How collateral is locked off-chain and brought on-chain

Off-chain Lock

Receivables are created every time a new purchase happens, in a never ending cycle between merchants and consumers. Kona enters the circuit at this stage, triggered by the merchant's demand for immediate capital.

  1. As soon as the merchant requests the capital, we check his receivable schedule with all registry companies and determine how much is available for collateral.

  2. Once the facility is active, we constantly monitor his schedule to verify if:

    • There is enough collateral to payback the (loan principal value + interest)*collateralization ratio.

    • The updated schedule maintains an attractive APY

  3. Once the facility is funded, we request the schedule to be locked, which is done online and immediately, and a lock contract is generated.

    • By locking the receivables, we actually become the legal owner and direct it to clear in one of our ramp accounts.


  1. Kona then deploys an oracle to monitor the contract value on-chain. This creates a literal expression of the receivable on the blockchain, which is updated constantly.

  2. The loan contract is subscribed to the oracle and constantly checks the amount that is safe to be withdrawn.

Current state and future developments

This simple, yet powerful, implementation of smart contracts can be expanded in several interesting directions.

  • A permanent facility where merchants can add receivables to the oracle constantly and draw against it.

  • A semi-collateralized loan against receivables that are created in real time, for investors seeking a higher risk/reward product.

  • A loan fully collateralized in more distant receivables but payable in the short term, which would provide merchants a more flexible solution, while maintaining investor protection.

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