What is the name of your solution?
Collaborative Value Deep Networks
Provide a one-line summary of your solution.
Preventing the past from limiting the future: Smart networks for inequality-overcoming debt-less finance and self-resilience from external shocks
Film your elevator pitch.
What specific problem are you solving?
The total money in economies keeps vastly expanding, but it is failing to result in healthy markets (Roubini, 2015) or healthy growth (Summers, 2016). Failures to move money productively are recognized as a liquidity problem (ECB, 2009) and they are increasingly turning into economy-wide liquidity crises from financial shocks (FT, 2020)(WSJ 2020)(HBR 2020). They particularly affect financially excluded and underserved individuals and small enterprises, who do not have enough savings and quick access to bridge loans, and fall into cashflow problems or cannot get started at all.
The first challenge for individuals and micro, small, and medium enterprises (MSMEs) is that banks are increasingly avoiding loans under $100K. 51% of small businesses in the US need loans under $100,000. The average startup founder needs only about $30K. Further, this problem disproportionately affects discriminated and marginalized populations. Loan requests from 25% of Black- and Hispanic-owned firms are less than $25K, compared to 15% for white owners.
There are no substantive alternatives to getting a loan for micro, small, and medium enterprises (MSMEs). Venture capital helps only 0.5% of startups. The capital in stock and bond markets is practically not available to MSMEs because of the complexity and cost of being a listed company.
One bright spot for MSMEs is the growing interest from non-professional, community, and impact investors who take individual and direct interest in projects in their geographic or ideological communities. However, mechanisms are lacking to connect MSMEs to this capital. This is one key problem we address. Peer-to-peer lending platforms have not scaled due to a number of reasons, such as the difficulty of assessing credit-worthiness and the complexity of loan agreements for non-professional investors.
Even when individuals and MSMEs manage to get a loan, they end up increasing their debt and are more exposed to financial instability as we see now with rapidly rising interest rates. Therefore, the challenge is not only in connecting to more funding sources, but also in innovating funding models that do not perpetuate debt cycles. This is another problem we focus on.
One underlying reason for liquidity problems is the current simplistic view of economic exchanges as being between only two parties, like a seller and a buyer or an loan issuer and receiver. For example, in cashflow problems an individual or MSME may be solvent (i.e. their accounts receivable match or exceed accounts payable), yet unable to make a payment because they are waiting for some other payment to be made to them first. However, if we had a network view of their inter-relatedness we could see which exchange balances which other and unblock them. This is the fundamental problem we address.
What is your solution?
Our solution powers systemic perspectives in an economy, which in our case means seeing economic exchange not in isolation between only two parties (like from one seller to one buyer), but as larger network structures that include the sequences of exchanges that brought economic value into the seller, as well as the sequences of exchanges that will move economic value further on from the buyer. This evolves economic exchanges to be literally more inclusive of those indirectly affected or vested.
Banks utilize systemic perspectives heavily to clear bank-to-bank payments without needing money. For the rest of the economy the technical and regulatory prerequisites are just coming into place. One notable early deployment is by the Slovenian government, where by finding circular patterns of debt in those network structures the government can clear the debt for all businesses inside the pattern without any of them having the money required. This systems moves hundreds of millions of Euros worth of economic activity every year without money, making that part of the economy immune to monetary instabilities during financial shocks.
Our fintech is built to democratize such proven technology and to accelerate its deployment into any community. Further, we are extending it to also support new purchases. The way the technology is used by banks and the Slovenian government is only for clearing old debt. For example, consider a network pattern that is missing one link to become circular. Without that link, the debt of everyone in the pattern cannot be cleared. But our fintech uses community information about desired purchases so that incomplete patterns can close into a circle, resulting in both debt clearing and the new purchases occurring with less money or even without any. With this approach, the previous distribution of wealth becomes less important. See demo of Payments app screens.
The second solution component addresses funding. We have designed and implemented novel smart-contracts for revenue-sharing without the use of any cryptocurrency and not even needing a blockchain, but being able to run on any legacy IT system. For a project that needs funding, these smart-contracts aggregate support from different interests in the project, including future consumers, community and impact investors, collaborators, etc. They all form the network pattern for the project without being bothered by its complexity. See demo of Funding app screens.
