Detailed Plan
In the United States, a certificate of deposit (CD) is one of the most secure financial assets – insured by either the NCUA or the FDIC each up to 250,000 USD. A CD constitutes a document that signifies the right to withdraw funds that were deposited into an account after a specified period of time plus interest. In practical terms, when a person purchases a CD, for $10,000, the person provides $10,000 to the bank. The bank deposits that money into a special account that corresponds to that particular certificate of deposit. This account is located in and managed by the Bank of the Federal Reserve where it can be insured. The bank then issues a certificate that gives the customer the right to withdraw that deposit plus interest after a specified period of time at a specified interest rate. If the person would like to redeem his or her CD prior to the end of the specified term, there is also a specified fee that the person would have to pay to redeem his or her CD sooner than originally specified. While this instrument is excellent as a secure asset protected from inflation, it could also be a secure tool to convert USD into tokens redeemable for a dollar. It will be inexpensive for the Credit Union to pay the Fed to generate a daily statement of the amount of USD in each insured account (https://www.frbservices.org/financial-services/accounting/daily-statement.html).
Credit Unions are non-profit organizations owned by their members whose mission is to support their communities. I am partnering with my local credit union to develop a tool to enable the purchase of CDs with the certificate itself as a set of tokens on the blockchain with a one-to-one correspondence between the number of tokens and the number of insured dollars in the account. These CDs will have no penalty for being redeemed at any time, and as a result, they will not pay interest. Rather, they will just be used to easily and inexpensively convert between stable tokens and USD in a safe and secure way.
Each CD token (CDT) will belong to an asset class with metadata that describes its date of issuance, the institution that issued it, and the account at which its funds can be found. At any time, any CDT will be able to be returned to its bank of issuance and redeemed for its face value from its associated account. When CDT is returned to its bank, it will be burned. Depending on the institution, it ought to be the case that the only fees will be the Cardano transaction fees as banks and credit unions will benefit by being able to offer a greater variety of securities and services to their customer base which will itself expand as the reach of the institution will expand to that of the entire Cardano network.
In the Metadata Challenge, I will submit a proposal to create a metadata server that will monitor the state of audited accounts against the state of their on-chain representations. This will allow consumers to freely transact in different issuances of stable tokens from different institutions and allow wallet applications to treat them as being interchangeable.
This will be good for my local community because I would like to be able to employ the homeless via smart contracts. I would also like to decrease the amount that local businesses have to pay in fees to the Visa-Mastercard network. These benefits extend to any community all over the world with a reliable stable token. So long as the Federal Reserve exists, so as long as the US Dollar exists, these tokens will be secure, stable and protected.
Success in 3 months will be that in which we have a proof-of-concept running on the test net such that it has been integrated with Campus USA Credit Union's accounting systems and automated via the banking portal. Success in 6 months will constitute having scaled to users in Gainesville and having offered education to local businesses on how to accept payments and account using CDT on Cardano. At 12 months, if IOHK has implemented Babel fees, we should see mass local adoption in partnership with the City of Gainesville.
I do not expect to benefit financially in the near term, so if I could have $50 for transportation costs for my trips between my domicile and the Credit Union, it would be awesome.
I expect to have a public launch on or by February 1st, 2022.
Attached, I have included a working draft of the proposal that I am providing to the banks. It is a rough draft, but please judge it harshly. I will update it as quickly as possible as I refine my approach and finish my implementation.
