Sikoba FAQ

Questions related to the presale

Will you issue a tradeable token?
Yes, following a successful presale we intend to issue an ECR20 token to presale participants, probably at the end of June or in early July 2017. It will be tradeable on CryptoDerivatives.Market and other ERC20 compatible Exchanges. This token will later be exchangeable into SKO tokens.

What exactly does a token represent? Is it a stake in the company, or is it something else?
The tokens will be used to pay for commissions on the Sikoba network. This will be similar to how ETH is used to pay on the Ethereum network. Therefore, this will not be a stake in the company. Sikoba (the company) will develop and “incubate” sikoba (the network) and then let it loose as an independent, decentralised, self-organising entity. The long-term value lies in the network much more than in the company.

General questions about the project

What’s your timeline?
To see a simple timeline, please go to the sikoba homepage, click on “about” and scroll down.

Competition

How is this different from Ripple?
When A pays C using its credit relation with B, this creates a chain of transactions/obligations A → B → C.
Sometimes this will be ‘final’: A pays something to B, B pays something to C (these need not be the exact same amounts, nor even currencies), and that’s it. A becomes completely detached from the B → C transaction, A → B → C has been split into two completely independent transactions A → B and B → C.
But sometimes there will be some ongoing fees resulting from the B → C transaction, for which A will need to compensate B on an ongoing basis - until the debt is repaid or the transaction is reversed via a clearing event. A remains attached to the B → C obligation. The Sikoba system must be able to keep track of such ‘non-final’ or ‘dependent’ transactions during their entire life-cycle.
Another feature of Sikoba is that an A → B → C chain of dependent obligations is not necessarily static. As the system state changes, it may be replaced automatically by another less ‘expensive’ chain of obligations, for example, A → D → E → C, which again may not be ‘final’.
From what we know, such features are not (or not yet?) available in Ripple.

How is this different from Trustlines?
(We do not know enough about the current status of the Trustlines project, so please do not consider this answer as definitive.) The Sikoba concept is indeed very similar to Trustlines. The main difference seems to be the complexity of the system. Sikoba is being designed to give users multiple options, for example if they allow other users to ‘ripple’ credit through them and what fees they charge. Ultimately, every credit relationship in Sikoba can be a complete ‘credit script’ - similar to a smart contract in Ethereuem. We are doing this to have the most generic system possible, which will also make is useful business users who actually have more complex requirements. The Trustlines network, in its current stage at least, appears to be more targeted at individuals.

How is Sikoba different than btcjam or other peer-to-peer lending platforms?
Sikoba is not a peer-to-peer lending platform! It is a peer-to-peer IOU platform, which allows payments to be made without having money (whether fiat, crypto or any other asset) to begin with. The way it works that you grant other users, whom you know personally, credit on certain terms which you yourself specify. These users can then pay you by drawing on that credit. Fiat, crypto or other assets can still be used for payment, for example if payment by IOU is not possible or not desired. Also, fiat or crypto may actually be required to repay debt. Both for practical and philosophical reasons, this is not intended to be, or ever become, a pure IOU system.

Technical questions

Is a mobile app planned?
Yes, especially as opening up the IOU economy to the unbanked is one of our goals - and these people will have smartphones and not computers or tablets. The mobile interface will not have all the features for precisely programming credit rules, but it should still have sufficient options to make it useful not only for individuals, but also for artisans and small business owners who need to carefully manage their credit relationships. But we’re also considering also is a dumbed-down version of the app that will be very basic and usable even for people who are not that used to smartphones. Linked to this will be the fact that we will also need some sort of KYC for these people, and they may not have passports or utility bills. So partnering with a company that does face recognition and voice authentication is part of the roadmap.

Will Sikoba use ETH as platform?
Sikoba will use a separate chain, mainly for performance and privacy reasons. We are however planning to use Ethereum as a notary system.

How do I know the system will not make an error?
Sikoba will be built on blockchain technology which provides a tamper proof digital ledger and accounting of transactions. All transactions are validated and verified. Once verified they become permanent and unalterable. The Sikoba nodes will be run by know and trusted parties, selected by the Sikoba users themselves, these groups or entities running these nodes will have incentives against cheating, for example via a goodwill deposit of assets. We may also require them to sign legally binding contracts ensuring that attempts to cheat could have legal consequences

The role of Sikoba in the financial system

Is your intent to replace the banking system?
The sikoba project is not some kind of crusade against banks, and it does not aim to replace banks. It is about bringing back credit to its rightful place in the financial system, alongside bank money.

