FactorFi

A DeFi protocol that turns unpaid invoices into NFTs, letting investors fund them instantly in USDC on Ethereum.

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Inspiration

Over 63 million MSMEs in India alone have more than ₹10 Lakh Crore locked in unpaid B2B invoices at any given time. When a small supplier delivers goods to a corporate giant, they're forced into Net-90 day payment terms — and traditional banks reject 80% of their loan applications. Legacy factoring companies charge predatory 15%+ fees with mountains of paperwork.

I asked myself: what if an MSME could tokenise a verified invoice and receive funding from a global investor in under 60 seconds — with no bank, no middleman, and no paperwork?

That's FactorFi.

What it does

FactorFi is a decentralised invoice factoring protocol that bridges Web2 financial truth with Web3 liquidity:

  1. Sellers verify a real Stripe invoice and mint it as an ERC-721 NFT on Ethereum
  2. Investors browse a marketplace of verified invoices and fund them at a seller-controlled discount in USDC
  3. Buyers repay the face value into a trustless smart contract escrow
  4. Investors claim their yield after repayment — all on-chain, all verifiable

The protocol charges a transparent 1% fee (hardcoded in the smart contract), and the seller controls their own discount rate via a slider (2-15%).

How I built it

Frontend: React 19 + TypeScript + Tailwind CSS v4 + Ethers.js v6, deployed on Vercel.

Backend: A Node.js/Express proxy server (deployed on Railway) that handles all sensitive API calls server-side. The frontend never touches a single secret key.

Smart Contract: InvoiceEscrow.sol — built with Solidity ^0.8.20, OpenZeppelin (ERC721URIStorage, SafeERC20, ReentrancyGuard), deployed on Ethereum Sepolia Testnet.

Integrations:

  • Stripe API — Server-side invoice verification (checks existence, ownership, and open status)
  • Pinata — IPFS pinning for immutable NFT metadata
  • Resend — Automated email notifications to buyers when their invoice is funded

Challenges I ran into

  • The Oracle Problem: How do you verify that a real-world invoice exists without trusting the seller? I solved this for V1 by building a direct Stripe API bridge — the backend verifies the invoice is real and unpaid before allowing tokenisation.

  • Double-Financing Prevention: A malicious seller could try to mint the same invoice twice. I solved this by hashing the Web2 invoice ID on-chain in a processedInvoices mapping — the smart contract mathematically prevents duplicate minting.

  • RPC Performance: Naively fetching invoices with unbounded loops took 15+ seconds. I implemented a getNextTokenId() getter in the contract and used Promise.all() on the frontend, dropping load times to under 1 second.

  • Security without Complexity: I needed to keep Stripe/Pinata keys hidden from the client without overengineering the architecture. The Express proxy pattern gave me bank-grade key isolation with minimal overhead.

Accomplishments that I'm proud of

  • End-to-end working protocol — Not a mockup. Every transaction (mint, fund, repay, claim) executes on a live Ethereum testnet smart contract.
  • Trustless two-step escrow — Buyers repay into the contract, investors claim separately. No party has to trust the other.
  • Zero secret key exposure — The entire Stripe/Pinata/Resend integration runs through a secured backend proxy. The React frontend never sees a single API key.
  • Sub-second marketplace loading — Bounded RPC fetching with Promise.all() brought page load from 15s down to under 1s.
  • Anti-fraud by default — Double-financing is impossible at the smart contract level, not just the UI level.

What I learned

  • How to architect a full-stack Web3 application with proper separation of concerns
  • The real-world challenges of RWA (Real World Asset) tokenisation — especially around fraud prevention and oracle design
  • How to build a trustless two-step escrow mechanism (repay → claim) that eliminates counterparty risk
  • The importance of bounded on-chain data fetching for frontend performance

What's next for FactorFi

  • Chainlink Oracle Integration — Automate the repayment step by listening to bank webhooks
  • GSTN API — Verify invoices against India's government tax portal for zero-fraud origination
  • The Graph — Replace RPC loops with indexed GraphQL queries
  • UUPS Proxy — Make the contract upgradeable for production deployment

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