A Solidity & Node.js challenge to recreate the legacy financial system on ethereum.
You will need to install the following tools:
After you have installed these tools, you can fork and clone the repository. I recommend creating a boilerplate hardhat project by following the instructions here.
The contracts should be written in Solidity with the Node.js part being done in either JavaScript or TypeScript.
The traditional banking system uses something called fractional reserve banking. Fractional reserve banking allows banks to issue credit with money that does not exist, but with a set reserve ratio e.g. 10%. For example, a bank could issue $100 worth of loans to somebody for every $10 they receive in deposits. This system creates the phenomenon of "bank runs", a situation where too many depositors try to withdraw at once, exposing the insolvency of the bank.
In this project we will recreate the system by allowing depositors to deposit their ETH in exchange for BETH (bank ETH), an ERC20 token representing their ETH deposit. Depositors are able to withdraw their deposit at anytime by redeeming the BETH token for ETH at a 1:1 ratio, provided that their is enough ETH in the contract to cover their deposit.
Borrowers are able to borrow BETH with the approval of the banker key. This banker key is able to issue BETH to a borrower provided it meets the reserve ratio requirement of 10% e.g. if there is 10 ETH deposited into the contract, the banker can loan out up to 100 BETH. Borrowers should have their debt balances stored in the contract and they should be able to repay the debt by sending ETH or BETH into the contract.
If too many BETH holders try to redeem their tokens for ETH, it will create a bank run whereby the holder will be unable to redeem their full balance of BETH for ETH.
Depositors should be rewarded for saving their ETH with the bank contract and borrowers should have to pay interest on their loans. Figuring out an efficient way to add interest to loans and deposits would be a great addition to the project.
Traditional banks often freeze their customers accounts, ostensibly for suspicious activity. We should be able to do that in the smart contract too.