With the advent and development of blockchain technology and smart contracts, businesses don't have to rely on any third parties or central authorities for making any transactions or when getting financing. The Hive platform lets different businesses connect, encrypt and upload received and issued invoices, which can then be either traded or used to build a transparent financial record. Invoice financing is a term used to denote asset based lending for products which allow companies to get finance for their slow-paying accounts receivable. Once a buyer receives goods, a buyer has 90–120 days to pay for them. But sellers need to get their funds faster than this time for cash flow reasons. Those companies can get their funds faster by selling invoices to a factoring company. In exchange for immediate payment, the seller of the invoice pays an interest rate to the lender or the buyer of the invoice ie the factoring company. Invoice factoring is a form of invoice financing which allows different companies to sell their accounts receivable to improve their working capital. This type of financing provides business with immediate funds and liquidity they need for continuous operation. Factoring is easier than conventional financing schemes because it is the process of selling liquid assets rather than taking a loan.
Applancer provides 15 insights on the new Hive Project ICO:
1. The concept of Hive:
Hive (HVN) platform uses Ethereum blockchain technology and smart contracts associated with the blockchain technology to assign a unique symbol or a fingerprint to every invoice issued by tokenizing invoices and declaring them on the blockchain. This makes it easier for the small and medium scale businesses and enterprises to automate their invoicing process, taking advantage of the process of invoice factoring. Hive acts as a decentralized data platform for all invoices submitted, each of which has a unique history or record for the issuer, owner, and payer of the invoice. These invoices can, therefore, be made available as a shared source of liquidity for factoring and invoice financing.
2. Secure financial documentation of different companies:
Today, companies record a debit and credit with each transaction — two entries, hence the term “double-entry” accounting. They could easily add a third entry, the blockchain record, which is instantly accessible to those who need to see it: the company’s shareholders, auditors or regulators. This is what the HIVE platform does - creating a “triple-entry” accounting. Generating any up-to-the-minute financial statement would be straightforward, with the click of a button providing an immutable, complete and searchable financial statement, free of error. Companies might not want everyone seeing these numbers, and so may give access only to regulators, managers, and other key stakeholders. Companies can upload all their financial documentation which enables real-time auditing to be conducted, improves the credit scoring process,
expedites credit approvals, etc.
3. Platform to help SMEs trade:
Hive is an end-to-end platform that will give the small and medium scale enterprises to easily opportunity to access to short-term financing by turning their accounts receivables into assets that are tradeable. This can be achieved by tokenizing and publishing each invoice they receive to the blockchain in a secure manner. A new meta-market will be created, where factoring firm, banks, investment funds, insurance companies, P2P lenders and private investors can provide liquidity in accordance with their specific criteria and expected returns.
4. A risk algorithm for claim selection:
Along with the Hive blockchain network, a micro-factoring pool is created which enables all Small and medium scale enterprises to gain fast access to liquidity by selling their invoices to the fund. A proven risk algorithm enhanced with proprietary blockchain algorithmic credit scoring will be used to perform checks on the company’s financial status for the claim selection process. The risk algorithm used scores each company on the basis of its financial and transactional history as well as other blockchain parameters. Those companies with a healthy credit history will earn benefits, and incentives are available when they choose to store their financials securely on the block chain. The algorithm is based on companies XBRL data and risk scoring results.
5. Invoice verification problem is solved:
Invoice verification is a crucial tool for preventing fraud in factoring transactions. Along with making the invoice factoring process more secure, The Hive platform speeds up the payment process. Invoice verification is an essential part of the invoice factoring process and demands time and resources for the factoring firm. Verification of the genuineness of the submitted invoices includes many steps like an inspection and confirmation that the quantity and quality of the invoiced goods were delivered as claimed, confirmation that invoiced services were delivered as claimed, etc. Hive blockchain implementation with ERP connectors enables automation of all processes involved in checking the validity of submitted invoices. History of submitted invoices on public blockchain enables further automated assessment of validity and associated risk.
