Etherplan Explained by Donald McIntyre

 

This presentation is to explain Etherplan, Smart Investment Plans (SIPs), and how they work on Ethereum.

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Etherplan and Donald McIntyre’s Disclaimer: The persons, companies, and brands mentioned in this presentation are used as examples and are not related to Etherplan. The investment ideas in this presentation are only for descriptive purposes. The information in this presentation does not constitute an investment recommendation or financial advice in any way.

 

Etherplan – How Do Smart Investment Plans On Ethereum Invest?

 

Like I wrote in my previous article, a Smart Investment Plan (SIP) on Ethereum is an account that a customer opens on the Ethereum network to save and deposit money, that is subsequently invested, and when a specific event happens, the funds are paid out to the customer or his/her designated beneficiaries.

SIPs may be used for personal finance goals like retirement, emergency funds, college funds, targeted savings, funding big purchases, deferred gifts, and estate planning. Also, since SIPs may be initiated by individuals or groups, they can be used for retirement and pension plans.

As a type of decentralized autonomous organization (DAO) SIP smart contracts are programmed to follow a logical investment process to manage customer’s funds.

The SIP Investment Process

As shown in the graph below a SIP follows 4 steps:

Smart Investment Plan (SIP) Investing Process

1. Profile: In this step customers answer some questions that are defined based on behavioral economics research to uncover important information about the investor’s risk tolerance, time horizon, and other parameters that help define the planning stage in the next step.

2. Plan: The planning step uses algorithms developed based on modern portfolio theory (MPT) and efficient market hypothesis (EMH) to build portfolios that will match or slightly beat performance in financial markets. The three levels defined in this step are: portfolio asset allocation, investment manager selection (if the customer indicates), and investment securities selection. Oracle services like Augur are used by smart contracts in this step to “see” the markets, analyze statistics, and decide the final values and allocations.

3. Execute: After the investment plan is defined and approved by the customer in the previous step, the next step in the process is to execute the trades. Because Ethereum provides an account system, many of the assets may be hosted in the network and thus under SIP custody. For the securities that are traded off-blockchain, the algorithms use APIs with financial institutions to enter their orders. Oracle services are used by smart contracts in this step also to track and verify market trading information and financial provider custody.

4. Monitor: Since investment goals and investor preferences may change overtime, and for evaluation purposes, portfolio reports are sent to customers in this step for their review. Customers may change their personal profiles and investment parameters on step 1 so the SIPs may adjust the portfolios accordingly.

The Etherplan Financial Marketplace

To facilitate the interaction between SIPs, financial providers, and individual securities, a financial marketplace is provided.

Etherplan financial marketplace

As shown in the graph above, SIPs constitute the “buy side” in the marketplace and financial institutions, investment professionals, and other “sell side” participants may offer their services and be hired by SIPs.

In the marketplace, SIPs may also find and invest in specific securities that trade within the Ethereum network like asset backed securities representing specific stocks, bonds, ETFs, and metals like gold as well as cryptocurrencies like Ether and Bitcoin among others.

If customers decide to hire an investment advisor to represent them and invest their portfolios they may also be participants in the Etherplan Financial Marketplace.

Etherplan Customer Account View

SIPs are created by customers for their specific financial goals and customers may have several SIPs in their Etherplan accounts.

The graph below is an example of an Etherplan account:

Etherplan customer account view

As may be seen above, a theoretical customer, Jane Doe, has several financial goals and they all constitute different SIPs in the Ethereum network.

Through the marketplace, each SIP has invested its corresponding customer funds at different providers, securities, or blockchains.

The free balance that is not invested in any SIP is 30,000 ETH that is deposited in the customer’s regular Ethereum account.

The customer may instruct their SIPs to change providers or securities from their accounts.

As an example, the “My Retirement” SIP allocated its funds at Fidelity and invested in target date funds, has a total value of $80,765, and its corresponding SIP number on the Ethereum blockchain is sip1xHDVpANxuQUtY9oploKKijguQUtY9opl.

Other SIPs are invested in different ways, for example the “Emergency fund” SIP only bought a Treasury Bill directly on an exchange in Ethereum because it’s objective is extremely conservative. The SIP at the bottom, the “General family fund” SIP hired, as per customer instructions, Financial Advisor Vitalik Buterin, CFP to manage its portfolio!

Specific SIP Customer View

The graph below shows Jane Doe’s “Retirement” SIP:

Etherplan customer SIP view

As it may be seen above, the portfolio @Fidelity has four target dated funds and the customer may also change or sell them.

The SIP Trust Instructions

The interesting part of the SIP customer view above is that, at the bottom, it shows the “trust instructions” by the customer when she created the SIP for her retirement goal. These instructions mean that the SIP is going to autonomously execute them, like a real life trustee, when the events described occur.

For example, if the date of retirement comes, the funds will be automatically transferred to Jane Doe’s family account or any other account she may specify.

