Instead of following the traditional financial model, the one that has performed so poorly in providing financing for promising small businesses worldwide, Debitum is using the blockchain to link disparate and sometimes distant parties together in a secure and intuitive system.
Debitum is built on the Ethereum blockchain. Debitum’s processes are powered by smart contracts that execute automatically according to the agreed terms without any input or influence from a third-party. This allows financing to be organized in a more secure and predictable manner and keeps transparency and accountability firmly in focus. We recently sat down with Martins Liberts, the CEO of Debitum to have a chat with him about the project as well as finding out his thoughts and insights.
Hi, Martins. Thanks for joining us today. Can you tell us more about yourself and Debitum?
Hi, I am Martins Liberts. I have been working in information technology sector for more than 15 years. Around 6 years ago we started our own IT company – INNTEC and soon after we run into liquidity issues that traditional financing institutions were not able to help us with. We thought that it’s not okay if smaller, but very often more innovative and higher quality or better customer service companies can’t get so much needed cash to grow. Hence around 3 years ago we founded alternative loan company, DEBIFO, that serves loans to small and medium companies, primarily located in Lithuania, European Union. After being in fintech business for some time and having strong IT background we realized that the most efficient way to solve small business financing on a global scale is to create an ecosystem that brings together more specialized companies to serve particular step of the financing process and use the newly established blockchain technology to guarantee trust and transparency among all members. That’s how Debitum Network was born in February 2017.
First off, why did you decide to use the blockchain in building Debitum? What was your thought process behind it?
The main issue we see at underserved small companies is trust of potential investors to deploy their available capital. We see that there are two options to solve that: a) create a large central organization, everyone trusts – unfortunately, we have seen limitations of such approach and it hasn’t happened so far. b) to use technology that allows putting trust in the technology and ecosystem itself, rather than a particular central body.
We chose to go with option b) and hence using blockchain for Debitum Network is essential to ensure that all data is kept transparent, objectively accurate trust ratings can be calculated and shown for each member to ensure data can’t be modified in any way. In addition, blockchain and underlying smart contracts functionality allow automating many steps of the financing process.
Tell us about how you came up with the idea of Debitum. Did you face a problem within the industry or do you think there is a gap in the market for Debitum to fill?
As I told before, we faced financing issues ourselves and we got determined to solve them for others. Debitum Network is a natural next step to actually solve financing issues for small and medium companies on a more global scale. When we started analyzing our options, we quickly noticed that the market is heavily underserved and the global market gap as estimated by the World Bank is ~2 trillion USD. Someone will definitely get on solving this issue using blockchain technologies – the more appropriate question is who will do it first and the best.
What do you think is the biggest problem Debitum will solve and why is the problem important to solve?
The global credit gap accounts for $2 trillion. There is a huge problem in financing small and medium businesses which accounts for 90% of all businesses and 70% are not well financed. Most of our economies depend on small and medium businesses. If we are able to provide more financing to small and medium businesses, we allow them to grow and compete more efficiently with larger (and often more wasteful) companies. Bottom line – we could shift the economic balance of our economies towards smaller companies!
Editors Pick: Debitum Network
Debitum Network – Small Business Finance on the Blockchain
Small businesses are the heart of many industries and economies across the world. Despite this fact, research suggests that many small businesses (particularly those in emerging markets) don’t have access to credit and even if they do, it’s under-served. It doesn’t take an expert to figure out that there is
How exactly does the technology work behind Debitum to connect small businesses and service providers involved in the platform globally? What do you think are the advantages of Debitum’s system instead of the current system in place?
All interaction between each other is done on Ethereum blockchain, using smart contracts (loans are provided in EUR and other fiat currencies; however, they are accounted on the blockchain). This allows tracking of all information with 100% guarantee. It also allows to build up an objective trust for involved members of the ecosystem.
Current traditional institutions fail to serve small and medium businesses, in many regions they are “unbankable”. The existing alternative marketplaces are centralized while still fragmented, hence they serve a small part of the whole market while heavily depending on the trust within the owners and managers of the centralized apparatus.
Unlike most projects, Debitum is co-developed by two reputable companies (InnTec and Debifo) instead of one. What is the reasoning behind this and what is the biggest advantage of this partnership, in your opinion?
The largest advantage is that we cover both main skills needed right out of the gate – alternative financing and IT. It ensures we have a team of competent professionals who can both understand and describe how the process should be decentralized and implemented, while we also have a team capable of doing this. This means we can guarantee the success of technical implementation, we can ensure that Debitum Network ecosystem actually fits the business needs of members of the ecosystem.