Is this some kind of socio-economical experiment?
We would not necessarily call it an “experiment”, given that credit (in the classic meaning of the term) has been used in business since time immemorial, and continues to be used widely today - even though nowadays its use is somewhat eclipsed by the omnipresence of banking. When a company sends out an invoice to a client, a debt is created and a credit relationship exists until the day the client pays. In Germany, until a few decades ago, promissory notes (“Wechsel”) were still routinely used by businesses - until bank credit became more easily accessible. And all over the world we still find examples of business networks transacting with credit rather than bank money - even in Europe.

Practical questions about using the Sikoba system

How does the Sikoba system determine a user’s credit worthiness?
Sikoba users are strongly encouraged to grant credit lines only to users (individuals and companies) they know and trust personally. For that reason, we have made the choice to not measure credit worthiness as such, because it might encourage some Sikoba users to give credit lines to users whom they do not actually know, just because of their credit rating. This would go against the Sikoba philosophy - although we will of course have no way of controlling actual user behaviour.
That said, Sikoba will flag users who do not discharge their obligations, and we may introduce a simple rating system based purely on the credit lines a user is given by other users - which reflect the combined trust of other users.
Remember that in the Sikoba system, a user will only ever have exposures to users to whom he or she has explicitly given credit. To give an example: if Bob trusts Alice, and Charles trusts Bob, and Bob allows what we call “credit conversion” for Alice, then Alice can pay Charles. However, Charles will only see Bob as his counterparty, and not Alice.

Do I need to have a bank account or cash to get started?
No, you do not need a bank account. You can simply join the network, find other users whom you know or already do business with, and start accepting their credit. You can also contact them and ask them to accept your credit. And if you own crypto-assets, you will be able to use them in the Sikoba system. This will give you access to most of the functionalities of the system.
However, some functions will be available only to users who have gone through Sikoba’s KYC process. These users will be able to interact with banks in the system, which will allow them to use additional functionalities which will be almost like having a normal bank account.

What are the tax and accounting impacts of borrowing/lending on Sikoba?
Sikoba is just a platform for making payments using IOUs, it is up to the users to manage their tax and accounting. This should be compared to the way the banking system works, where banks hold funds and make payments on behalf of customers without being involved in tax and accounting issues.

What currencies are supported?
We will support the world’s major currencies such as USD, EUR, CNY, JPY, GBP. Crypto-currencies (e.g. bitcoin) as well as commodities will also be supported. In addition, groups of users can create their own currencies.

Will there be fees are associated with using Sikoba?
Yes, there will be fees which will mainly serve to remunerate the members of the Sikoba Federation who run the Sikoba nodes. These fees will be paid using Sikoba tokens that will be native to the Sikoba system.
Note that each user will be able to have a small overdraft in his Sikoba token account. That way, new users can start transacting even without having bought any tokens.

What about fee levels?
In most cases, we expect Sikoba fees to be extremely low compared to bank fees.
However, you need to remember that credit conditions between users may be ruled by “credit scripts” of almost arbitrary complexity, and a payment may involve a chain of such credit relationships. Fees will need to reflect that. This will be similar to gas costs in Ethereum, where transactions involving complex smart contracts cost more gas than those with simple smart contracts.
Finally, some transactions will require interfacing with the financial system, such as foreign exchange operations or withdrawals of fiat to a bank account. These transactions will incur fees at levels similar to the ones that a competitive bank or forex broker would charge.

Why would a bank want to join the Sikoba platform?
There will likely be a demand for fiat money from Sikoba users, in particular to settle outstanding IOUs inside the Sikoba system rather than outside. We therefore aim to have banks and/or payment service providers join the Sikoba system to provide an interface to the world’s financial system. Although there will be obvious regulatory hurdles to overcome, we hope that the opportunity to earn fees on fiat deposits and withdrawals, and on forex, will provide a sufficient incentive.

What happens if a user cannot repay a debt?
Users will have to deal with with defaults outside of the Sikoba system, although Sikoba will flag users who do not meet their obligations. The advantage of using Sikoba is that creditors will have strong proof that an obligation exists.