Accessible and fair lending markets are essential for an economy to work for everyone. Unfortunately, lending markets are riddled with issues of asymmetric information, imperfect competition, and systemic bias making it hard for small businesses, the unbanked, and those who are already marginalized or economically disadvantaged to obtain capital; which leads to increased income inequality.

These systemic and long-standing problems in lending markets have been exacerbated by the unprecedented slowdown created by Covid-19. Small businesses everywhere have been shutdown and are threatened as lending markets are not able to provide the liquidity needed to survive the crisis. Government assistance has been slow, uncertain, and inadequate. In response, many communities and businesses are creating new systems to help ride out the storm: e.g., towns and businesses are issuing their own scrip and companies are offering discounted gift cards that can be redeemed in the future. These systems face significant challenges including information hiding, liquidity, fraud, problems with valuation, and acceptance.

Building on Local Trust (BoLT) is a universal solution that generalizes the existing ad hoc proposals and eliminates the problems of asymmetric information, imperfect competition, and systemic bias. BoLT is a bottom-up, community-based system that uses a public ledger to create a transparent and universally accessible system where businesses can raise money by selling claims to their future goods and services ata discount. Furthermore, the claims are immediately tradeable and can function as a medium of exchange within the community.

24 pages

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