Sikoba: A blockchain for IOU lending.

Sikoba is a blockchain designed to facilitate credit through circles of trust. These circles of trust form a chain of trust between individuals who trust common parties but do not necessarily trust each other directly. Aleksander Kampa, research director for Sikoba explains his brilliant ideas and how he is creating this blockchain project to make his vision a reality.

What is the driving mission of Sikoba?

Sikoba’s main mission is to bring back IOUs and credit to its rightful place in the financial system, alongside money. With P2P lending already growing at 50% p.a., we see the market of P2P IOUs as the next frontier of finance, and the ultimate distributed finance application.
Why do people who trust each other enough to give credit to each other need Sikoba to manage that transaction?

For a simple credit between two people, registering the transaction on the Sikoba blockchain offers only a small advantage. The added value of Sikoba becomes apparent when it comes to keeping track of multiple obligations in a large group of people or companies, where some of the obligations carry interest or are subject to fees.

Also, the Sikoba system allows users to transact with others whom they do not trust by using credit conversion, a configurable rippling algorithm which automatically adapts and optimises credit relations to expanded trust circles.

Can you tell us more about the people in your team?

The core technical team consists of myself, Craig Sailor and Dr. Eyal Ron. My work over the past 25 year was mostly related to finance and IT, but I have also had a lifelong interest in monetary theory.

Eyal and Ron joined the project at the beginning of February 2017. They know and complement each other very well. They have an existing blockchain development contract with the German Institute for Standardization — for which they were selected from over a hundred proposals. Although that means that they can work for Sikoba only 67% of their time, it also gives them exposure to other projects that will be useful for their work on the Sikoba platform.

Our communications director, Jean Lasar, has joined us recently and brings decades of experience working for large corporations, as well as his own decarbonisation cryptocurrency project.

With Roland Kofler, we also have a strong and well-connected Ethereum consultant with many talents, including organising our token presale.

We are also very happy to have Bokky Khoo on board as a consultant. He conducted a thorough audit of our presale contract and has agreed to help us on specifications and architecture. With his background in finance and interest in community currencies, he is a perfect fit for our project.

My good friend Lisa Tan, who is based in London, deals with admin and accounting. She has many years of experience as Head of Finance for a UK listed company so I can rely on her completely, which is a great relief.

What will be the parameters to start a Sikoba IOU transaction?

When a user needs to make a payment to another user, the Sikoba system will find the optimal payment path to do so.

For example, if Bob trusts Alice and opens a credit line for her, this means that he is willing to accept Alice’s IOU as payment, instead of bank money, in a given currency and up to a given amount. Alice can now pay Bob.

Now suppose Alice wants to pay Charles using Sikoba, but does not know him personally. However, Bob and Charles know each other, and Charles accepts Bob’s credit. The Sikoba system can automatically route the payment through Bob (assuming Bob has agreed to this), with the result being that Alice will have a debt towards Bob, and Bob a debt towards Charles. This is called credit conversion and enforces Sikoba’s basic rule that a user will only ever have exposure to those he has expressly chosen to trust. Applying this mechanism successively, Alice gains the ability to transact with a large number of users even if she does not know them.

Note that Sikoba is not a pure IOU system: if a payment via IOU is not possible, fiat money can be used. Fiat money will also be used to repay outstanding balances when needed.
Are Sikoba contracts legal, are they recognised by a court, if so is it any specific ones?

Sikoba IOUs will have the same legal value as written acknowledgements of debt.

How many degrees of separation between individuals who trust each other will be accepted as a “credit tunnel”?

Example: Bob > Alice > George > Mike > Lucy > Fred If the credit lines of Lucy Mike, George and Alice are exhausted can Fred borrow through Bob’s credit line?

We will probably put a cap at 5 or 6 degrees of separation, this will partly depend on number of users and system performance.

If any one of the credit lines on a path between Bob and Fred are exhausted, a payment from Bob to Fred is via that particular path is not possible. The system will attempt to find other payment paths, and among these will select the one that is the least expensive for Bob. If such a path cannot be found, it means that a payment using an IOU is not possible, Bob will then have the option to pay as usual, with money.

Will there be an easy to use interface and API to Sikoba, when will it be issued?

Initially, there will be the web and mobile interfaces to the Sikoba network, with an API coming later. We expect to have first test users during 1Q2018, with a full-scale launch planned for 3Q2018.

Is a rating system within Sikoba planned?

Sikoba users are strongly encouraged to grant credit lines only to users (individuals and companies) whom they know and trust personally. For that reason, we have made the choice to not have an internal rating system, because it might encourage some Sikoba users to give credit lines to users whom they do not actually know, just because of their credit rating. This would go against the Sikoba philosophy – although we will, of course, have no way of controlling actual user behaviour.

