How many investors or potential customers did you lose due to lack of confidence?
How many businesses opportunities and projects did you give up due to lack of transparency and trust?
At Bimount we explore innovative ways and solutions to create trust and transparency
- Our team research solutions for different business scenarios and in various sectors.
- Any payment from a principal to an agent or between two counterparties in a transaction is subject to the uncertainty of default by either party. Transparency, traceability of funds and conditional and automated payments are an increasing necessity in a borderless world where counterparties transact without trust.
Traceability of funds ensures the use and purpose agreed between principal and agent.
Principal agent problem
The principal-agent problem refers to those situations in which one entity or person, the “agent”, has the ability to affect the situation of a third party, “the principal”, by making decisions that concern them both, mostly in context of money or assets transfers. The problem arises from the agent’s discretion to perform acts not agreed with the principal. “The agent” possesses more information than “the principal” and, therefore, is in a position of power that allows it to act on the basis of its own interests. This information asymmetry also implies that the “principal” is unable to determine whether the decisions made by the “agent” are in its own interest or whether they will adversely affect its situation.
This problem can be solved when the agent only obtains the funds or assets if it complies with certain obligations. The verification of the fulfillment of obligations can be performed by an independent and reliable entity manually or automatically with the use of encoded smart contracts.
An escrow account is used to ensure transfer of funds until certain obligations are met
- Protection – The interests of both parties are protected in an account subject to certain business rules while obligations have not been met.
- Reduced risk – reduced counterparty or market risks
- Guarantee: the escrow account provides an independent assurance of escrow objectives thanks to codedd smart contacts;
- Flexibility: escrow services can be tailored to meet the requirements of many different parties, situations and jurisdictions
Escrow services are useful in different scenarios where money or goods are transferred between parties:
- Real estate
- Charitable fundraising
- Online sales
- Joint ventures
- Mergers and acquisitions
- Corporate finance/capital raising
- Asset sales
- Securitisation of assets
- Tokenisation of assets
- Legal settlements
- Private trades of high value
Blockchain and smart contracts automate business rules transparently, securely and ubiquitously.
Blockchain and smart contracts: blockchain automate payments and transfers based on a predetermined set of conditions or business rules encoded in smart contracts. In this way blockchain becomes an independent entity capable of replacing trusted third parties, eliminating errors and biases and at the same time reducing time and costs.
Blockchain and smart contracts advantages
- Security in financial transactions
- Data cannot be falsified
- Information is never lost
- Lower cost and risk
- Elimination of expensive trusted third parties
- Less paperwork and manual work, thus elimination of error-prone activities
- Reduction of the need for special covenants, costly audits, monitoring procedures and collaterals