The funding-requestors do not receive the funding themselves, but the smart-contract does and they command expenses through it. If supporter constraints are broken, the smart-contract lowers their ability to make expenses (which would include their salaries as well), or stops their access (similar to digital collateral).
The revenue also comes in through the smart-contract and repayments and profits are algorithmically distributed. Because the supporters get their returns from the smart-contract directly, there is no debt assigned to any individual or MSME. This and the preprogrammed nature of smart-contracts minimizes the complexity of agreements and difficulty of assessing credit-worthiness. Financial profiles become less important than the ability for project tasks.
Who does your solution serve, and in what ways will the solution impact their lives?
The ability to make payments in excess of available money, and yet without new debt, can serve anyone who is financially blocked while being solvent or having recognized prospects for being solvent. This is often those without enough savings or without quick access to small loans, such as individuals who live paycheque to paycheque or MSMEs who barely meet their recurrent fixed costs. Even in Slovenia, which is the 34th economy in the world by GPD per capita, anywhere from 1-8% of businesses use this method annually. Hence, the chances of needing to overcome such liquidity problems and inefficiencies is likely larger in most of the other 190+ countries. In addition, the Slovenian system only clears old debt, while ours, with its added support for new purchases, would be applicable in more scenarios.
This solution could also be implemented for users without Internet but with only text messaging. Similar to managing payments over SMS, users can report payments due and get notifications when they fall into a circular pattern and when their debts lower or clear.
The other ability for debt-less funding through smart-contract can serve anyone who is underserved by conventional funding channels, cannot take on more debt, or does not want to lose equity, as long as they can organize supporters around their project. However, our solution is particularly targeted for community network settings, MSMEs, and a funding range up to tens of thousands of dollars.
Our solution also benefits the various supporters who make up the network pattern behind the smart-contract. Future consumer can prepay now to get discounted access later. Unlike in crowdfunding where one has to personally receives all the prepaid items, and is thus unable to support a project beyond personal consumption, in our system whatever a supporter does not take for personal use remains on the open market. When it sells to non-supporters at non-discounted prices, the smart-contract distributes the financial benefit between the related supporters and operators.
This novel consumer-investor flexible supporter profile can benefit existing community-supported agricultural (CSA) or similar programs, where supporters prepay a budget ahead of growing or fishing seasons. Their challenge today is guessing the right budget they can consume, and then using it all up before it expires, resulting in supporter attrition after trials. Our solution solves this challenge because the supporter can decide later on how much to consume from their prepayment, without loss because they get a refund+reward for the rest when it sells to non-supporters.
Non-professional, community, and impact investors lack mechanisms to engage with MSMEs, as discussed above. Our solution allows them to become investor-like supporters on any MSME they are interested in, build wealth jointly, or target impact through the smart-contract in a more precise and custom way than current ESG-like impact investing. For example, an environmental supporter can route their funds into a "green-powered restaurants" impact through the smart-contract without giving their funds to any specific MSMEs, yet allowing matching MSMEs to be funded as operators under that impact.
How are you and your team well-positioned to deliver this solution?
Our first implementation is targeted for across the rural islands of British Columbia, and Martin and Angie live on one of them. The team lead is part of the Community Economic Development Council for his island municipality, which reports to the elected council and the mayor. The team lead is also involved with the Rural Island Economic Partnership (RIEP), an organization for uniting the voices of the many islands on economic resilience, co-creating an economic future, and advocating with various government institutions. Martin attended the RIEP 2023 Forum in April which gathered representatives from across the islands, including their chambers of commerce, municipal councils, economic development groups, as well as various government institutions. Our solution was presented for community feedback. At a workshop on building economic capacity, we got support for and co-developed an action resolution to design and launch a pilot that can bring to life a systemic perspective of our regional economy, matchmaking for needs and offers/capacities, and guiding us in economic development.
