Summary: In recent years, gaming companies introduced a revolutionary way to generate revenue by selling in-game currencies for future purchases. The business model is essentially a digital evolution of the gift card. Fwd Credit takes the model to the next level by offering companies and municipalities the opportunity to tokenize credit for their local ecosystems. Credit tokenization unlocks enormous potential to raise pre production capital and regulate Central Bank driven inflation, protecting both consumer and producer from market volatilities.
Example: TE$LA Credit
Overview
In 2019 Tesla announced a presale for the Cybertruck and began collecting $100 usd fully refundable deposits. The radical design and low cost deposit were an overnight sensation ultimately resulting in approximately 650k orders, raising $65m. Many were eager to pay $100 to participate in the meme. The following showcases a variety of ways Tesla could utilize Fwd Credits tokenization systems to govern this process more efficiently.
Problem
Although Cybertruck deposits are fully refundable, in the event of Tesla’s insolvency, purchasers would not likely get their deposit back. Additionally, if Tesla simply refused to issue refunds, legal expenses and time cost would likely outweigh the benefits of pursuing the $100 refund. In fairness, reputational risk and company strength suggest that Tesla is highly unlikely to default on depositors however, an realized loss is inevitable for Cybertruck refund seekers. $100 paid in November 2019 is vulnerable to massive currency devaluations by the time Tesla delivers in 2023.
Solution 1
Fwd Credit enables Tesla to tokenize their presale agreement in a smart contract by delivering Cybertruck Deposit Tokens (CDTs) to deposit payers. Tesla may also utilize a Fwd Credit Vault to secure funds with redemption terms determined by the company and guaranteed by the smart contract. Fwd Credit provides CDT holders programmatic assurances unavailable under Tesla’s current deposit system.
More importantly, CDT holders now possess a tradable asset until the delivery strike date occurs. 1 CDT equals the rights to a $100 Cybertruck deposit. If Tesla caps orders, these tokens (acting as place holders) would likely warrant a premium. Though they only technically carry $100 in value, Cybertruck speculators may be willing to pay thousands more for a guaranteed early purchasing opportunity.
CDT holders who choose to exercise refund rights would additionally benefit from FWD Credits redemption mechanism. Refunds would be processed by simply using CDTs to unlock funds from the vault according to terms of the arrangement. This solution shows the benefits FWD Credit markets could offer consumers but it doesn’t have many benefits for the producer (Tesla).
Solution 2
Tesla could leverage Fwd Credits to actually earn pre-product revenue on early Cybertruck orders. Base models are estimated to sell for around $40k so let’s assume an approximate cost of around $30k. Suppose Tesla agreed to sell the first 10k Cybertrucks for cost ($30k) plus 10% ($3k), $33k total with terms that required a $3k non-refundable deposit. Tesla would issue 10k CDTs for sale for $3k each. Token purchasers would deposit $3k to the contract but Tesla would have full rights to the vault. Tesla (producer) earns $30m outright in working capital based on their ability to deliver the completed product to consumers. CDT holders now possess an exclusive, limited supply asset worth at least $3k backed by faith in Tesla’s ability to deliver the Cybertruck. Product demand could result in dramatically higher valuations for CDT tokens based on popularity and faith in the company’s ability to deliver.
Solution 3
Fwd Credit also enables Tesla to adopt, mint, and regulate their own ‘in-company’ currency model. Tesla would initially establish terms defining monetary policies. Terms determine token utility, offerings structure, and redemption terms. Producers can structure their currency however they like but sound monetary policies will determine long term success.
Fwd Credit recommends a token for dollar (plus interest) currency model with releases occurring in tranches to regulate inflation. The model enables producers to access consumer capital to fund production while consumers gain inflation adjusted currencies to purchase products from companies they support. Let’s take a look at how it works.
- Tesla establishes contract terms detailing monetary policies (token utility, system rules, etc.)
- Telsa mints, and sells or loans Tranche 1 of TE$LA tokens.
- Tesla (producer) receives capital and consumers receive tokens backed by vaulted fiat, dollar for dollar.
- Consumers spend tokens on Tesla products or buy back vaulted fiat when redemption windows are open.
- Tesla uses tokens paid by consumers for product deposits to unlock capital.
TE$LA Token Example
Monetary Policy & Token Utility
- Tesla introduces a 10% fiat levy policy, meaning all fiat only purchases will pay an extra 10% for Tesla products.
- To avoid this tax, deposits must be paid with TE$LA tokens.
- TE$LA holders also gain exclusive access to new product launches as they are required for pre-production deposits.
Tranche 1
Tesla issues 10 million TE$LA credits in exchange for $10m USD plus 10% interest, $11million total. Consumers pay $1.10 USD for 1 TE$LA credit. 10% interest payment loss is negated when consumers purchase Tesla products by avoiding the 10% fiat levy. Considering TE$LAs are backed 1-1 by vaulted fiat, token value is assured to never fall below $1 USD. Fixing the floor allows Tesla’s pre-production demand to become the price discovery mechanism for TE$LAs. Strong demand for new products increases demand for tokens. Additional tranches enable supply increases to manage inflation. Under this scenario, 10m TE$LAs are backed by $10m USDs held in a FWD Credit vault with unlocking conditions determined by Tesla’s token contract. Tesla acquires $1m in working capital from the premium required to purchase or borrow TE$LAs.
In 2020, Tesla earned approximately $28 billion in revenue. Further modelling should validate massive financing cost reductions were Tesla to transition to our pre-production credit issuance systems. Fwd’s credit tokenization systems offer enormous flexibility for all producing enterprises with relatively straight forward technical implementations. Producers UI would consist of publication of monetary policy defining the token parameters for the contract, token minting/offerings functionality, vault redemptions, and token burns.
Fwd Credit is the tokenized embodiment of a revolutionary financial system that leverages negative interest rate theory to inspire radical innovation while supporting integrity of production. Consumers benefit from lower cost product purchasing opportunities while holding currencies that offer inflation protection from the destructive forces of Central Bank monetary debasement policies.