Key features of the Spigot
A Spigot's purpose is to provide Trustless Recourse for Secured Agreements
Whilst the first usage of the Spigot is to provide security for Secured Lines of Credit, later products will be built around it for requirements like selling off collateral or securitising revenue.
A Spigot is automatically deployed with a Secured Line of Credit. Please refer to Revenue-Based Financing for an overview of the features that the Spigot enables.
The Spigot Owner has direct control over Revenue Contracts.
The Operator, the obliging party generating the revenue, cannot change where the revenue streams go.
A common attack vector is to divert revenue from contracts that are streaming revenue using apps that were not designed to treat these contracts as collateral.
Although its 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.
The Spigot captures a fixed percentage of Revenue Tokens from a Revenue Contract under its control and escrows it for the Owner.
The percentage split of revenue (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.
In the event that the Operator (the obliging party) defaults on an agreement, the Owner role can be transferred to 3rd party arbitration or permanently to the 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 product 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 Developer section.