We are specializing our current solution to match the needs of a rural economy: a distributed network of smaller communities; each with a stronger sense of interdependence; many needs for the community get served by self-organizing; the vast majority of businesses being micro and small enterprises, including small scale agriculture, tourism, artisans, artists, local trades, etc.
Angie has been embedded for almost a decade within networks for entrepreneurship around Vancouver, the closest major city for the rural islands, bringing understanding of the needs of local entrepreneurs. Similarly, Vladimir is engaged in startup ecosystems in Macedonia, including mentoring entrepreneurs. Macedonia is a likely location for a second pilot with him as the proximal leader for it and a version customized more that that economy.
Three of our team members have grown up and lived as adults in developing countries and experienced a variety of debt instability dynamics as well as sensitivity to external financial shocks. Two have longer-term experience with an economy where most payments are blocked because most individuals and businesses are waiting for payments themselves, even when they are solvent. They have experienced first hand how in an economy like that people look for alternative ways of settling obligations and what that does to the economy.
Through his career with IFC (World Bank Group) in Africa, Kobina brings in a more systemic understanding of how economies under stress can develop.
Vladimir brings in a high level of understanding of the risk that project operators as well as supporters would face in our solution, based on his knowledge from managing a risk management unit in a bank. He is able to guide us in building a risk model for the users of our funding module and appropriate insurance mechanisms.
We are very open to and actively looking to expand the team with others who can bring us closer to target communities. In general, we would not deploy future implementations without an onboarded proximal leader from the affected communities.
Which dimension of the Challenge does your solution most closely address?
Make it easier and more affordable for individuals and MSMEs to make investments and transfer payments, across geographies and across different types of platforms
In what city, town, or region is your solution team headquartered?
Bowen Island, Canada
In what country is your solution team headquartered?
What is your solution’s stage of development?
Prototype: A venture or organization building and testing its product, service, or business model, but which is not yet serving anyone
How many people does your solution currently serve?
We are currently in a prototyping stage and the technology has only been used in experiments and simulations.
The pilot we are currently working on in BC and which we hope would begin within the year could reach tens of thousands of people across the targeted rural islands and coastline. When we scale to nearby cities of Vancouver and Victoria, we could reach over 3 million people, which we believe is possible by the second year with our current capacity roadmap. Within 5 years we should have enough experience to mature a turn-key open-source platform that could be turned up and managed by any community, municipal, or national government for their own jurisdictions.
Why are you applying to Solve?
The primary barrier we face, by far, is cultural, due to the paradigm shift from seeing the economy as a collection of separate events between only two parties (eg. a seller and a buyer) to seeing it as a networked system where a single economic event is a network pattern that includes many stakeholders. Audiences who have a background or exposure in systems thinking and tackling big and complex problems have an easier time with this shift. MIT Solve can expose us to preeminent such audiences, allows us to communicate the solution fluently, and most importantly - distil and amplify our message so it can be received by a far greater audience.
We can certainly benefit tremendously from any partner connections made through Solve, even just from simple feedback, especially in helping us identify more blind spots, especially with legal topics. We are not aware of any legal barriers, especially because our system does not collect deposits, does not hold other people's money, has nothing to do with crypto, and our supporters are technically "resellers" so they not fall under regulations for investors. But there might be issues with interpretation, or updated laws coming into place as we progress.
In which of the following areas do you most need partners or support?
Who is the Team Lead for your solution?
Martin Dimkovski
What makes your solution innovative?
The main innovation in our collaborative economic deep networks (CEDNs) are the funding smart-contracts. The closest related technology that utilized system perspectives, like the one used by banks and the Slovenian government, requires all obligations in the network pattern to exist at roughly the same time. In other words, all the payments need to happen at the same time. If someone needs to spend now but does not get paid for months, they cannot be part of a network pattern in previous systems. This cannot work for a start-up or a business developing a new product where the MSME needs to spend now but new sales need months or years to become a reality. Our fintech solves this time gap. This lets us cover more scenarios in the economy than previous technology.
