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.
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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.
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.
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.