Fraud and scams are risks that may happen in financing processes. How will Debitum help to prevent frauds and potentially harmful situations from happening especially on a global scale platform like yours?
First, there is an option to buy verifications or risk assessors services prior investing in a particular loan. This allows estimating the risk/reward ratio. It will also be possible to insure against the risk of default within Debitum Network.
Secondly, as time will pass more and more members of the ecosystem will have objective trust ratings based on their past activities; hence potential investor will see the trust level of the borrower and of other service providers involved.
These two things will ensure that the potential investor makes an informed decision, thus improving his chance of successful investment.
Unfortunately, sometimes a loan will be bad and a borrower could default on it. In such cases, it will be possible to purchase debt collection services on the ecosystem. This will allow ensuring the best possible activities to recover as much of the funds provided to a particular borrower as possible.
Moreover, it is always better to have third parties performing all these tasks mentioned as they are more motivated to keep honest and to do maximum they can, compared to centralized institutions.
Tell us more about the trust rating system of Debitum. How reliable is the system and how does it decide when to add or remove points from the rating?
Are there specific outcomes that are implemented in the smart contract to determine the trust rating?
Trust arbitrage smart contracts have a protocol for calculating trust ratings. In each market (country) they might be a bit different to better correlate with local conditions and environment. In essence, they will rely on the outcome of a smart contract (performed/canceled), on the amount of the loan, on the outcome of the loan and similar. They will be calculated on two levels – for each individual member as well as for the community the member belongs to.
What has been your happiest moment so far working on Debitum? On the flipside, what has been the most painful, or perhaps the most regretful decision you’ve made with Debitum?
Winning d10e ICO Pitch award for both categories – investors and audience. It was an awesome experience! I was very proud that our project has been evaluated.
Projectwise I really liked a couple of ‘eureka’ moments when we figured out particular business feature or solution. The last one being, an agreement with a provider of exchange technology to integrate internal exchange within Debitum Network ecosystem. Thus making the ecosystem more approachable for businesses as they will not need to make additional accounts on exchanges to get their Debitum tokens for use within the ecosystem.
Is Debitum already working with notable businesses or firms? Are there any future partnerships in the process? If yes, can you explain briefly about it?
Yes, we have agreed on a partnership with all steps of the financing process – institutional borrower, verification/risk assessment, insurer, institutional investor, debt collector. Due to their corporate regulations, we can’t announce all of them. But the one we have announced is Creditinfo – risk assessment company operating in many countries throughout Europe and beyond.
What was the process of building and developing the DEB token like? Were there moments during the token creation process that caught you by surprise (in a good or bad way)?
The speed with which crypto community and crowdsale landscape changes. A principle or trait true just a couple of weeks ago may not be true anymore due to the speed the whole space is progressing. That has caught me by surprise couple of times.
What do you think is the biggest challenge or obstacle Debitum will face? How do you plan to tackle that challenge?
I believe the biggest challenge will be to create Debitum Network in such a way that non-crypto businesses may use it, may use the underlying crypto, Debitum tokens, but would have user experience that would allow them to do it easily and without extra hustle. To solve this issue we are already designing how potential Debitum Network members would be using the ecosystem as well as we will design the whole solution to allow for ‘invisible’ crypto – fiat conversions.
Moving on to more personal stuff, what does a typical day in your life look like?
They are not typical anymore! 🙂 Sometimes I spend all night talking to business partners based in the US or Asia. Sometimes I spend all day traveling to various events and meetings. Often I purchase a one-way ticket only as I’m not 100% sure if I’ll come back straight away or will I try to pass by some more events, places, and people. I think for the last half a year no two of my days have been the same.
Can you express one personal opinion of yours about the blockchain? It doesn’t matter if it’s negative or positive, we just want to hear your thoughts on it.
“Trust the untrustable” – blockchain allows to put trust among parties that could not otherwise be trusted. It is a great feature that allows getting rid of middlemen, allows to decentralize processes as well as allows to decentralize governance. I really love the potential I see in the blockchain technology and I would love to see how this technology develops.
Finally, what other personal goals (besides your career) do you have in life? Is there anything else in life you want to achieve?
Professional life is just about 50% of one’s life. It is very important to leave enough time for your family and your close ones. My personal goals are rather private – they are related to how I would like to see my family develop and grow in the next few years.
That concludes our Interview with Martins Liberts
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