As a side-effects of how the novel smart-contracts work we get the unique consumer-investor supporter profile where, unlike in crowdfunding or legacy CSA, the user does not have to consume everything they prepay. Whatever they do not take personally, remains on the open market. When it sells to non-supporters at non-discounted prices, the smart-contract issues them a refund plus a bonus from the difference with the supporter discounted price.
Another novelty out of the smart-contracts is the new impact investing precision. CEDNs allow an impact supporter to target an activity, e.g. "making solar panels", focusing more on the activity output and less on the operator(s) who will run the activity or business. This is possible because the impact supporter does not give their funds directly to the operators, but streams it through the smart-contract into expenses. Smart-contracts also allow for layering of impact objectives. For example, another supporter may target "green energy transformation", and yet another may target "solar panels based on a new technology X". A start-up that fits the last one would actually be able to draw funding from all 3 supporter because they nest. This allows for far greater impact customization than is possible today.
CEDNs also address one of the biggest problems in the investment industry, information asymmetry. In conventional investing, an investor doesn't have same visibility into the business or customers as the business operator does. But with CEDNs, all supporters are in the same information space, and they have the same visibility like operators.
There is also a significant innovative aspect in terms of fiscal policy for government. The current options for growth are to increase more debt, increase taxes, cut spending, or quantitative easing ("print money") and risk inflation. Many of the old arguments in political economy that still trouble us are about which pain to choose. But the ability to use deep network patterns to clear debt, pay for new purchases, and create more funding, is opening up a new growth alternative without the pain points above. The clearing debt (and new individual purchases) were possible before, but it is the addition of our longer-term funding smart-contracts that makes this emergent technolgy a complete model for economic growth.
What are your impact goals for the next year and the next five years, and how will you achieve them?
The pilot we are currently working on in BC and which we hope would begin within the year could reach tens of thousands of people across the targeted rural islands and coastline. Our goal is to enable individual and MSMEs to tap into the benefits described earlier: to internally create novel funding with minimized dependence on external sources and thus increased resilience to external shocks, to clear old debt and cashflow issues, to create an aggregate increase of revenues and build wealth jointly. We want to make markets more collaborative and transparent by revealing their systemic perspectives, so that individuals and MSMEs see how better to develop products or skills to fit in the best network patterns for them. Our solution literally exposes how one can plug themselves deeper into their economy. The overall impacts goals are community self-empowerment, and overcoming underserving and exclusion in the current financial system.
When we scale to nearby cities of Vancouver and Victoria, our goal is to reach over 3 million people, which we believe is possible by the second year with our current capacity roadmap. Within 5 years our goal is to have enough experience to mature a turn-key open-source platform that could be turned up and managed by any community, municipal, or national government for their own jurisdictions. Our long-term goal is community by community, nation by nation, to scale the impact of this technology to billions.
These figures are based on the population size which is larger than possible users. However, we are using them with impact in mind, based on the approximation of at least one family member or business representative using the system in order to find supply and demand opportunities in their local economies. Because, if we deploy the pilot jointly with municipal governments or local development organizations, the CEDN app would be primarily branded as their local community economic app.
Our vision is for every viable idea and economic potential to be free from inherited, undeserved, unrelated constraints like wealth inequality and privileges in access to capital. Our mission is to evolve economic models so that they catch up to the full productivity & creative awesomeness of humanity, and unleash the economic potential imagined by every community.
Given the need for addressing climate change and demographic changes, the coming years will require economies to somehow spend and grow more than has been possible while carrying unprecedented debt. The current options for growth are to increase more debt, increase taxes, cut spending, or quantitative easing ("print money") and risk inflation. Many of the old arguments in political economy that still trouble us are about which pain to choose. But the ability to use deep network patterns to clear debt, pay for new purchases, and create more funding, is opening up a new growth alternative without the pain points above. Our overall impact goal is to democratize the capability for this alternative that can free the future from the past, and to facilitate its further evolution.
Which of the UN Sustainable Development Goals does your solution address?
How are you measuring your progress toward your impact goals?
