A local community is comprised of more than just businesses and consumers. Public and private organizations represent a key component in the social fabric of any community. While the most basic use of BoLT focuses on the relationship between business and consumer, it puts the consumer at risk of the business going bankrupt. BoLT can be used to significantly reduce that risk and increase overall trust in the system by having a community organization be the central actor in the system.
Central community organizations could be any of a local chamber of commerce, a church, community development firms, local governments, etc. Our platform would provide these central community organizations with an alternative way to engage with the communities they were made to serve. The BoLT system allows for any entity to issue BoLTs, contingent not upon the provision of a good or service but instead on public trust. These community organizations would have sufficient public trust given their involvement in the local community.
This funding model utilizes the public trust in the organization to bring merchants and consumers together. It uses the BoLT TrustLine transaction to create a low-risk widely accepted bolt in the community. In our example, a local community organization, the LCC, will sell its own bolts to the public. Here Bob buys $40 worth of LCC bolts which pay a bonus of 4%. (Alternatively, LCC could choose to use its bolts to make grants to individuals.)
Meanwhile, local merchants participate in this model by selling their own bolts to the community organization in exchange for US$. Because there is a potential risk of the local merchant defaulting, the community organization could ask for a bolt with an interest rate. In our example, Main St. Hardware and Alice's Bakery each sell $100 worth of their bolts to LCC and get $100 from the LCC. At they same time, they each issue a TrustLine to the LCC for the same amount, $100. The TrustLine indicates that they will accept LCC bolts exactly as if they were their own. So, a customer who has LCC bolts is guaranteed to be able to spend them at the store. In our example, Bob knows he can spend the LCC bolts he has at either Main St. Hardware or Alice's Bakery.
At some later date, Bob spends $10 of LCC bolts at Main St. Hardware to buy some tools and $30 of LCC bolts at Alice's Bakery to buy some baked goods.
Behind the scenes, the amount of the TrustLine between Main St. Hardware and the LCC goes down by $10 in the case of Main St. Hardware and it goes down by $30 for Alice's Bakery.
Finally, in order to reduce their outstanding debt, the merchants can redeem their bolts with the community organization. In our case, Main St. Hardware trades $10 of LCC bolts for $10 of Main St. Hardware bolts, reducing their outstanding debt to the LCC. Similarly, Alice trades $10 of LCC bolts for $30 of Alice's Bakery bolts.
The key advantage of this model is that if a single merchant goes bankrupt, the consumers can still spend the community organization's bolts at any of the other participating merchants. This significantly reduces the risk to consumers and at the same time creates a larger BoLT community. The community organization can set the interest rate it pays out and takes in to account for the risk of any of its merchants defaulting.
This model allows for the central community organization to infuse their locality’s businesses with capital while increasing economic activity. The organization could even set their interest rates so that they are gaining slightly more than they are spending, creating a self-sustaining system of investment. Since the pooled risk will result in more consumer activity, the businesses will benefit from increased sales and receive free marketing from the central community organization’s network. Loyal customers of one business in the network will be more likely to try a new business from the same network given the flexibility of the bolts. Of course, the merchants can also issue their own bolts directly to consumers—something that is more likely to be viable once the community as a whole has already woven bolt into their daily lives.