That said, Sikoba will flag users who do not discharge their obligations, and we may show the total amount of credit lines a user is given by other users – which would reflect the combined trust of other users.

Can an external third party credit rating system easily be integrated into Sikoba?

User information will be managed by an identity management service outside of the Sikoba blockchain, and we do hope to find a partner who can provide such features as third-party credit rating integration. I expect that this will mostly be useful for companies.

Can a platform like BTC Jam use Sikoba, what would their benefit be?

We would not necessarily be very welcoming to someone who would want to use Sikoba as a bitcoin lending platform – although technically this will be possible of course. The purpose of Sikoba is to give people and businesses additional ways to transact in economically useful ways. I don’t see anyone wanting to borrow BTC other than for speculation.

Remember that the major advantage of Sikoba compared to lending or value transfer platforms is that Sikoba participants can pay each other with IOUs even in the absence of fiat money, cryptocurrencies or other assets.

How will identities be confirmed on Sikoba?

First of all, it is important to note that it will be possible to use Sikoba anonymously, in the same way as it is possible to use other blockchains such as Ethereum anonymously. In fact, because access to the blockchain data will not be public, Sikoba will be slightly more anonymous than Ethereum or Bitcoin: a user will only be able to access his own data.

For example, a group of friends or colleagues could join Sikoba, share their respective public keys or user names (they would have to do this outside of Sikoba) and grant each other credit lines. They could then track their mutual obligations in the system. However, such users will not have access to all of Sikoba’s functions, also their mutual obligations would obviously be difficult to enforce in a court of law.

In order to have full functionality, users will be encouraged to go through Sikoba’s KYC process which will be managed by an external identity management service. We also want to be able to allow a biometric-only KYC, for people who have a smartphone but no identity documents.

Can Sikoba IOUs be traded to third parties?

We currently have no plans for that.

To whom will the fees generated by the IOU contracts go to?

All Sikoba users will pay small fees in SKO for making transactions in the system, whether in IOUs or fiat money. These are transaction fees paid to the miners (although some of it may also go to a future Sikoba Foundation.)

Apart from that, users can set additional fees for accepting each other’s IOUs, for example, interest rate payments. These fees will simply be paid from one user to another.

What are the economics of SKO*?

We have not yet decided what the total supply will be, this will be part of the preparation for the upcoming ICO at the end of the year. Our goal is to design a supply system that will be fair to both users and miners.

Our goal is a system where the transaction costs for users remain stable (and low), but where the value of SKO tokens tends to increase with the number of users. We should be able to achieve this with a fixed supply model, or a mildly inflationary one where the growth of token volume would be lower than the growth of transaction volume in the system.

*SKO is the Skiboa coin symbol.

What are the technical details of SKO?

The SKO coin will be native to the Sikoba blockchain. While the platform is being developed, SKO will be represented as ECR20 tokens on the Ethereum platform which will later become exchangeable into SKO tokens.

Aleksander Kampa Research Director - Sikoba
Aleksander Kampa Research Director – Sikoba

What is the marketing and branding strategy for Sikoba?

We see two main use cases for Sikoba on which we will focus initially.

The first one is inter-company credit systems. Even in industrialised countries, this has the potential to reduce companies’ reliance on bank credit.

The second major use case is to offer an alternative for micro-credits, which typically carry very high-interest rates, sometimes over 50% annualised. When artisans and merchants start using their own credit on the Sikoba platform for local trade, they will be able to significantly decrease their reliance on micro-credits.

Our marketing strategy will focus on these two use cases.

Apart from that, we think that using Sikoba via a user-friendly mobile app with biometric id will facilitate the development of an IOU economy for the poor and unbanked – by giving them a tool with which they can transact even if they have no money.

You plan to have a completely decentralised organisation, will there be nodes running the contracts? What are the requirements to host such nodes?

Sikoba will function as a “federated blockchain”, a permissioned mining model where only authorised nodes add blocks to the blockchain. The Sikoba federation will be self-governing, meaning that miners will be chosen by the Sikoba users themselves. We expect that in order to become a miner, a node will have to have powerful processing capabilities and be run by a well-identified entity or organisation.

How will the Sikoba transaction fees be allocated?

Miners will receive the majority of the commissions paid by Sikoba users for transacting on the network. These commissions will be paid in SKO tokens.

What will be the price difference between the pre-sale and the ICO? 

Presale buyers will get exactly 50% more SKO tokens per ETH than later ICO participants. By defining it that way, we keep all our options open to structure our ICO.

Would you like to add anything in addition to the above answers?

The current public presale end on 15 May. If we do not reach the threshold in the public presale, we plan to do a private token sale in the second half of May. Whatever happens, the ICO is planned for the end of the year.

For more information visit: Sikoba

We thank Aleksander Kampa for the interview.