Measures per user or per groups:
- Increase in funding and purchasing power without additional debt in a way that is immune to inflation due to our smart-contracts. Related to SDG indicator 2.c.1 on food price stability
- Lowering of debt level under equivalent purchasing power. Related to SDG indicator 17.4.1
- Increase in income in dollar-value equivalent. Related to 7 SDG indicators (10.2.1, 10.1.1, 10.4.1, 1.2.1, 1.2.2, 2.3.2, 8.5.1)
- Increase in access to credit without increasing conventional debt. Related to SDG indicators 9.3.x
- Increased integration into value chains and markets for small-scale enterprises. Related to SDG indicators 9.3.x
Measures per CEDN and its administration/government:
- Increase in spending power for government projects without increases in debt, taxation, or inflationary money stock. Related to 11 SDG indicators (1.a.x, 1.b.1, 14-a-1, 15-b-1, 15-b-2, 17-1-1, 17-17-1, 17.19.1, 2.a.x, 8.b.1, 9.5.1)
- Increase in GDP network-equivalents. Related to SDG indicators 8.1.1, 8.2.1
- Decrease of unemployment numbers. Related to SDG indicators 8.3.1, 8.5.2, 8.6.1
- Indicators of SDG type 10.5.1 for soundness of financial markets
- Exact Keynesian/fiscal multipliers which come directly out the circular pattern that close and cycle.
Overall indicators on funding green energy transitions (SDG 7.a.1, 7.b.1) and climate action (SDG 13-a-1). Today’s key concern is on where could the immense sums of money come from for this transformation given the existing global debt and growth challenges. CEDNs offer a novel answer, essentially that the question of existing money is less important and show how the spending power can be co-created by shaping the future economic network patterns and economic systemic perspectives, which themselves become the spending power.
What is your theory of change?
Activities:
- Continue theoretical work through peer review papers and academic partnerships
- Continue software development as open-source and keep building a development community
- Release a turn-key platform product tat allows any community, organization, or government (municipal or national) to turn up their own CEDN, customized for their own constituents. Each CEDN pursues its own independent operation.
- Developing technical and administrative routing protocols that can inter-connect CEDNs globally, leading to a new form of an economic Internet, distributed in operation and ownership like today's world wide web (where each ISP or data centre is independent and they inter-connect through public routing protocols).
Outputs:
Activities (1) and (2) reinforce each other and lead to more co-creators, better evolution of the algorithms and code, and greater awareness based on higher confidence.
- One example of such a link is with AI algorithms, where the activities (1) and (2) in that domain have led to output (1)
Activity (3) enables the participants local to a network (e.g. members of a community network, or citizens of a national network) to start powering their economic growth with self-managed and self-sourced liquidity
- Entrepreneurs and businesses get access to a new funding option that is independent from problems with legacy liquidity.
- Customers also get a new purchasing power that goes above their available money.
- Supporters get a uniquely safe way to grow their capital without information asymmetries. The new opportunities may not have existed for them if liquidity problems were impeding the use of legacy methods.
Activities (3) and (4) lead to a more scalable global inter-network, where flows across jurisdiction domains and facilitate more diverse economic growth and symmetric investment opportunities globally.
- The data Internet is an inspiration for this activities-output link with the way its routing protocols have interconnected its many local jurisdictions.
Outcomes:
- Future economic growth is far less limited by the past, for both communities and nations
- Because IONs build stakeholder associations, we become more invested in each other, more bonded in each other’s growth.
Assumptions:
- Users have at least an SMS phone for text messaging
- New financial regulation do not change the current situation where this technology is uniquely compatible as things are.
Describe the core technology that powers your solution.
At the core of our technology are algorithms that route economic value and solve economic inter-connectivity similar to how the data networks can route data and solve inter-connectivity across the globe. We experience a connection to a webpage as if it was direct, but in reality our data flow crosses many routers in between. Importantly, we do not need to know anything about those routers, only the destination we want. Also importantly, network protocols can figure out the whole path even if each router knows only about its immediate neighbours, i.e. there is no need for someone to know everything that is going on. The protocols piece the path solution one leg at a time, yet to us it feels instantaneously. The data flow may even branch out to different paths, splitting its data payload, and the protocols make sure everything is reconstructed at the destination regardless of which pathway they come on.
