts as a central repository for searchable, time-stamped data.
- The immutable and publically verifiable nature of transactions on the Analog blockchain makes it a suitable technology to improve financial transparency and accountability.
Analog can use ANLOG rewards to incentivize individuals and third parties to provide time-stamped details of all raised invoices for submission to the Timegraph. The Analog API can then search, organize and display all payments due for any individual in a single interface. This makes keeping track of financial history and obligations easier, and minimizes the probability of missing payments and incurring the penalties that would entail. Businesses would also benefit due to less bad debt, faster cash cycles and less need to invest in credit management.
Crypto credit scores
Participants could elect to submit their Ethereum wallet transaction details to the Analog Timegraph. Over time, this would build up a profile of their financial behavior and associated risk profile. This allows major lending protocols such as Aave or Compound to leverage the Timegraph data to assign credit scores to wallets, resulting in lower borrowing rates and lower collateralization ratios for wallet addresses deemed to be creditworthy.
Macroeconomic failures due to under-explored risk
By its nature, the Timegraph acts as a central repository for searchable, time-stamped data. If governments and financial institutions can be incentivized to submit financial data en masse, the timechain can therefore serve as a focal point for information from which economic analysts can compile their datasets. If the depth of this function develops sufficiently, it will remove the existing issue of conflicting data from varying sources, and can significantly improve the accuracy and completeness of the information being fed into algorithmic risk management systems.
The immutable and publicly verifiable nature of transactions on the Analog blockchain makes it a suitable technology to improve financial transparency and accountability. For example, if a political party vouches to spend a specified portion of their budget on an issue, they can commit to their future expenditure being submitted to the timechain. This allows scrutiny of their budget expenditure by the public and media, thus enforcing accountability to their campaign promises.
From a regulatory standpoint, dollar transactions above a specified size could be required to be submitted to the Timegraph. This would remove any subjectivity in risk assessment or self-interest from banks and ensure that all substantive transactions are saved for future review. This would disincentivize bank frauds such as 1MDB and would also improve the likelihood that frauds committed are identified and successfully prosecuted.
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By offering an oracle feed of the time between building construction and renovation dates, Analog can create smart contracts to incentivize better real-estate management. This includes rewarding or penalizing building contractors, city officials, and tenants to keep buildings in shape.
Supply chains are the lifeblood of the consumer economy we live in today, and blockchain technology is already revolutionizing how they’re operated. By introducing a distributed time-source, the supply chain industry can provide more reliable global timestamps at checkpoints for products being transported across borders, incentivizing more punctual deliveries and penalizing delays.
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