Pluto Loans allows users to spend their future yield today.
With Pluto Loans, users can deposit yield-producing collateral and get a loan of their future yield immediately. No liquidation risks. The loan debt is time-based and self-repaying. While the long term objective for Pluto Loans is to be global, the initial rollout will be focussed in Argentina, and with plans to quickly expand to the rest of LATAM.
While the concept of self-repaying loans exists in other chains such as https://alchemix.fi, the fees charged by the ETH network make it prohibitive for the average Argentinian to make use of. Thanks to Stellar’s low network fees and broad network of Anchors, we are able to bring financial inclusion to the personal loans space to every Argentinian.
 https://home.anclap.com/, https://anchors.stablex.org/
The Problem: In depth
To fully understand the potential of Pluto Loans, it is important to take a look at the unique economic situation of Argentina; The Nobel prize-winning economist Simon Kuznets is said to have remarked that there were four types of countries: the developed, the underdeveloped, Japan, and Argentina. .
Argentina has one of the highest inflation rates in the world. On an annual basis, consumer prices soared 55.1 percent, the fastest annual rise since June of 2019, quickening from a 52.3 percent surge and beating market forecasts of 53.8 percent. 
This inflation chart comes hand in hand with the depreciation of the Argentinian Peso, a currency that has suffered a massive devaluation in the past few years, going from requiring ARS 4.42 to buy USD 1 in May 2012, to requiring 115.32 to buy 1 USD as of April 2022 
The unique positioning of Pluto Loans in the Argentinian market could not be completely explained without also mentioning the ban on purchasing foreign currency that was reinstated in Argentina on September 1st, 2019  which has created a parallel market which is often used as a reference for the “true price” of the USD, currently with a ~100% gap with the official exchange rate . This has made Argentinians seek to hold their savings in crypto stablecoins, especially USD-pegged ones,  which can be legally bought and traded in the country.
The core concept presented by Pluto Loans is simple: A user takes out a loan by locking away yUSDC which is a yield-generating asset, with an estimated yield of 9% at the time of writing  and 50% of the locked amount is loaned out in the form of pUSD (therefore, pUSD is backed by the future yield of yUSDC). After the yield produced by the collateral has covered the loan amount, a user can get back their initial investment and keep their loaned amount.
In order to illustrate the basic operation behind Pluto Loans, let’s consider a user who wants to take out a loan. They would deposit 100 yUSDC into Pluto Loans’ platform which would be securely locked away and start generating a daily interest thanks to yUSDC’s mechanics, and immediately get 50 pUSDC disbursed to their account. This happens atomically in one single transaction.
The user is free to spend those 50 pUSD how they see fit, perhaps exchanging it to other stellar assets such as BTC or ETH because they believe the price might go up.
After ~4.5 years, the original 100 yUSDC has generated 50 yUSDC in interest @ 9% APY; At this point, the owner of the loan can simply withdraw the original 100 yUSDC and keep the 50 pUSD, which are now backed by 50 yUSDC still locked in Pluto Loans’ account.
Note: Pluto Loans generates revenue by keeping 10% of the APY generated from loans, which is omitted from the calculations and diagrams to keep things simple. In the above scenario, the 100 yUSDC would take ~4.87 years to generate 55 yUSDC to pay for the 50 pUSD loaned out and the 5 yUSDC service fee to Pluto Loans.
Extra repayments, pegging mechanism and rewards
While the title seems to have disjoint topics presented, this section will explain how they are interconnected.
The Pluto Loans system allows users to pay back their loan debt at any time, with no repayment or cancellation penalty. Consider the case of our user who took out a 50 pUSD loan and locked away 100 yUSDC. If they were to regret their decision and pay back the debt immediately (50 pUSD not considering Pluto Loans’ service fee), they would pay back the 50 pUSD which would in turn be burnt (as they are no longer backed by future yield of yUSDC) and the 100 yUSDC would be sent back to the user.
An important aspect of the burn mechanism is that Pluto Loans accepts pUSD always at a 1:1 rate, regardless of market price, this incentivizes borrowers to buy more pUSD when the price is low, helping to maintain a 1:1 ratio. Let’s see an example.
Pluto Loans considers yUSDC, USDC and USDT as valid USD assets, and any of them can be used to repay a loan at a 1:1 rate, regardless of market price, and they may choose to use any of these assets to make repayments or cancel a loan, which has a in interesting consequence for the Pluto Loans ecosystem.