So in data networks, like the Internet, the network power comes from being able to hop across multiple nodes to get somewhere. Similarly, in social network the information power comes from seeing who are the friends of your friends, and who are theirs, etc., again multiple hops over multiple nodes.
A similar idea can be applied to economic flows, to upgrade the pre-network-age view of an economic exchange as a straight line between only two parties to a 21st-century view of a single exchange containing multiple parties in complicated network patterns, all of them benefiting from the same movement of value. It is literally a more inclusive way to exchange value.
These algorithms for finding and shaping patterns and routing value packets run on a conventional server, as does the database that tracks the changing network of obligations. Users use mobile apps or any browser to interact with the system. When the system finds a pattern that might be useful to them, they are engaged through a mobile alert or email.
Our innovation to support start-ups and new product creation requires smart-contracts in addition, which manage the time gap in the value delivery of those patterns. Our smart-contracts do not need a blockchain and do not involve any cryptocurrencies, but are simply programs running on a conventional server. The smart-contract issues a novel instrument which we call IONs (I-Owe-the-Network) which stores the value during the time gap. All the complexity in the explanations below are hidden from the users.
IONs are very different from money and cryptocurrencies because IONs are "flow-through" instruments which deliver value to a payee without the payee needing to keep the ION to get the value. The ION delivers the value and flows through an intermediary payee, and can do that as it flows instantaneously through many intermediary payee, always ending up with a supporter. Money and cryptocurrencies on the other hand are "store-and-keep" type instruments, because a payee needs to keep them (store them in a wallet or a bank) in order to keep the value, i.e. the opposite of IONs. In addition, IONs are always burned at the end of a supply-demand cycle they underpin. Unlike money and cryptocurrencies, IONs cannot just keep circulating in the economy after they are issued. Also, one cannot issue IONs like money and cryptocurrencies are issued, where someone just decides to create a large initial volume of them. IONs can only be created per specific activity, only under constraints of the supporters of that activity, and only when that activity is creating new value. For example, a new start-up for cashew milk needs to buy supplies and equipment. This are tasks directly creating value for that activity and the smart-contract can issue enough IONs only for those expenses. The IONs end up with supporters (explained more below) as supporter exchange their monetary or non-monetary support to make the expenses happen. Later, when a supporter buys the cashew milk for themselves the smart-contract burns the ION they hold. When a non-supporter (someone from the public, on the open market) buys the cashew milk, because the revenue comes in through the smart-contract and because a non-supporter does not have IONs, the smart-contract needs to find an ION amongst the supporter to burn. An ION has to be burned when the milk is sold, to close the supply-demand cycle. So, a monetary supporter who earlier on put in funds to enable expenses at a early supporter ION:money exchange rate, can not reverse that (market-make) and exchange back the ION they hold with the money from the new sale, only now at a higher ION:money rate, and thus benefit financially for their support. It's important to highlight that users are not troubled with any of this, as the simplicity of our app UX shows in the demo.
In the case of non-monetary supporters, like people who put in time and energy during the cashew milk production, who also hold IONs as the smart-contract paid them for their involvement at the time - they benefit financially in the same way like a monetary supporter - when revenue starts flowing their IONs are equivalent to IONs of those who got them through money. They appears exactly the same in the system.
Lastly, for matching between needs and offers we use the latest AI from OpenAI, embedding models in particular as well as the chat models. Our design lets a user post a need or an offer without having to navigate any categories or follow templates or browse catalogues. A user simply needs to express in natural language what they are trying to accomplish. They could say something like "I might be interested in product A if it was released in less than 4 months and then I would pay $150, but after I would only pay $120, and only if it has feature X".
Which of the following categories best describes your solution?
A new technology
How do you know that this technology works?
The science of modeling complex transactions as network patterns across many parties has by now been well studied for networks of economic relationships.
