A Blockchain Mutual Fund by xHumanity

A Blockchain Mutual Fund by xHumanity​

Mutual funds are savings vehicles that allow you to pool your savings with many other investors, sharing the risk and cost of your investment. Laying the groundwork for this on the blockchain will provide a much more secure, transparent, and efficient operating model to meet the challenges of the future. Let’s take a look at what the social economy is and how blockchain-based operations can help create a more successful mutual fund.

What is a mutual fund?

The idea behind a mutual fund is that it’s a type of financial instrument that collects money from many investors to invest it in securities such as stocks, bonds, money market instruments, and other assets. Managers of mutual funds allocate the fund’s assets and seek to maximize capital gains and income for investors. Transparent investment objectives are set and implemented in the portfolio and are frequently assessed during operation.

Investing in mutual funds offers retail and individual investors the opportunity to invest in professionally managed securities. Therefore, each shareholder shares the profits and losses of the fund proportionately. Generally, a mutual fund’s performance can be determined by the change in its total market capitalization, which is derived from the results of its underlying investments.

How does the social economy improve this concept?

Various enterprises and organizations make up the social economy, including cooperatives, mutuals, foundations, and associations. It is an economy based on organizations, without a type of shareholder structure, and composed of only the organization’s members. A member of the organization is also a beneficiary of the goods or services offered.

The game-changing social economy principles are:

  • Rather than increasing profits only, individual and social goals are given priority.
  • Solidarity and collective responsibility play key roles in setting goals.
  • The convergence of associate members’ interests and the interests of the community as a whole.
  • Activities are controlled by the members democratically.
  • Forms of an organization such as partnerships in social economies are voluntary and free.
  •  A large part of the profits is a contribution to the community or the members’ non-patrimonial interests.

Use case

A credit union is a great use case for xHumanity’s social economy-based model. Let’s see how it works:
By contributing regularly, the members establish an association fund. Another way to establish the fund is to borrow from other mutual associations with similar goals. Funds are mutual assets that cannot be individually claimed.

Members are accepted after receiving a trust score in the xHumanity application based on several factors, including their social media activity. A pool of members’ funds is created on the Ethereum blockchain. Each member contributes a sum of tokens to provide liquidity to this pool.

A credit union is governed either through direct participation, according to the democratic principle, or by a scheme of representatives elected to an elected board of directors. Each voter’s vote will be weighted according to their level of trust. An xHumanity team member and the elected representatives will oversee the fund’s operations.

The main purpose is not profit, so the surplus is reinvested based on governance principles into social equity and exclusively humanitarian domains. Members’ contributions will be protected by the association.
xHumanity’s blockchain platform provides a great foundation to create mutual funds and credit unions due to its independence, firm governing, high transparency, and social values.