When a user makes an early repayment in pUSD, these are burnt since they are no longer backed by the underlying asset. However, when repayments are made in USDC, yUSDC or USDT, there is no need to burn these assets since their value has a different pegging mechanism. When this happens, these funds are exchanged to yUSDC and since they don’t belong to any loan, they start creating “Shared Yield”, which is distributed proportionally based on the weight of each loan, which effectively means that the yield of Pluto Loans is always higher than the yield of yUSDC alone.
Because the yield is higher than simply keeping yUSDC, some users may choose to keep their funds locked in Pluto Loans vault even if their loan has already been paid out in order to keep generating interest. This is also possible and encouraged, as a small 0.5% fee is charged and added to the “Shared Yield”.
Other pegging mechanisms include rewarding those users who provide liquidity to pUSD and other valid USD pegged assets.
Finally, recalling the original scenario when a roach has reached its maturity and it has been self-repaid, “... the owner of the loan can simply withdraw the original 100 yUSDC and keep the 50 pUSD, which are now backed by 50 yUSDC still locked in Pluto Loans’ account.” Those 50 yUSDC are also now generating “Shared Yield”, further helping to auto-pay down loans faster.
While Stellar has created Turrets, a clever smart contract protocol for stellar , they have lost momentum due to the recent announcement of native Smart Contracts ; Pluto has decided not to pursue an implementation using Turrets but rather build its software in a way where the server-based approach can be replaced by smart contracts once they become available. Two models are being considered at the moment, one which is purely CEFI (Pluto must be trusted as an entity), and another one which is semi-CEFI (trust is still required, but it guarantees that the funds will not be spent by Pluto).
The technical design for the full-CEFI solution is as follows:
From a storage perspective, Pluto Loans does not use a centralised database and instead relies on account balances stored on-chain. This design puts the system in a good place to be migrated to smart contracts later on.
When a user takes out a loan, they send the money to a Pluto Loans account, and in exchange they receive tokens that represent their loan status; the reason for this approach is that
By using the AUTHORIZE  flag on the assets sent to the user we can guarantee the assets are immovable and the user cannot transfer, delete or otherwise alter their loan data.
A common authorization pattern looks as follows:
Operation 1: Issuer uses SetTrustLineFlags to fully authorize account A, asset pUSDDEBT
Operation 2: Payment of pUSDDEBT from Pluto Loans to A
Operation 3: Issuer uses SetTrustLineFlags to set account A, asset pUSDDEBT to AUTHORIZED_TO_MAINTAIN_LIABILITIES_FLAG state (effectively freezing the asset)
The list of immovable assets we use are:
When the loan has been repaid in full, either because of an early repayment or because the loan has been self-repaid, the borrower can ask Pluto Loans to get back their collateral which will then unfreeze the Pluto Loan assets and burn them, and give the user back their collateral.
The technical design for the semi-CEFI solution is similar to the above, but with the following twist:
Instead of one central vault, each loan will have it’s own vault (account) of which Pluto and the user will carry 50% each of the required weight to perform any operation. This guarantees that Pluto cannot move the funds without the users’ consent, and also that the user cannot withdraw the collateral without Pluto’s consent.
Due to Ultrastellar’s innovative model, yUSDC is paid daily into this vault; the loan gets repaid over time automatically. It is innovative because generally in dApps the interaction is initiated by users (e.g. “Claim reward”).
This approach has the benefit of clear accounting, but it requires managing multiple vaults which has some drawbacks:
Pluto has so far implemented the fully-CEFI approach but will be seeking community feedback regarding the semi-CEFI approach.
Is Pluto a DAO? Not yet, but we want to be, and we are working very hard to achieve it. In order to show our commitment to the full decentralization of our project, Pluto has open sourced its governance projects which will provide the on-chain voting mechanism that the DAO will be built on top of:
The Pluto team has been hard at work developing the governance module which is open source and publicly available. The Pluto Loans is in the final stages of development, with the MVP for the API complete, and actively developing the UI to do a soft launch (closed beta) by August, and a full launch in December.
By end of June 2022 users will be able to do the following on the testnet:
Pluto aims to launch its new Pluto Loans platform in production in the next 6 months and capture USD 1,000,000 TVL in the following 12 months.
In order to get there, Pluto is doing or planning to do the following:
PROBLEM & SOLUTION
Pluto Loans aims to improve the financial inclusion of Argentinians to the loans sector. With an inflation rate of over 50% and a ban on the purchase of foreign currency, their only option is to get loans with an interest rate which surpasses 75% p.a.
