Use case discussion: PAYGO DeFi in Secret Contracts

I would like to have some feedback about a potential use case for the secret network.

In the last years Pay As You Go technologies became very successful for companies (especially off-grid solar) who sell physical assets to unbanked people (mainly in Africa) on installments. The concept is that the asset is only unlocked - either via Keypad or GSM/IoT - when the customer does an (electronic) payment - mostly via Mobile Money. So the asset is only usable when the customer pays the installments. Biggest use cases are solar home systems, water pumps and smart phones. Volume is around 1Bn yearly with 20-30% increase per year.

This reduces the default risk as the customer has little incentive to not repay the asset and the collection costs are very low.

One existing issue is that the financing for PAYGO companies is provided by traditional finance and due to the (unbanked) customers high risk profile the interest rates are very high and funding is difficult.

Here comes DeFI with the opportunity to directly connect the PAYGO customers with retail investors.

Concept idea:

  1. Each PAYGO device belongs to a specific secret key that is needed to create valid unlock codes
  2. A secret contract contains this specific key (or is linked to it)
  3. When a customer does a mobile money payment - the corresponding amount of SCRT is forwarded to the contract and a valid token is generated (e.g. 1 SCRT => 2 days of unlock)
  4. Only one specific contract is able to unlock a specific device
  5. The contract also contains the nominal value of the underlying asset sale (how much the customer has to pay until the device unlocks forever) - this is the maximum amount of money the contract is worth
  6. Each payment to the contract updates the remaining balance of receivables and thereby defines the residual value of the contract

This would lead to the effect that the contracts are related to real world assets and repayment plans with the specialty that: only a particular contract can create valid unlock codes for this device which makes it valuable in itself.

This concept can not be implemented (at least to my limited understanding) with a public chain as Ethereum as the secret key for the device needs to be kept secret to make sure only the specific contract is capable of creating the correct codes. A combination of public / private side chains could work but seems very complex.

Do you think this use case could be interesting for secret? If yes - how could that be designed? If no -are there better solutions around to implement it?

I really would like to work on this as I am passionate about bringing financing to unbanked people (800 Million in Africa alone) to improve their lifes and thrive their businesses.

Looking forward to hear your thoughts and I am happy to give more background (I have a 9 years background in PAYGO Software)


This is an amazing use case for Secret Contracts!
All the functionality you require already exists on mainnet.

In terms of design, I might not get the question, but It seems to me that you can implement payment processing and secret keys storage with a Secret Contract.



Do you need a key to activate these devices?

Let’s focus on Solar - would the idea be, if customer pays, she is given a key. She can then use this key in the PAYGO operators (company) website (product) to unlock a given solar panel? If this is the case, YES we can use secret contracts to release a code when a payment takes place. That code then somehow be used to activate the device (probably on PAYGO company’s app). This is where some industry background is helpful - there will need to be a bridge between on-chain data + device controller (PAYGO company).

The above solves Pay as you go and access part. I feel like we are replacing the mobile payment + panel activation part.

How do we exactly solve the financing problem PAYGO companies? Seems like they have upfront cost of acquiring the devices. Is the idea retail defi investors become owners in the paygo companies and share profits?


Hi @can ,

the devices have an immutable individual secret key flashed into their firmware. Unlock-Codes are then generated by a server who knows this specific secret key through an algorithm.

If the customer pays (e.g. 2000 TSh => 1 USD) she receives a keycode (around 12 digits) by SMS or USSD which can be physically entered into the device itself (keypad) or is transferred via GSM to the device automatically. This keycode unlocks the device for a defined period of time.

Where I see DeFi potentially coming in is the following:
Normally the companies borrow money or raise equity to pre-finance the devices and use the customer payments to grow / pay back the debt over one to four years.
Either debt as well as equity is difficult to obtain expensive as the customers are poor people mostly in Sub-Sahara Africa without any banking track record and the PAYGO companies are mostly very young.

What I would like to achieve is to assetize the repayment claim towards the end-customer through a secret contract (which is the only entity that can create valid keycodes due to the shared secret key with an individual device) and offer this contract for purchase. The PAYGO company would get the sales price - a discounted upfront value - directly and therefore need less financing to grow.

The investor into the contract would receive all payments out of the contract but has to bear the default risk of the particular customer. As no one else than the particular contract can generate valid codes that even works agains the will of the original PAYGO company who sold the device to the customer. Interest rate of the investment would be around 8-15% p.a. in USD.

While the customer pays off the price for the device the remaining repayment expectation of the contract reduces and therefore the contract itself loses value. With the final payment the contract generates the indefinite unlock code and the customer owns the device fully while the contract renders worthless.

Alternatively contracts could be bundled and risk could be shared across these. Or ownership in the PAYGO companies could be an option although I think that increases complexity and risk too much.

Does that help a bit to give insight into the industry and my thoughts?


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