Stable Credits <> Fiat Loans
The Stable Credit protocol provides a liquidity gateway which allows network members to access loans in external currencies (such as fiat or crypto) directly from their Stable Credit Accounts. This mechanism allows network members to receive a fiat loan, while paying back in kind with Stable Credits - under the same favorable credit term structure in which Stable Credit debt is settled within the network.
The capital to extend external loans can be sourced from multiple avenues, such as the controlled sale of Stable Credits or humanitarian economic development aid. While the Stable Credit protocol does not enable the direct sale of Stable Credits, it provides means by which Stable Credits can be converted into digital "gift cards" which can then be sold at a fixed discount rate, set by a network's operator.
In order to preserve the monetary integrity of Stable Credits, protect their soft peg and comply with regulations, the sale of "gift cards" is only possible through protected gateways (read below) which prevent speculative trade and the deflation of debt denominated in Stable Credits.
These gateways specifically prevent the following scenarios:
- 1.Indebted members purchase Stable Credits at a discount in order to service their debt at a reduced fiat value.
- 2.A malevolent actor creates a covert Stable Credit market.
The Resource Stable Credit protocol provides two methods to extend fiat loans to network members: on-demand loans extended to members of established networks via the Credit Pool contract, and launch loans extended to members of new networks via the Launch Pool contract.
As will be shown, Launch Pool loans are an efficient way to launch new networks. The Credit Pool provides members of established networks with the opportunity to leverage their Stable Credit membership to access on-demand fiat or crypto liquidity. This does not only increase the utility provided to network members, but also improves a network’s monetary velocity.