Pluto Loans offers a unique solution to the Argentinian market:
How do you use Stellar in your solution?
Stellar is at the very core of our solution. It’s the network's low fees and far-reaching network of Anchors that makes it possible for Argentinians to take their pesos and get US Dollars (in the form of yUSDC for our project needs); Pluto Loans leverages ultrastellar’s yUSDC to create the self-repaying concept, and in turn, creates pUSD, a USD pegged asset emitted on the Stellar network, backed 1:1 with yUSDC.
Pluto Loans targets markets that are in need of financial inclusion. In the Latin American region, cryptocurrencies are an instrument of financial inclusion due to its lower-cost way of transferring funds. Nearly ~50% of people are unbanked, according to The World Bank .
Considering all crypto assets, the total value of the market surpassed USD 2 trillion as of September 2021 which represented a 10-fold increase since early 2020. This growing ecosystem has been driven by emerging countries, especially from Latin America.
A research from Statista shows that If we look at the percentage of users or owners of cryptocurrencies in each country, we will see that Argentina (21%), Colombia (15%), Chile (14%), Peru (13%) and Brazil (13%) have a greater crypto adoption compared to powerful economies such as the US (10%), Russia (8%), China (7%), Germany (7%) and Japan (4%). 
Our initial target market is Argentina; The economic conditions that the country goes through makes it fertile ground for a project such as Pluto Loans to thrive. This is a market we know well: every member of the team is either Argentinian or lives in Argentina. Argentina is ranked #10 worldwide for cryptocurrency adoption  and #1 in Latin America 
The Washington Post published an article titled “Worried about inflation? In Argentina, it's a way of life” ; this is a problem that permeates every Argentinian home. Very high inflation rates trigger two things:
The crypto landscape at the moment makes it increasingly difficult to discern between legitimate and rug-pull projects, furthermore: most of the DeFi projects exist in a globalized world, which also doesn’t help a country where 15% speak English at a basic level and only 1% speak it at a reasonably fluent level . By delivering a highly localized message, Pluto Loans will be able to tap into a ~17.7 million customer base out of ~46 million total population when taking into consideration the working force (~64%) that is above the poverty line (~40% of Argentinians are poor, making them unlikely to be able to take out a loan due to having no disposable income) 
In terms of the desirability of Argentinians to preserve value in USD-pegged sablecoins, “... According to a report by economic daily El Economista, Argentines hold some US$130 billion within the financial system — estimated to represent about eight percent of the actual physical stock of dollars in the world — and another US$175 billion “under the mattress,” as Argentinians like to say.” . That combined $305 billion market is what Pluto Loans wants to start capturing.
Pluto Loans has a simple revenue model: The service fee is 10% of the APY generated by the locked in collateral. In our previous example, a 50 pUSD loan (100 yUSDC locked) would give Pluto Loans 5 yUSDC at loan maturity (or when the loan is paid off in advance).
With our targets of 100,00 and 1,000,000 loan books, would generate 500 and 5000 in income respectively for Pluto Loans at loan maturity, however: If loans are repaid in advance in an asset other than pUSD (which gets burnt), those assets are changed into yUSDC to generate more shared revenue, of which Pluto Loans also gets 10%.
Considering no other source of income for simplicity sake, in the next 2 years, Pluto Loans needs ~10,000,000 TVL in order to be profitable, which we believe is achievable considering Alchemix has USD 698,841,000 TVL, meaning Pluto Loans only needs to achieve ~1.43% in comparison, in order to succeed. Kinetic, a relatively new protocol on Terra has raised $71.40M since it’s inception, meaning Pluto Loans only needs ~14% in comparison.
THREATS AND OPPORTUNITIES
Alchemix.fi, pioneers in this area. (Ethereum) . They have already translated their website to multiple languages, including Spanish. While we don’t foresee this to be an immediate issue due to the high gas fees of the Ethereum network which makes it inaccessible for most Argentinians, they are certainly by far the strongest player in this market.
MARKETING AND SALES
We will minimize our marketing budget by tapping into existing communities, and creating our own. Our initial marketing strategy will aim towards freelance developers in Argentina. According to a Workana report (a freelance work marketplace) 
Pluto Loans aims to reach a TVL of USD 1,000,000, or 4,000 users @ USD 250 each on average; This represents only 1% of the aforementioned ~420,000 freelance developers in Argentina (and 0.022 of the ~17,700m workforce in Argentina). Finally, in order to bring more awareness in the region to the Stellar network, and therefore increasing our market share, we are developing haciendostellar.com which collates Stellar news and translates them into Spanish, as well as generating its own content.
