In the last period of time, the popularity of centralized intermediaries is drastically decreasing because of the blockchain technology and at the same time of smart contracts. In the world of decentralized markets, Hive platform desires to create a platform which will allow businesses to “connect, encrypt and upload received and issued invoices, which can then be either traded and/or used to build a transparent financial track report.”
Invoice financing is a slow process and most companies want their invoices to be paid faster. In cases like these, the best option is invoice factoring. SMEs can safely rely on invoice financing because the invoices which are submitted are from certified commercial clients. But because the entire process requires a great deal of manual work, many SMEs cannot get invoice factoring from conventional institutions. This is where Hive steps in.
Hive’s plan is to use the Ethereum blockchain technology accompanied by the smart contracts in order to make possible for SMEs to turn “their accounts receivables into tradable assets.”
Every invoice issued will be assigned a particular fingerprint. This will be possible by tokenizing invoices and later on publish them on the respective blockchain. SMEs also need prompt access to liquidity.
The solution for this is a micro-factoring pool where the SMEs can sell their invoices. Furthermore, the Hive platform will use a proven risk algorithm which will be “enhanced with proprietary blockchain algorithmic credit scoring.”
A decisive factor in the factoring transactions is the prevention of the fraud. A tool which not only prevents fraud but also makes speeding up of the whole payment process possible is invoice verification. Hive thought of implementing the blockchain with ERP connectors.
There is always a chance that companies don’t update their financial reports. This is most encountered when it comes to small companies. Hive wants to factor the data into the risk premium when a creditor decides to assess the term sheet for financing.
Before tokenization happens Hive uses XBRL so as to present financial data. It is important for investors to evaluate investment opportunity for long-term reasons. In order to do this Hive platform will use two core calculations, namely:
- Opportunity Qualification and Risk Assessment;
- Predictive Behavior Credit Scoring with Artificial Intelligence.
There is always a chance of a company going bankrupt. In cases like this, it is a must to have a method which can predict before an event this like this takes place. For this reason, the Hive platform uses the Altman Z-score formula which is known to be fairly accurate.
The Hive will include more data points in order to improve risk calculation and also an assessment of the borrowers. To successfully do this, Hive will find more measuring points associated weights.
In the whole process of either accepting or not invoice factoring, Hive will use a credit scoring model.
Building solution on a blockchain has four main advantages:
- Transparency and consensus;
- Immutability and at the same time digital uniqueness;
- Data privacy;
- Smart contracts.
There will be also two more services, namely Company Credit Scoring and Automated Auditing, that will let companies “make their business and financials more transparent.”
A smart contract is an important part of the whole process. The ones Hive uses will follow a modular contract structure. This is an important detail as it will make the contract not only reusable but easy to upgrade.
Hive needs all the data which is stored on the blockchain to be protected. The optimal solution is the usage of the IPFS. “IPFS allows static files to be stored in a distributed file system and uses distributed hash tables to distribute the files.”
In the whole Hive ecosystem, there are in total four forms of participation:
- Hive Administrator;
On the Hive platform, tokens will be used in order to access the data on the blockchain.
It is largely believed that blockchain technology will revolutionize the invoice issuing process and on top of that the financial services which are based on it. In the near future, it would be straightforward to get any up-to-minute financial statement just with a click of a button. Hive thinks that “blockchain is the missing link required to speed up the already swift adoption of this financial mechanism and at the same time bring crypto investors closer to the real economy”