Introducing the 8x Protocol
Crypto currency’s first use case is payments. Blockchain technology enables fast, secure and borderless payments to occur. However there’s still a long way until payments as a use case is fully realised.
For example, the volatile nature of the crypto market makes it an unsuitable exchange of value for retailers and consumers paying for real world products and services. One Ether was worth almost $1500 in January only to be worth a third of that four months later. To expect a business to deal with such volatility is unreasonable at best.
In addition to facilitating stable exchanges of value, there isn’t any way to facilitate a stable recurring transfer of value between two parties. Put more plainly, there isn’t any way of enabling stable, recurring payments on the blockchain.
Recurring payment crypto arrangements do not exist
Recurring payments as a use case is a pretty major one — so why hasn’t this been problem solved?
There’s three main issues which make it more complicated that simply deploying a smart contract:
1. Programming stability into smart contract is hard. Relying on a 3rd party service to provide accurate exchange rates puts too much trust in a single party. In addition, once the exchange has happened the business still needs to deal with the volatility of crypto currency markets.
2. Since users have to sign transactions with their private keys, you can’t “pull” Ether from them directly. The most obvious option is to store funds inside an escrow contract which has custody of your funds. However this opens up the system to attacks from black-hat hackers who like to target high net-worth contracts eg. The DAO.
3. Making sure the system is technically viable has it’s own set of challenges. In order for a smart contract to have scheduled execution (call this contract every 30 days) isn’t possible with existing infrastructure. While you could use an external server to trigger the smart contract, any downtime of that server could lead to loss in funds for businesses due to missed scheduled executions.
8x is an Ethereum based protocol that aims to abstract these complexities away and make it simple for businesses to accept cryptocurrency as a means of payment. It aims to solve this through the following mechanisms:
1. Rather than programming stability, the 8x facilitates stable coins such as MakerDao as the underlying mechanism for transfer of value. To learn more about how MakerDao keeps a 1:1 peg to the USD read: https://medium.com/cryptolinks/maker-for-dummies-a-plain-english-explanation-of-the-dai-stablecoin-e4481d79b90.
2. Stable coins such as MakerDao are ERC20 compliant. What this essentially means is that you can “approve” another address (such as a smart contract) to spend tokens on your behalf. The 8x protocol utilises this by asking users for permission to spend Dai so no funds are held by the smart contract.
3. When a user subscribes to a plan, the transaction is emitted to a network of “processors” who hold 8x tokens. These processors have the ability to claim the right to execute the payment when it’s due in the by staking 8x tokens proportionally to the value of the subscription. As a reward for executing the transaction at the correct time, processors take a 1% cut of the subscription (paid in the stable coin not 8x tokens) and receive their staked 8x tokens back. Failing to execute the transaction will result in their stake being slashed.
Having new technologies such as blockchain are great, although they don’t mean much unless they can offer a significant improvement over the existing system. The 8x protocol offers the following benefits for business and users:
— Businesses: existing credit card processors such as Stripe and Paypal charge 2.9% + 30c fee to retailers for every payment made. 8x will allow this fee to be reduced to 1% + gas fees.
— Users: all your subscriptions can be viewed and managed in a single interface. Rather than stumbling through a businesses website to cancel a subscription, you can do it through a unified interface.
Money is just the vehicle for the exchange of value between two entities. 8x aims to be the underlying mechanism for the exchange of recurring value to occur. Part of this involves creating a global fiat settling layer that allows businesses to accept crypto currencies and receive cash payments into their bank account without any knowledge about crypto whatsoever. Furthermore, the entire protocol will eventually be run and governed by processors/token holders who will ensure the protocol thrives and adapts.
If you believe in the project and it’s potential impact I’d love to hear from you to learn how you could get involved. This post gives a brief overview of the protocol, however if you’d like a more detailed view on concerns such as gas costs, claim conflicts and more you can read the white paper at: github.com/8x-protocol/whitepaper.