The project fits in the Medium project scope, < USD $50,000 bracket.
The current team is composed of a general manager/co-founder, a product manager/co-founder, a part-time lead engineer/technical co-founder, a senior UX designer, 5 full-time developers, a marketing strategist, a community manager & translator and a financial analyst.
We seek this funding to maintain our current product team developing pluto loans for another 6 months, and to add one full time senior software engineer.
TOTAL (USD/6mo): 48,480
General Manager / Operations
18+ years working in digital projects in Argentina, México, Uruguay and Spain. Being part of and managing multidisciplinary teams (marketing, tech, administration, finance, etc). Fulfilling different roles, both technical (analyst, solutions architect) or commercial (account executive, project manager), as well as performing the role of “Cebador de mates” (mate brewer).
Over the past few years, I have doubled-down in the development of tech businesses, I have successfully launched www.smarttrack.com.ar; www.smart-bus.com.ar as well as being a partner of www.fanplayr.com.
In 2021 I have co-founded Pluto, putting the team together and designing tech products for the stellar network that aim to help people gain financial independence. Over 15 years of experience managing virtual teams in Argentina and Latam, supporting the team in the development of products and experiences that generate value for clients and organizations. Vast experience in planning and execution of technology projects and digital transformation processes for companies in the Finance and Retail industries. My strong points are team work, innovation, negotiation and very adaptable to change.
Fabricio Leonardo Sodano
Lead Software Engineer
15+ years of experience in Software Engineering, including managing teams of 100+ around the globe across Product Engineering, QA, Platforms, Mobile, Data and Security, with experience managing multi million dollar tech budgets, currently working in the FinTech industry. Founder of argentinaprograma.com, a free online course for people in Argentina with an active community of ~5k+ students who regularly connect with each other on Slack, where I also run small paid internships for students to be able to get their first job in the industry.
Regarding my experience with Stellar:
Federico Perez Jacomet
Viktor Agustín Luzny
Ana María Rodriguez Rivera
The USD valuation of the budget request in XLM will be calculated using the CF Stellar Lumens-Dollar Settlement Price on December 5, 2022 as administered, maintained, and reported by the cryptocurrency index provider CF Benchmarks Ltd. (using the ticker “XLMUSD_RR”) (available at https://www.cfbenchmarks.com/indices/XLMUSD_RR). Learn more in the SCF Handbook.
*The USD valuation of the award in XLM is calculated using the CF Stellar Lumens-Dollar Settlement Price on July 5th as administered, maintained, and reported by the cryptocurrency index provider CF Benchmarks Ltd. (using the ticker “XLMUSD_RR”) (available at https://www.cfbenchmarks.com/indices/XLMUSD_RR)
**The USD valuation of the award in XLM is calculated using the CF Stellar Lumens-Dollar Settlement Price on December 16, 2021 as administered, maintained, and reported by the cryptocurrency index provider CF Benchmarks Ltd. (using the ticker “XLMUSD_RR”) (available at https://www.cfbenchmarks.com/indices/XLMUSD_RR)
*The USD valuation of the award in XLM is calculated using the CF Stellar Lumens-Dollar Settlement Price on September 27, 2021 as administered, maintained, and reported by the cryptocurrency index provider CF Benchmarks Ltd. (using the ticker “XLMUSD_RR”) (available at https://www.cfbenchmarks.com/indices/XLMUSD_RR)
* The USD valuation of the award in XLM is calculated using the CF Stellar Lumens-Dollar Settlement Price on the date of transfer as administered, maintained, and reported by the cryptocurrency index provider CF Benchmarks Ltd. (using the ticker “XLMUSD_RR”) (available at https://www.cfbenchmarks.com/indices/XLMUSD_RR)
*This budget request has not been fully awarded to the project. The USD valuation of the budget request in XLM will be calculated using the CF Stellar Lumens-Dollar Settlement Price on day of payment as administered, maintained, and reported by the cryptocurrency index provider CF Benchmarks Ltd. (using the ticker “XLMUSD_RR”) (available at https://www.cfbenchmarks.com/indices/XLMUSD_RR). Learn more in the SCF Handbook.