Clearing debts by finding circular patterns in the network of obligations is the simplest and oldest method used in mainstream markets. Ex: A owed $10 to B, B to C, C to A, hence they can all clear their debts without anyone having the $10. Only the patterns are vastly more complicated in reality, hence the need for good algorithms. Slovenia has been using such a system for three decades and proving every year that this approach works. Depending on the year Slovenia boosts its GDP with it by 0.5%-1.9% with 1%-8% companies participating (more participate during financial crises). Performance data clearly shows this small boost being enough to keep Slovenia out of recession a number of years.
We have not seen many countries adopt such a system yet because it requires a centralized and mandatory national registry of business invoices, of who owes how much to whom. Slovenia happened to have such a registry early on. However, the number of countries that are implementing such a registry has been growing, especially in the past several years. Many are doing it to combat tax evasion, but once this registry is online, all third-parties have to do is turn on the proven algorithms.
Our solution for such debt clearing without money only democratizes this existing technology, by allowing communities to build their own registries of obligations and then run the proven algorithms.
Our feature of making a new purchase with less or no money is a small extension on the above case. When a pattern is missing one link to become circular, if the nodes around the gap can be incentivized to transact, the circle closes and everyone's debt (including the new purchase which is now the most recent debt) clears without money. Unlike the simpler debt-clearing-only case above, this requires more interactivity with users and for the system to have information on their desired purchases, not just old debts. Otherwise the technology is exactly the same, and here we are just designing a new application of an existing technology.
Our IONs smart-contract technology and its unique ability to support support start-ups and new product creation is a new technology however. We have released an open-source implementation with a simulator which shows it working. The repository includes step-by-step instructions for anyone to run a basic simulation and see the algorithms work in details. We have also released a whitepaper which cover the theory and technical design in details.
Please select the technologies currently used in your solution:
If your solution has a website or an app, provide the links here:
https://socialcogs.net is the project website
In which countries do you currently operate?
In which countries will you be operating within the next year?
What type of organization is your solution team?
Nonprofit
How many people work on your solution team?
8, currently all volunteers
How long have you been working on your solution?
4 years
What is your approach to incorporating diversity, equity, and inclusivity into your work?
To begin with, we chose to work on CEDNs precisely because we are motivated about improving equity, i.e. opening opportunities to thrive for people regardless of their financial history or profile or the economic conditions their community has been inheriting. Our motivation is also directly about inclusion, because CEDNs reate an economic environment where everyone’s value surfaces, especially of those underserved or not visible in current systems.
CEDNs are just our initial and most active project. The larger scope of SocialCogs is about surfacing systemic perspectives and network patterns over human relationships of various types. CEDNs do it over economic relationships. In the future, we also want to work on designs over trust relationships and decision-making relationships. The former one could result in network solutions that tackle misinformation and the challenge of combining skills and knowledge in communities. The latter one can help for more people to have a seat at the problem-solving table, and therefore about thriving through diversity.
The science on cognitive biases is a key ingredient in our solutions, and we have been building up a toolkit of knowledge and practices, and helping each other educate ourselves.
As SocialCogs scales, all of this will be part of our organizational DNA, not only our solutions DNA.
What is your business model?
For community implementations, our customers are economic development organizations such as chambers of commerce, grassroots organizations working on economic objectives, or government departments targeting development in specific communities. For municipal and national implementations, our customers are the respective governments. The beneficiaries in both cases are the individuals and businesses under our customer's jurisdiction or interest.
To our customers we provide a turn-key platform for debt-less and inclusive development of their economies. The platform is white-labeled as theirs, customized for their needs, and fully in their control. It self-empowers their constituents to internally create novel funding with minimized dependence on external sources and thus increased resilience to external shocks, to clear old debt and cashflow issues, to create an aggregate increase of revenues and build wealth jointly, to plan and target impact in a more precise way than is currently possible. Our product creates more collaborative and transparent markets due to its systemic perspective, with individuals and businesses becoming more aware of the supply and demand forces, and more able to shape them. They can see how better to develop products or skills to fit in the best network patterns for them, and what kind of network patterns could address their needs. Our solution literally exposes how one can plug themselves deeper into their economy.