If Jane Doe is deceased before or at the time of the retirement date, the SIP will transfer the funds to her husband’s account.

If the husband, John Doe, is deceased then the SIP will distribute evenly the amount of the funds to Jane’s three children, Mary, Nick, and Donny.

The customer may change her trust instructions whenever she wants, but if she dies, the funds and the instructions will be managed and executed for the benefit of her designated beneficiaries.

Conclusion

SIPs created by customers on Etherplan have two major roles, investing funds and executing trust instructions according to customers needs and profiles.

To invest the funds, SIPs perform a series of sophisticated algorithms to plan, invest, and interact with providers and investment vehicles on the Etherplan Financial Marketplace.

Customers receive reports to monitor their SIPs and adjust their preferences. While they are alive they can also change their investment and trust instructions, but if they pass away they are executed for the benefit of the designated beneficiaries.

 

Disclaimer: The public companies and brands mentioned in this article are used as examples and are not related to Etherplan. The investment ideas in this article are only for descriptive purposes. The information in this article does not constitute an investment recommendation or financial advice in any way.

 

Etherplan – What Is A Smart Investment Plan On Ethereum?

 

A Smart Investment Plan (SIP) on Ethereum is an account that a customer opens on the Ethereum network to save and deposit money, that is subsequently invested, and when a specific event happens, the funds are paid out to the customer or his/her designated beneficiaries.

Powered by Artificial Intelligence

A SIP is a type of decentralized autonomous organization (DAO) where a network of AI autonomous agents, called smart contracts, collectively perform the tasks of the smart investment fund to accomplish the customer’s financial goals.

Unique Features and Benefits of SIPs on Ethereum

Since Ethereum is an open source, decentralized peer-to-peer network with a blockchain protected by a cryptographically secure consensus mechanism, SIPs have a series of properties that are not possible in traditional centralized financial markets:

Autonomous: They are governed by algorithmic rules, no need for institutions, lawyers, trustees or administrators.

Transparent: They are visible and auditable at all times.

Trustworthy: Interaction with them does not require trust because their algorithms are hard coded and stored on the blockchain.

Incorruptible: It is impossible to convince them to do anything other than what was instructed by the customer.

Resilient: There are no central points of control or failure, they may span long periods of time irrespective of financial crises, and will soon be recognized legally.

Fiduciary: They have no self interest, therefore they act solely for the benefit of the customer and his/her designated beneficiaries.

Confidential: Customer information is securely (and incorruptibly) protected.

Low cost: They pay for the low Ethereum network computational costs and may pay small fees for services like Etherplan.

How Does A SIP Work?

As described in the graph below, the generic process of a SIP consists of 6 steps and each one has a set of components and tasks that are performed by smart contracts on Ethereum.

Also, each process may require interaction with several outside entities including the customer and his/her beneficiaries.

Smart Investment Plan (SIP) Components And Tasks

 

Customer $: Is the first step and it consists of receiving and understanding the cutomer’s profile, instructions, and investment needs. Customers may send new instructions at any time to make changes. Since SIPs may be established by groups, a voting system may be set up to facilitate decision making.

Money in: Is the step where the SIP receives the funds in recurring payments or lump sums from the customer. There are inbound logistics to accommodate multiple account types and currencies. APIs with outside banks, brokers and exchanges are implemented.

Storage: Is where the money is invested. There are active or passive investment policies. The smart contracts monitor the financial markets, evaluate investments and managers, and make decisions based on customer parameters. To enter trades and receive information SIPs interact with banks, brokers, and exchanges as well as specialized information services and prediction markets.

Event: To trigger the payout schedules to customers or their designated beneficiaries, SIPs interact with smart oracles to “see” the real world, identify relevant events, and set the next step in motion.

Money out: In this step SIPs execute the payout schedules to customers or their beneficiaries. It is similar to the “money in” process, but implemented to send money out to multiple account types and currencies.

Beneficiary $: Finally, if the money is paid out to beneficiaries, they need to be tracked, contacted and identified. Once verified and made aware, if they weren’t before, of their benefits, they receive the money. The SIP, in this final stage, prospects the new potential customers and promotes the services of Etherplan.

Etherplan as a “SIP Factory”

Etherplan is a service that enables customers to build SIPs on Ethereum. Individual SIPs are build for each customer and customers may have several SIPs in their Etherplan accounts as needed.

For example a customer may want a savings plan to buy a house, a retirement plan, a college fund for his kid, and if he passes away he might want everything to be transferred to his wife and heirs. Everything can be implemented as SIPs and managed through Etherplan.

In this function Etherplan operates partly outside of Ethereum as an interface on the web and a dapp on Mist, the Ethereum browser.

Etherplan is a “SIP factory” because it generates the corresponding smart contracts and stores them on the Ethereum network.

Even if Etherplan disappears, all customer SIPs will prevail on Ethereum and continue to serve their customer and beneficiary needs.