Altrufund is a groundbreaking protocol for the issuance of donation-banked loans, drawing inspiration from the concepts of Social Impact Bonds and Advance Market Commitments to enhance funding for public goods. By combining innovative financing mechanisms with a focus on social impact, Altrufund aims to revolutionize the way we approach funding for crucial societal projects.
Note: This is so cutting-edge that it hasn't even been released yet! Stay tuned for updates and get ready to be part of this revolutionary journey in socially impactful investing.
- Boost Donations to Public Goods: Leverage a derisking mechanism to amplify contributions towards societal welfare.
- Empower Socially Conscious Lenders: Introduce innovative asset classes that harmonize financial growth with impactful social contributions.
Social Impact Bonds represent a novel approach in the realm of impact investing. They are not traditional bonds; rather, they are contracts where private investors fund social services upfront and are reimbursed by a public sector entity only if the project achieves predetermined, measurable outcomes.
- Investment and Risk: Private investors bear the financial risk. If the program does not meet its goals, investors may lose their capital.
- Outcome-based Payments: Returns to investors are contingent on achieving specific social outcomes, measured by independent evaluations.
- Social Impact Focus: SIBs aim to solve challenging social issues, ranging from education and healthcare to homelessness and recidivism.
Advance Market Commitments are financial mechanisms designed to stimulate investment in areas where market incentives are insufficient. They are primarily used in global health, notably for vaccine development.
- Market Creation: AMCs guarantee a market for a product, typically a vaccine, by committing to purchase a certain quantity at a set price.
- Incentivizing R&D: By assuring demand and revenue, AMCs motivate pharmaceutical companies to invest in research and development for vaccines.
- Global Health Impact: AMCs have been pivotal in making vital vaccines available and affordable in low-income countries.
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Mechanism:
- Donors secure an amount in escrow to be released retroactively upon meeting project goals.
- Service providers and lenders competitively submit project proposals and funding offers.
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Post-Project Evaluation:
- Success: Escrow is released to the lender, rewarding social impact.
- Failure: Donors can extend, redirect, or reclaim their escrowed funds.
- Donor Assurance: Escrowed funds are secure, promoting generous contributions.
- Lender Incentives: Returns are based on the successful social impact of funded projects.
At the commencement of a project, service providers mint a hypercert. Hypercerts, in this context, represent a blockchain-based certification of project initiation and progress, akin to digital tokens that embody the project's value and impact.
Donors stake assets, which are programmed to be automatically swapped for the hypercert upon successful evaluation of the project. This mechanism ensures that donors' contributions are directly linked to the tangible outcomes of the project. Assets staked in Altrufund are rehypothecated to yield-bearing DeFi protocols, optimizing their potential to generate returns.
Evaluation is a critical component that determines the success of the project and, consequently, the transfer of staked assets.
- For criteria that are subjective or cannot be verified on the blockchain, one or more attestors are selected. These attestors come from a list of evaluators provided by the donor and/or lender.
- Attestors are compensated for their services through negotiable fees. Their role is to independently assess the project's achievement of its stated goals and provide a credible attestation of success or failure.
- Example: A local urban farming initiative aims to enhance community food security and provide educational workshops. An environmental nonprofit is chosen as the attestor to evaluate the project's impact on food availability and community engagement through surveys and direct observations.
- For criteria that can be verified directly on the blockchain, oracles are used.
- Oracles are automated, smart contract-based systems that verify project outcomes. They play a crucial role in unlocking staked assets based on the success of the project, as determined by pre-set, verifiable on-chain criteria.
- Example: A clean water project involves installing filtration systems in a rural area. The success is measured by the volume of clean water produced, data for which is tracked by smart sensors and verified by an oracle to ensure project criteria are met.
- Lenders provide loans to service providers with the hypercert serving as collateral. This arrangement aligns the interests of the service providers with the successful completion of the project. In technical terms, the lenders issue non-recourse zero-coupon notes secured by the hypercert.
- Upon successful attestation and verification, the hypercert is transferred to the donor, signifying the project's success. Simultaneously, the staked bounty is transferred to the lender as a return on their loan.
In conclusion, Altrufund's Web3 system design leverages the power of blockchain technology to ensure transparency, accountability, and direct linkage between project success and financial transactions. It embodies a new era of impact-focused finance, where the achievements of social projects are tangibly and reliably rewarded. Altrufund bridges the gap between philanthropy and financial markets, fostering a dynamic ecosystem where social good and financial returns are mutually reinforcing.
Pull requests are welcome. For major changes, please open an issue first to discuss what you would like to change.
Please make sure to update tests as appropriate.