Carolina Cloud pays SOFR on unused prepaid credits

Carolina Cloud pays SOFR on unused prepaid credits(docs.carolinacloud.io)

37 points by bojangleslover 3 hours ago | 26 comments

badatnames 1 hour ago |

I've looked at doing this in Europe before, interest-bearing completely changes the classification of the prepayment. I didn't dig too deeply, but the general gist was that regulation-wise it really wasn't worth doing for a relatively gimmick-level feature

mynegation 27 minutes ago | |

I think that is why Carolina Cloud pays the interest in credits (redeemable for their services), as opposed to cash. It is not much different how some business give you a discount if you pay the amount upfront or in a more convenient form of payment.

dannyw 17 minutes ago | | |

At scale, a decent number of commercial/business agreements have Net Discount provisions (or provisions to that effect); basically get a % discount if you pay within X days; or pay the full amount with no discount in Y days, so the general arrangement is far from unorthodox.

Opening it up to everyone is nice.

bko 1 hour ago | |

I've heard about similar regulatory barriers especially in finance so this does not surprise me.

A long time ago I remember reading about banks that want to provide incentives for saving that amount to basically lottery tickets. The idea is that people aren't thrilled about a savings account that pays 2%, but if instead they offered a monthly 1 in 50 chance to get 100% return (same expected value, ignore compounding), people would like that a lot more. But this amounted to essentially a lottery and that's a state monopoly.

dmurray 1 hour ago | | |

Ireland, like the UK, has a system of Prize Bonds that work exactly like this, administered by the state. The expected return on them is actually quite competitive, depending on your tax situation.

Everyone here seems to have got a present of €20 Prize Bonds for a 10th birthday from an aunt or grandmother, yet people from outside are always surprised that such a product can exist.

jwrallie 37 minutes ago | |

In some regulations you can also be expected to declare and pay tax on the money you earned from the interest, which can be annoying to do for such small values.

dannyw 12 minutes ago | | |

Definitely annoying, and YMMV, but a lot of jurisdictions don't treat credits (that cannot be redeemed back to cash) as income.

In the same way signing up for $App and getting $100 in API credits isn't income; paying a bill early for a 3% discount isn't income; and frequent flyer points or cash back you get on our credit card isn't income.

bojangleslover 1 hour ago | |

This is interest on credits, not on cash. Once you start paying interest on cash you need a banking license. I think you'd be fine even in Europe paying interest on credits.

infecto 43 minutes ago | | |

Why would you think credits and cash would be treated differently? I am not a EU tax expert but it would be shocking if that’s the case because you could create some pretty interesting schemes if by turning cash into a “credit” meant it was treated entirely different.

Maybe that’s the case for the EU but it would be surprising.

Imustaskforhelp 1 hour ago | |

Very interesting I am curious how this is the case, could you share some more details/information about it?

Also, how does it compare to say, accepting gold or treating a gold based ledger instead treating gold as a currency and similar ideas?

Also could this re-classification be ever useful too? For examples bonds being treated in such way?

bojangleslover 51 minutes ago | | |

It's the case because once you buy cloud credits you are in an entirely unregulated space. At Carolina Cloud, that means your cloud credits are nothing more than an audited and backed up DB entry. Therefore, we can do whatever we want with them. We could double them every 6mo if we wanted. We settled on something more reasonable (SOFR).

Not unlike the hyperscalers giving $100k+ to startups and it not counting as income for C-corp tax purposes. Totally unregulated space!

infecto 41 minutes ago | | |

What is surprising? Paying interest on cash is effectively a financial instrument. Not sure what gold has to do with it. If you pay a business cash and they turn it into credits that pay interest that would not pass a smell test.

No customer would truly care about this and in most jurisdictions you would probably go through a lot more paperwork because of the interest payments.

RNanoware 1 hour ago |

I wonder if they see any material differences in their customers’ usage or spending habits on the platform, receiving this interest? My perception of most businesses is that prepaid plans are typically disincentivized compared to subscriptions that auto-renew.

brightball 1 hour ago |

That’s pretty slick. These folks need to come to the Carolina Code Conference in a couple of weeks…

effnorwood 1 hour ago |

Region North or South?

stego-tech 1 hour ago |

I think this is pretty great, though I’m sure hyperscalers will find a way to make sure such a scheme becomes as shitty for customers as frequent flier programs are today.

Think of it from a small hobbyist perspective: I want to host a few small workloads, but I don’t want to deal with reoccurring billing. Maybe I have money now, but can’t guarantee it later. With this scheme, I frontload with a substantial amount of prepaid credits - say, $150 - while only using $5 or $10 a month. In theory, if the interest rate is correct, I could earn more on interest faster than the prepaid credits get drawn down - thus having a perpetual instance for a one-time charge.

Personally? I think that’s a fair and reasonable arbitrage opportunity, because it also means the vendor can take that excess Capital and invest it themselves to create a return greater than the credits paid out. In practice, some greedy jerk C-Suite inevitably places caps on payouts or time limits on credits to ensure they capture more for themselves and leave less for their customers.

I guess what I’m saying is that I dig the idea, I’d love to see it implemented by more vendors, but I also know it’ll get rules-lawyered to death in nanoseconds under the current market incentives.