The Future of Finance
By: Obianaba Noble
Tags: Finance, Blockchain, Defi, Saving, Credit Unions

Image gotten from Xend Finance

I should start start this paragraph by telling you how I made a million before I turned 18. Probably that will be very compelling and catchy to read but honestly I haven’t made my first million yet (not even in naira) and I’m in my mid 20’s. (sighs). Well… I can tell you confidently right now I am closer to achieving that and even more with my latest discovery!

A lot of fintech apps and ‘motivational speakers’ now encourage people to save for ‘rainy days’ (but it seems once you set aside a portion of your money to save, here comes the rain with so much thunder and lightning). Now, this brings me to ponder if just putting my money away for a given period of time without spending it is really going to get me that yacht? (For someone who hasn’t touched a million naira yet, I sure have an exquisite taste, don’t you think so?)

Image gotten from Google

During my numerous quests in search of riches (as always, I came across an article on the ‘First- Ever De-Fi Platform for Credit Unions by Xend Finance written by the company’s CEO, Mr. Ugochukwu Aronu). Since then I have done quite a number of research on Xend Finance and to be honest, I find the idea to be ‘problem fixing’ and super intriguing (kudos to the team behind that project).

For the not-so ‘techy’ persons, I will leave out the complexities behind how this platform operates and go straight to explain what you stand to benefit by making use of this platform (to know more about the Binance Smart Chain click here).

Xend Finance gives you access to tap into the global money market to not just save but also invest your money in ‘stable currencies’. Let’s say you had a million last year in your savings, it is probably worth way less now if you didn’t save it in a stable currency… You get the point?(why do I keep mentioning ‘a million’? I wonder too!)

So during my research, I uncovered some saving features (Individual Saving, Credit Union and Esusu) on the Xend Finance platform, which I will be sharing below. (It’s time to get that yacht!)

TERMINOLOGIES

Before I proceed, I will like to explain certain terms Xend Finance platform.

$Xend — $Xend is the native token used to reward users, protocol fees, and for governance on the Xend Finance platform.

Reward —Saving, investing, lending, and/or performing other operations on the platform gives you $Xend rewards which is based on the reward distribution algorithm. The rewards reduces over time which leads to scarcity and thus more value for the holders.

Protocol fees — $Xend is used to pay for such fees as Credit Union group subscription fees per saving cycle or charge for defaulting in a group.

Smart Contract — There are 3 Smart Contracts governing the platform; Xend Token Smart Contract, Governor Smart Contract, and Time Lock Smart Contract and only $Xend holders have access to it. These smart contracts allows users to propose features, vote, and execute approved proposals.

THE INDIVIDUAL SAVING

You can create an Individual Savings Node (ISN) on the smart contract by using the Web UI.

Next, the individual selects a set of predefined rules such as the deposit amount and the contribution interval. The individual also selects from the smart contract, the charges (protocol fees) for for failing to contribute within a contribution cycle or withdrawing before the saving cycle is completed. Failing to contribute within a contribution cycle incurs the charge of 0.3% of your savings per contribution cycle while early withdrawal has a charge of 0.7%.

An individual will be rewarded 0.07XEND for every $1 contributed. which decreases to 0.035XEND per $1 contributed when the individual has saved up to $100,000,000. ( Fantastic, yes?)

CREDIT UNION

If you are not amazed yet, the Credit Union feature will have you calling your realtor and asking for properties. (Yes, I said it!)

The Credit Union allows a group of friends to not just save and lend but also to invest as a group. To get started, a user creates a group — a small fee is required. (A creator can choose to name the group for the sake of customization).

Next, the creator sets the deposit amount and the contribution interval suitable for group members and just like the Individual Saving, he/she also sets the charges for defaulters and early withdrawals (that is members who fail to contribute within the contribution cycle and/or withdraws before the saving cycle is completed). To complete the process, the creator then shares the group ID to the group members. Failing to contribute within a contribution cycle incurs a charge of 0.5% of savings per contribution cycle while withdrawing your savings before end of a cycle incurs a charge of 1.0%.

Members of the Credit Union group get rewarded with 0.1$XEND for every $1 contributed. This reward value decreases to 0.05$XEND per $1 contributed when the contract has received $100,000,000 in savings.

The Credit Union attracts a higher percentage reward of Tokens than any other savings category.

ESUSU

For people who live in Africa, or have visited the beautiful continent, the word Esusu might not sound strange. (If you haven’t, here is another reason to take that long awaited vacation to Africa).

Esusu also known Susu, Tontine, Ajo, and Adaji by various tribes describes a form of cooperative in the Africa society whereby a group of individuals (usually from the same institution) contribute a part of their earnings with the sole purpose of saving and/or lending out for the benefit of the members of the cooperation.

Group of traders remitting their monthly Esusu contribution… Image from www.africanliberty.org

Let’s say 6 colleagues from an office contributes 10,000 per person monthly, 6 slots are drawn and every member is assigned a slot number from 1 to 6. For the first month, the individual with slot 1 takes a total of 60,000 and for the second month, slot 2 takes the same amount (a member can decide to exchange slots with another member). It continues till it gets to slot 6 and then it can be terminated or starts again from slot 1, depending on the rules of the cooperative or the decision of its group members.

Now I know you are itching to ask me how Xend Finance Esusu is different from the already existing Esusu. Well, with Xend Finance, a member of the Esusu group gets paid interests on his savings with his/her whole contribution still intact. (This surely feels like heaven on earth if you ask me).

The icing on this very beautiful cake is that Xend Finance doesn’t just only insure these deposits, they also help group members to maximize profit by optimizing and aggregating lending protocols. This they do through staking savings on some DeFi Networks such as Compound, Polka dot, Maker and Aave, and that is not even all!

Image gotten from Xend Finance

The Traditional Esusu system faces a lot of problem, ranging from its very small group size ( because it operates mostly within colleagues, friends or members of an existing organization). Also, the fear of members defaulting in remitting their contribution as at when due makes the groups even smaller as those involved would rather go into this arrangement with people they trust. This in turn results to low contribution amount realized.

Another problem is that a lot of these contributions are not insured and by so becomes a huge risk for many individuals to partake in, not also forgetting the nature of the currency of many developing countries as a result of constant currency devaluation.

The Xend Finance Esusu on the other hand with the help of the existing smart contracts used in checkmating defaults can have as many members as possible in a given group, irrespective of the location of it’s member (something the use of a unified currency has also made possible).

RESOURCES