Populous is a blockchain system designed to provide a marketplace for invoices – a type of commercial debt intertransferrable between companies…
Based in the UK, the system was designed by a small company with past experience in the corporate finance world (especially invoice financing). The aim with this is to create a central marketplace through which companies can raise the required capital, and lenders can get the best deal on debt allocation.
What is Populous?
Billed as a marketplace for invoices, the idea is to directly pair invoice sellers and lenders to transact directly and without third parties.
The system was released via an ICO in June 2017 to provide SME’s the ability to quickly raise debt via a decentralized – global – marketplace of investors who’d buy the issuance certificates and essentially remove the banks from the equation.
Whilst the system was hailed by some as a solution to a multi-trillion dollar industry, many others pointed out that lack of regulation and the prevalence of shadowy figures would make it very difficult for Populous to maintain the validity of its marketplace.
Unlike a number of other coins (which just sought to offer currency type functionality), Populous created a centralized service through which people were able to outline its various deficiencies, and the company could adapt to fix them.
The problem with this – from a blockchain perspective is that whilst the idea is good, it has a lot of regulatory requirements – especially in the UK and US – which could prove to be somewhat of a problem, especially for a system that has pride in being decentralized & generally unregulated.
Having said that, there have been a number of developments which have made the Populous system a lot more desirable than the others:
- Real Time Database
The system is able to extract and filter data from the XBRL data format, which allows the platform to create a real-time picture of the various companies it manages.
- In-Depth Risk Analysis
Using the ZScore algorithm, it’s able to manage the credit risk with all offerings inside the marketplace.
To summarize, it’s basically the equivalent of Ethereum with an actual core business case (the facilitation of a market for invoicing debt). Because of this, the system *may* have some real use value, otherwise you need to be very careful about how it’s meant to work etc.
Who created it?
Like many in the finance space, the founders of Populous are not very high profile. They have mentions on their website but nothing of substance on other parts of the Internet.
Whilst this isn’t a problem, it does raise questions about the underlying credentials of the people behind the company. Especially with a space with as low barriers-to-entry as crypto, the notion that two guys suddenly set up a world-beating debt-financing operation is somewhat suspicious.
The founding team consist of…
- Stephen Williams (CEO)
Market research and analysis expert, Williams created a way to match XBRL to find clients for a number of different criteria. This became the basis for the Populous blockchain platform – which essentially would decentralize the way in which this data was processed and managed.
- John Morton (CTO)
Former Chief Technology Officer at SAS (UK), helped create cost-effective solutions for many different global clients. A seemingly capable CTO, Morton has been responsible for the majority of the work that went into the Populous platform infrastructure (to utilize Williams’ algorithm).
At present, there are a number of other members of the company (who provide technical support mainly). Although it should be stated that it *is* for profit (not a foundation), which should be good for anyone looking to take a position with their currency…
Why it exists?
The underpin of this system is the necessity of many small medium enterprises (SME’s) in the UK to turn to invoice financing to help ease cash-flow concerns.
This is currently handled by central brokers who are not very competitive or transparent, making the idea of a marketplace for this type of debt somewhat intriguing…
Keeping a positive cash flow is the most important part for any SME, even more so in an economy which is currently recovering from a recession. After all, having access to the monies owed to an SME allows that SME to create new opportunities, develop existing plans, purchase new equipment, pay salaries and negotiate the best terms with their suppliers.
Unfortunately, keeping a regular flow of cash in the business is often easier said than done. Especially if late payments to the SMEs are holding them back. It’s currently estimated that late payments are costing UK SMEs as much as £1.9 billion a year. If an SME is selling its products or services to other businesses on credit terms, invoice factoring or invoice discounting also known as invoice finance, could help.
It’s a form of funding that releases the cash tied up in an SME’s outstanding sales invoices instantly at a cost that both the SME and investor agree on. There are currently over 40,000 businesses across the UK using invoice finance to support them at various stages in their business life cycle.
Furthermore, there are businesses across the UK at this moment using this form of finance – particularly at a time when more traditional financial institutions have been turning down funding requests. As of 2016, 50% of SMEs accounted for the UKs total turnover of £3tn and 46% of SMEs experienced some form of cash flow problem and late payment.
You can view the Populous Whitepaper here.
Whilst there is still skepticism in the market for this platform, its underlying trajectory seems to have been making decent progress. The key with a system like this (primarily focused on business) is to encourage inventory to be put into the system, and that inventory to be serviced by debt providers.
There are several important things to consider with financially-centric services like this – namely that they are almost always unregulated. This isn’t necessarily bad, but it certainly means that most investors will not partake in it.
This is vital for the success of the platform because only by encouraging users / growth to adopt the system will they be able to achieve anywhere near the scale required to achieve critical mass.
In other words, investors will only buy the coins of the system if there’s something in it for them. The only way that will work is if the system has access to the types of companies those investors would expect to back the debt for – not being regulated prevents many companies & investors from doing that.
Thus, when considering a crypto system like this – don’t let the hype fool you. The system might work well, but that doesn’t mean it will be profitable. And if you’re looking to buy one of its coins in the hope that it will increase in value/price over time, what you need to look for the adoption of the system achieve at least near to critical mass (the basis required for the system’s proposition to be realized).