Our summary value proposition is that our solution frees the future of an economy from pre-21st-century constraints that are still holding us back. 21st-century science and technology is beginning to let us surface and shape systemic perspective of deeper interrelationships in the economy and society. The technology is already proven in principle by inter-bank systems and pioneers like Slovenia, and is now maturing to a level accessible to all individuals and MSMEs in any economy.
We develop and maintain the open-source backend technology which anyone can use to adopt this technology. The frontend, i.e. the user facing apps and websites, need to be white-labeled and customized for each customer. We have partnered with Unlocal for this, who specialize in user apps, UX, and digital user channels.
We offer professional services to non-profit and government organizations. They can engage us to inform them better and guide them in adopting and customizing the open-source software for themselves. We can also help them build their own teams who can manage and support their own CEDN. We are also building inter-CEDN routing protocols, so that value can move between the CEDNs.
In terms of readiness of our customer audience, we believe that openness for new economic approaches is increasing. As societies are struggling with the inadequacy of legacy growth methods, as discussed above, alternatives are being considered increasingly. Experimentation is increasingly practiced in development economics (1,2). COVID-19 additionally shifted governments into unprecedented experimentation, including “sweeping, structural changes to how their economies work”, setting new expectations.
Do you primarily provide products or services directly to individuals, to other organizations, or to the government?
Organizations (B2B)What is your plan for becoming financially sustainable?
A smaller revenue source, although critical initially, is charging for the professional (services listed above) during a deployment of a CEDN and for level 2+ service contracts afterwards. We would want the customer to provide level 1 support to its constituents.
In the longer term, because our technology is an engine for economic development and it is supposed to grow economies, our goal for a principal revenue source is a slice out of the growth we enable in the community, municipal, or national economies which adopts CEDNs. We do not plan to charge payers or payees when they transact on existing goods in the economy, nor any supporters who come in with existing wealth.
We can measure our contribution to the growth vs other reasons for that growth by comparing transactions on our platform vs off-platform and vs previous years. Or, instead of measuring, we can agree on a fixed percentage. We can get a sense of the revenue potential by considering that Slovenia boosts its GDP by 0.5%-1.9% with 1%-8% companies participating using a predecessor technology to ours which, as discussed above, cannot handle startups and new product development like our CEDNs can. Therefore, our participation and boost should be higher, although we can only talk in qualitative terms since the figures will vary widely across different economies. Nevertheless, even a couple of percent growth of a whole economy can be a significant base for our revenue slice.
We can collect our revenue at one of two points. For implementations with governments, once the growth boost is known and only if it is positive, we can invoice the government. A second more general approach is to charge new-value-creation fee through each funding smart-contract on the operator side when their customer claims a newly created product. We plan to start with a 1% fee, which is less than transaction fees when operators accept credit cards. The fee would only be charged if the product is sold at a profit.
All surplus revenue will go into subsidies for financially challenged communities and governments.
In the initial year we are going to apply for grants, since the first planned pilot is for a community organization that will also be applying for grants to fund their side. We estimate about 6 part-time technical and design resources to be engaged from our side for a rough equivalent of 2 full-time resources, which at $80K/year means our budget need is about $160K. We have no other fixed costs. We have an Azure infrastructure grant from Microsoft that is sufficient for the first pilot.
Although we prefer to stay focused on community and government implementations, we can also work with commercial companies. Social networks and tech giants are interested in becoming a full-fledged economy over their users that offers banking, payments, and a full spectrum of other financial services. They are exploring fintech alternatives, with Facebook's failed cryptocurrency attempt being an example. CEDNs can be a full-spectrum economic engine that avoids cryptocurrency and other regulative complexities.
Solution Team
-
Mr Kobina Aidoo Senior Associate, Kina Advisory
-
Mr Vladimir Davchev Risk Management, CRO, SocialCogs
-
Martin Dimkovski Systems Design, SocialCogs
-
Angie Fleming Data Humanist, SocialCogs
to Top
Our Organization
SocialCogs