Whilst the first usage of the Spigot is to provide security for Lines of Credit, later products will be built around it for things like selling off collateral or securitizing future revenue.
A Spigot is automatically deployed with a Secured Line of Credit in order to capture cash flows from Borrower Revenue Contracts to secure and repay Credit Lines. Please refer to for an overview of the features that the Spigot enables.
The rest of this section focuses on the Spigot more generally.
Ownership
The Spigot Owner is a party that is owed 'something'.
It has direct control over Revenue Contracts belong the the party that owes (the 'obliging party', which we will call the Operator here).
The Operator, the obliging party that owes the 'something' and is generating the revenue, cannot change where the cash flow streams go.
The Owner will receive a share of these cash flow according to an agreed 'split'.
An attack vector could be for the Operator to divert revenue away from being received by the Revenue Contracts. This is unavoidable but mitigated largely by eligibility criteria and B2B due diligence processes.
Value Capture
The Spigot captures a fixed percentage of cash flows from a Revenue Contract under its control and escrows it for the Owner.
The percentage split of the cash flows ('Owner Split') is based on rules and events defined by the parties at the outset. For example, the parties can agree to escrow more or less revenue when a defined trigger event occurs.
Value Transmission
Value escrowed for the Owner is available to be withdrawn on demand.
An example of value transmission is the paying back of interest and principal, or payments related any other additional conditions agreed between the parties from the outset of the agreement.
Permissions
Although a Revenue Contract is collateralized and controlled by a Spigot, the Operator (the obliging party) can still manage its products/protocol.
It can use whatever functions it needs to ensure that revenue can still be generated and business can carry on as usual.
We call these permitted functions the 'whitelisted' functions.
Programmatic Recourse
In the event that the Operator (the obliging party) defaults on an agreement, in addition to a first possibility that 100% of the value accruing to Revenue Contracts flows to the Owner, the Owner role can also be transferred to 3rd party arbitration or permanently to other beneficiary parties.
If the agreement is a Secured Line of Credit for example, this can result in the full amount of value of a Revenue Contract being transferred from a Borrower to Lenders until the Line is repaid.
If you want to use the Spigot independently or develop a custom lending products or smart contract integrating a Spigot then please contact us to discuss. An overview of the Spigot's external functions and methods is available in the documentation.
