What is ROSCA - Trusted Lending Circles?
ROSCA stands for Rotating Savings and Credit Association.
A ROSCA is an agreement between a group of trusted parties, who agree to contribute a fixed amount of money at set intervals, called rounds. For example, you and three friends could agree to contribute $10 per month. In this case, each round is one month long, and the ROSCA will contain four rounds, one for each participant.
At the end of each round, the pot should contain the sum of everyone's contribution. In our example, that would be $40. Users bid on this amount in a reverse auction manner, where the lowest bid wins.
The winning bidder then receives their bid. For our case, if someone bid $35, they would receive $35, with the remaining $5 being split between all of the participants.
In the event that no bids are received, the winner of the pot is chosen psuedo-randomly.
Each round is won by only one user (in the simplest case), and each user is guaranteed to win exactly one round. This ensures a pareto optimal outcome according to many researchers, where everyone is at least as well off as they would have been had they saved the money alone.
Below is an example of a ROSCA going through all four rounds.
Step by Step Walkthrough
Learn how to participate in a ROSCA through the WeTrust website by watching this video!
Right now, you will need an Ethereum wallet and a Web3 compatible browser. The easiest way to get both of these things, is by installing MetaMask.
Currently our platform only runs on the Ethereum blockchain, but we plan to support as many as we can in the future.
Yes, only the foreperson is able to invite new members at this time. In the future, we plan to support more open Lending Circles.
Currently, a TLC can be up to 10 participants in size, including the foreperson. We plan to increase this limit as time goes on and we bring more features to the platform.
Not at the moment. In the future, WeTrust will implement the ability to request to join a TLC, and the decision will be left to the foreperson and existing participants to make.
In some ROSCAs around the world, the foreperson charges a fee for organizing the group and the work involved with ensuring members contribute continuously. In a TLC, the foreperson can set a fee quoted in Trustcoin, equivalent to 0-2% of distributions. It is worth noting that at this time, fees are paid in Ether, not Trustcoin.
The foreperson receives their full fees only if there were no delinquencies. When some participants are delinquent, the foreperson receives only fees relative to amount contributed and gets penalized by reducing the fees that they earn.
Absolutely, we have a demo site set up at our demo site, which runs on the Ropsten testnet. You can use the same login information, but you will need to make sure you are on the testnet in your browser!
Currently, WeTrust runs on the Ethereum blockchain, and participation in a TLC can only be achieved through the use of Ether. No other tokens are accounted for when participating in a TLC. WeTrust plans to support other coins in the future, with the eventual goal of using stablecoins.
The contract code is completely open-source. You can view it on our GitHub. The code that runs this website is proprietary software, and owned by WeTrust. We have chosen to do this so that it is more difficult for anyone to profit from our hard work.
WeTrust’s first and current product is the TLC platform. Future products include sovereign credit identities, trusted lending, mutual insurance, and more.
WeTrust never receives or has control of your funds, period. All contributions are made directly to TLC contracts from a user’s own Ethereum wallet. WeTrust can only withdraw its fees from these contracts, and nothing more than that (currently no fees to go WeTrust, but this will change soon). The only other users who are able to withdraw from the contract are those specified as participants, and each can only withdraw their fair share. You can verify this yourself by reading through the code on our GitHub.