Inspiration
Despite the massive growth of DeFi application usage, there are few services that are utilized for activities besides financial speculation. The vast majority of projects lack product-market fit; this not only wastes the potential of decentralized technologies, but hurts real-world entities that can benefit from them.
One area I found that can be disrupted is accounts receivable financing. The current process is costly and inefficient, but the power of the XRP Ledger can change that.
The old system 👎
Imagine you’re a small business that sells handcrafted furniture directly to other businesses. You just made a big shipment to a buyer, but instead of paying you directly in cash, they send an obligation to pay you in 60 days. This is how accounts receivables work. Similar to an invoice, accounts receivables, shortened A/R, track the amount that customers owe a seller after a good was provided.
What happens if you need access to the funds immediately? Small businesses will have to go through A/R financing, where a lender provides a fraction of the funds upfront.
Traditional financing has several drawbacks:
- Lenders will typically only advance up to 90% of the amount
- APRs can be very high (between 13%-60%)
- Fees charged every week
- Funding can take days to weeks
What Receive Finance does
Receive Finance is a platform targeted for three types of users: businesses that issue and accept accounts receivables, and investors. Businesses can obtain A/Rs directly from their customers and sell them instantly through Receive’s pool of funds for 98% of its face value. Customers are automatically billed after a specific payment date.
One of the most disruptive characteristics of Receive Finance is that it turns A/R into an investment for private investors. Traditionally, only certain institutions are able to profit from lending to A/R holders. With Receive, any investor can deposit into Receive’s liquidity pool, and on every A/R sale, receive a fraction of the 2% fee. Instead of earning yield from faulty tokenomics, users of DeFi can now generate returns from real-world activities.
How I built it
- Receive Finance consists of interactions between the React frontend, the Node.JS backend, and the XRP ledger.
- Accounts receivables and investor entitlements are tokenized using NFTokens
- Accounts receivables metadata is stored on IPFS
- Funds are automatically pulled from debtors using Checks and a cron job
- Payments and A/R sales to the Receivable Pool are tracked and handled in realtime using WebSockets
- Business Information and other details that can’t be stored in a decentralized fashion are kept on a MongoDB server
- Private keys / seeds / mnemonics NEVER leave the frontend
Challenges I ran into
Coming from solidity development, it took time to adjust to the way XRPL operates. Building this system without smart contracts meant that the architecture had to look drastically different.
Accomplishments that we're proud of
Building a project that can positively impact real-world people, as well as creating a comprehensive architecture without the need for smart contracts.
What I learned
I now feel very comfortable developing on the XRP Ledger. I also learned how to design complex architectures such as these.
What's next for Receive Finance
Adding more functionality, including the ability to sell fractional amounts of account receivables, calculate fees based on demand for liquidity, and withdraw partial funds. Businesses will also need to be vetted before they are allowed to use the platform.
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