6. No Outdated and Non-Transparent Financials:
There is no real incentive for companies to reveal their live financials to the public. In the common platforms, the financing details about small companies become outdated with every half year and these companies do not reveal enough quality data to obtain an accurate opinion about the company’s financial health. With Hive platform, this data from all small companies will be factored into the risk premium when the creditor assesses the term sheet for financing according to the parameters like interest rate, maturity, collateral required, annuity, etc.).
7. Financial data format - XBRL:
The Hive platform is planning to use XBRL for presenting financial data before tokenization happens. XBRL is the open international standard for digital business reporting. XBRL is used around the world, in more than 50 countries. In a nutshell, XBRL provides a language in which reporting terms can be authoritatively defined. These terms can be then be used for representing financial statements and for other reasons. XBRL lets reporting information move accurately and tokenized to the
8. Core calculations which help investors evaluate investment opportunities:
Hive platform uses two core calculations for helping the investor in evaluating an investment opportunity. These two calculations are:
1. Opportunity Qualification and Risk Assessment
2. Predictive Behavior Credit Scoring with Artificial Intelligence (AI)
In order to provide the lender with risk factoring information, we are using proprietary based on Altman Z Algorithm. This method checks the possibility of a company's success and gauges any possibility for bankruptcy. The Altman Z-score is calculated by evaluating five financial ratios found on a company's annual 10K report. Hive is planning to include more data points sourced from our blockchain and by using training set and Machine Learning algorithms to improve risk calculation and assessment of the borrowers by finding more measuring points and related weights. All these additional data is available for data collection in the Hive blockchain.
9. HIVE Smart contract design:
HIVE’s underlying architecture is based on an Ethereum smart contract. As already mentioned, this architecture yields full transparency of events along the supply chain, increased process efficiency, a reduced risk of fraud and dramatically lower costs. The Hive platform provides a highly modular structure which makes it easier to make any alterations to it. All the modules will be written in the programming language Solidity. A smart contract can include multiple parties such as, for example, lenders, borrowers, buyers, sellers, etc.
10. Smart oracles:
Smart Oracles is off-chain data sources that smart contract is using to modify its behavior. The Hive is going to use this concept in order to capture events around published invoice and beneficiaries. Smart Oracles contains all the information related to the invoice factoring deal including block signature. Smart Oracles is directing invoice smart contract to change/update beneficiaries contact info with lenders information.
11. InterPlanetary File System (IPFS):
HIVE will also use the InterPlanetary File System (IPFS). IPFS allows static files to be stored in a distributed file system and uses distributed hash tables to distribute the files. HIVE uses the IPFS to store all static files and event metadata. It has certain disadvantages also which are also overcome by the Hive platform.
12. HIVE Ecosystem:
In the Hive network ecosystem, different parties take different roles. Following are the different forms of participation:
(a) Hive Administrator – can create, manage and disable Lender accounts.
(b) Vendor – This is a user who is publishing his financial information on Hive blockchain in order to benefit from Hive services, such as invoice factoring, credit scoring, and auditing.
(c) Buyer – Uses Hive in order to stay informed to who invoice need to be paid.
(d) Lender/Investor – are using Hive in search for new investment opportunities. They are able to see financial information published by the vendor and also collected by Hive. Lender or investor is able to purchase the HVN coins.
13. HIVE Platform interaction:
Hive Invoice Factoring network will support three distinct types of application layers. On the Vendor side Hive is providing ERP plugin application for various ERP systems. Second interaction module is Buyer module that enables invoice acceptance and notification of changes. The last one is Lender module that enables investors to search for available investment opportunities, assessment and collaboration tools.
14. Hive (HVN) Token Functionality:
HVN token grants the token-holder the right to claim right over invoices on the Hive platform and obtain credit scores for certain entities which have a sufficient financial track record on the Hive blockchain. When, for example, a factor who is financing SME wants to claim ownership of invoice they financed and by that bought, they will need to pay HVN tokens to Hive foundation.
The crowdfunding campaign or the ICO for the Hive platform is scheduled from 3rd July to 14th August. The start-bonus of the ICO is said to be 15% of the total supply. The total supply of the coins is limited to 500,000,000 HVN.