Bitcredit flow

From issuing an e-bill,
to minting into bitcredit, and
final redemption in bitcoin.

Bitcredit flow (dark mode)

How does it work?

Imagine, it is Juli. Apricot harvest time.

Alice Fine Jams Ltd. London wants to purchase 10 tons of apricots from Bob Apricot Orchards GmbH in Vienna. Bob asks for 1.0 BTC minus a 2 % cash discount for instant payment.
Alice does not have that cash. She first needs to produce and sell her fine apricot jam. She proposes to pay with a three month bill of exchange.
Bob knows Alice is honorable, they have a long standing business relationship, so he agrees.

There are three ways in which they could now continue: either (I) Alice or (II) Bob issues a two-party bill or (III) Alice drafts a bill for a third party to sign as payer.

E-Bill (Wholesale money)

I. For two parties - Alice issues e-bill

Bob delivers the apricots to London.
Alice draws and digitally signs an electronic bill of exchange where she promises to pay 1.0 BTC to Bob in three months' time. The apricots are hers.
After receipt of the e-bill, Bob either
a. holds the e-bill until maturity => Continues with "Payment", or
b. pays another party directly with the e-bill => Continue with "Endorsement", or
c. sends the e-bill to a mint to get bitcredits => Continue with "Minting"

Endorsement ↕

Later, Bob wants to purchase a tractor from Charlie Machinery AG in Hamburg. He proposes to pay in part with his 1.0 BTC e-bill which is payable by Alice.
Charlie knows Bob as an honorable farmer from prior sales, he agrees and delivers the new tractor.
Bob digitally signs the endorsement of his e-bill to Charlie. Bob remains a guarantor for e-bill payment at maturity.
Charlie likewise can hold the e-bill or continue either at "Payment" or "Minting".

Payment

At maturity, Bob (or if he endorsed, Charlie) digitally signs a payment request to Alice.
Alice sends 1.0 BTC to a specific Bitcoin address for the e-bill which only Bob can spend.
Bob sees the confirmed receipt of the 1.0 BTC on mainchain.
Finished.

II. For two parties - Bob issues e-bill ↕

Alternatively, Bob can issue the bill and send it along with the apricot delivery.

Bob issues an electronic bill of exchange, instructing Alice to pay him 1.0 BTC in three months' time.
When Alice receives the apricots in good order, she digitally signs the acceptance of the e-bill to confirm that she will pay it.
Continue with either
a. Endorsement,
b. Minting, or
c. Payment.

III. For three parties - Alice drafts e-bill on Dave ↕

Alice Fine Jams Ltd. in London is owed some money by Dave Imports Corp. in Boston.
Alice draws and digitally signs an electronic bill of exchange which instructs Dave to pay 1.0 BTC to Bob in three months' time. Bob delivers the product in exchange for this e-bill.
Later, Bob digitally signs an acceptance request to Dave.
Dave digitally signs the acceptance of the e-bill to confirm that he will pay it.
After receipt of the acceptance, Bob holds the e-bill for a while.
Note: If Dave does not accept on time, Bob can request immediate payment from Alice. Her signature in step 2 makes her liable.

(Here Bob could go to a mint. Let's assume he does not. )

Later, Bob wants to purchase goods from Charlie Machinery AG in Hamburg. He proposes to pay with Alice's e-bill. Charlie knows Bob as an honorable business and agrees.
Bob digitally signs the endorsement of the e-bill to Charlie in exchange for the goods.
At maturity, Charlie digitally signs a payment request to Dave.
Dave sends the bitcoin to a specific address for the e-bill which only Charlie can spend.
Charlie sees the confirmed receipt of the 1.0 BTC at that address. Finished.

Minting

(Continued from Endorsement.)

Wildcat is a Bitcredit mint on the internet. It runs the open "Wildcat" credimint software, holds verifiable guarantee capital and maintains credit lines for vetted customers. It advertises its minting fee of e.g. 2.0 %.

Bitcredit creation

Charlie GmbH needs to pay workers and suppliers. He holds the e-bill but it is neither divisible nor fungible.
Charlie checks his mints guarantee capital in eIOU. Given other mints' fee level, he considers the 2 % fee to be competitive, so he asks Wildcat to mint the e-bill.
Wildcat verifies the requirements of the e-bill and the parties' credit lines and agrees.
Charlie endorses the e-bill to Wildcat. Charlie remains a guarantor for redemption.
WIldcat digitally signs a blank endorsement, thereby joining the e-bill's guarantee chain.
It opens a payment channel for 0.98 BTC credits which only Charlie can spend and keeps 0.02 BTC credits in its own payment channel.
(Continue at "Wallet" below.)

Bitcredit redemption

At maturity, Wildcat digitally signs a payment request to Alice Ltd. London. (For the 3-party ebill, to Dave.)
Alice sends the bitcoin from her wallet to a specific Bitcoin address on mainchain.
From this input, Wildcat redeems all final BTC credit balances one-to-one into outright BTC UTXOs. Finished.

Failure to Pay (Guarantee Chain) ↕

If Alice fails to send the bitcoin, all bitcredit created from this e-bill show as overdue.
Mint must sell the needed eIOUs for bitcoin and pay to the clearing address.
It now holds full control of the e-bill.
It now can request, in turn, recourse payment from any party along the guarantee chain.
Should none of them pay, Mint can initiate legal action on the e-bill against any of them.
After recovery, Mint can use the proceeds to re-stock his eIOU guarantee capital.
Finished.

Wallet (Retail money)

End users do not need to know anything about the earlier stages. For them, payments with Bitcredit are instant, private, and practically trustless: Bitcredit-compatible wallets monitor the issuing mints' assets, liabilites, guarantee capital and payers' honour. In the rare case of a problem with an e-bill, traffic lights signal this to end users.

After step 6 in "Minting", Charlie GmbH has possession of a payment channel.

Charlie can spend his BTC credit and pay anybody, instantly and privacy preserving.
As can Wildcat, with their 0.02 BTC credit.
Receivers can likewise pay others, until e-bill maturity.

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