Foundation Use Case

When economic downturns are caused by crises, such as the COVID-19 pandemic, philanthropies are often called upon to help out local communities. Due to restrictions on the use of endowments, philanthropies are often constrained in how much they can use; exactly when they are needed most. BoLT offers philanthropies two advantages. First, they can leverage their impact by at least an order of magnitude. Second, they can use their endowment without depleting it.

The basic idea is that the philanthropy would take part of their endowment and invest it in, say an interest bearing bank account. They commit to leaving the money in the account for an extended period, say two years. In this example, they commit $80 (which they lock up in a bank as a surety bond).

Then, they use BoLT's FutureLine transaction to guarantee the bolts of the merchants in the community. The FutureLine is like a TrustLine, but is only activated in the future based on some event. In this case, the philanthropy agrees to redeem up to $200 of each merchant's bolts in two years only if the merchant goes bankrupt. Because only a few merchants may go bankrupt, the philanthropy can safely issue FutureLines for more than the amount they have tied up in the bank. Because the money is not dispersed, they will not exceed the withdrawal limit of their endowment. Thus, they can use their money when it is most needed—in times of crisis.

The FutureLine reduces the risk to the customer since any bolts of a failed business that a person owns will be redeemed by the Foundation's FutureLine. And, because everything is on a public ledger, the Customers of the merchant can see the FutureLine transaction on the ledger. This will increase trust in the system and give them the peace of mind to safely purchase the merchant's bolts without having to worry about default. In our example, Bob purchases $20 of bolts from Alice's Bakery and Main Street Hardware.

Bob can, of course, use his bolts immediately. Here Bob is spending his bolts at Alice's Bakery. An additional benefit for the community is that merchants who have a FutureLine from the foundation are more likely to accept each other's bolts.

If a business defaults, then the philanthropy will use its account to redeem holders of that bolt. Because the FutureLine specified a two year time period, Bob will in this case, get back his money for Main Street Hardware's bolts after two years.

In this way, local customers can invest in their preferred merchants at low risk. Furthermore, the philanthropy's gift is leveraged so more businesses are helped.