Friend in Debt vs. Venmo: Round 1

On August 6th, BlockMason unveiled our newest product: the Credit Protocol (CP). The CP is an extremely versatile and powerful tool that enables a complex array of financial transactions too long to list. While you can read more about the specifics of the CP in our whitepaper, we wanted to focus one exciting application in particular: Friend in Debt.

At its heart, Friend in Debt (FiD) is a jurisdiction agnostic decentralized application for creating, tracking and settling debts. You can think of it as Venmo on the blockchain, but better. Like Venmo, FiD allows users to move money between parties within a social network, but unlike Venmo, it doesn’t suck.

As with any good old-fashioned blood feud, we’ve invited Venmo and FiD to compete in a three round, no-holds-barred bout to determine once and for all who is the heavyweight champion of secure, casual payments between friends. Pay-per-view is through the roof, and the bets are in, so let’s get ready to rummmmmmmbllleeeeeee!

Last announcement: I’d be remiss if I didn’t mention that we have a working, beta version of Friend in Debt right now. We invite you to visit fiddy.io with a Metamast supported browser and start playing with FiD, joining the decentralized economic revolution. Or, keep reading — we’re sure you’ll be convinced in no time.

Round One: Flexibility

TL’DR: It’s not that Venmo and its ilk are not useful. The question is, if you’re stranded in wilderness, would you rather have a bottle opener or an XL Swiss Army Knife.

Let’s start with something you may not have realized: Venmo doesn’t do very much. In fact, because Venmo supports only on-the-spot settlement, it has exactly two use cases: bill splitting and immediate debt repayment.

That’s it.

Admittedly, Venmo — and other similar applications like WeChat Pay and Alipay — filled a glaring financial void. Mobile payment was the logical, digital evolution of debit cards, but these applications in no way changed the fundamental types of financial transactions available to users. They only ease the completion of these old modes of transaction — creating a form of digital cash a few steps removed from Bitcoin or payment with crypto wallets.

But what about the many transactions you can’t accomplish with Venmo?

Lender? Hardly know ‘er!

First and foremost, the biggest difference between Venmo and FiD is the ability to create and track debts over time. With Venmo, you must immediately settle transactions, and there is no way to record a debt if a user doesn’t currently have the funds to repay the lender. FiD allows users to move debts back and forth without sending actual currency, enabling users to engage in transactions that exceed their present capital — say, for buying a new lambo. FiD will also be able to help users set a payback schedule that is easy to manage, further reducing the costs associated with traditional banking.

In this way, FiD effectively democratizes the ability to create credit in social networks, though how this functionality will manifest itself in the future is difficult to predict. FiD is an extremely powerful tool for borrowers, but also for those who desire to issue credit or small sums to his or her associates, avoiding the fees, overhead, and restrictions of traditional banking. Further applications include the development of microloan communities, crowdsourced medical expenses, and lending in communities without access to traditional banking

It’s Business Time — Except on Venmo

It’s also worth noting that using Venmo to pay for goods or services violates the application’s terms of use.

This is largely due to Venmo’s many security issues (discussed in Round Two), but this policy dramatically diminishes the number of situations in which Venmo can provide value to its users. Thankfully, Paypal (Venmo’s parent company) will generously allow commercial bank transfers for a mild 3% fee.

All Hail, Auto Von Bismark

Of course, many users disregard Venmo’s policy on commercial use. While this puts commercial agents at risk of losing the money they are paid through Venmo (if, for example, the payment is made using a stolen credit card), the application is also not optimized to the handle recurring or automatic payments that play a role in both business and everyday life.

It is common for people to use Venmo to pay for regular, casual services such as tutoring, babysitting, or gardening. With Venmo, users must complete the transaction after each and every occurrence of the service. By contrast, future versions of FiD will enable the creation of regular autopayments that will resolve on a schedule of your choosing, even allowing you to consolidate your bills in one location so that you can better track your finances. This autopayment reduces the hassle of anything from paying for casual services, such as those discussed above, to consolidating rent for a landlord who prefers payment in a single check. No longer worry about whether or not your slovenly cad of a roommate is going to remember to Venmo you his half — just set up the monthly transfer in advance.

Around the World in 80 Unnecessary Venmo Transactions

A lot of people think that Venmo has made it easier to go on trips with friends, and, while that’s true, Venmo’s use is once again limited.

Let’s stretch our imagination a bit. Say you and your buddies are taking a vacation to the moon. Everyone everyone piles in to your rocket ship, leaving their gum wrappers and McDonald’s bags all over the goddam shuttle, and of course because, you’re the one piloting, you get stuck paying for the gas. No problem! Every time you fill up at some International Space-Gas Station, you just divide the cost up between everyone hitching a ride and Venmo charge each one of them. Every time. And it takes a lot of gas to get to the moon. Before you realize it, your buddy has paid for the moon hotel, and your girlfriend gets all the moon groceries, and everyone ends up charging everyone over and over again for group expenses over the course of the vacation, and what at first seemed convenient is still a huge bookkeeping headache, with each individual needing to keep track of who has paid them for which things, potentially completing dozens of transactions just to move a few dollars back and forth.

With FiD, moon vacations will become a lot easier. Before you fire up your rocket for the first time, you just create a new group — let’s call it AstroNUTS — and add each of your fellow cosmonauts to the group. Then, as the vacation proceeds, each user can simply mark down the group expenses for which he or she pays. After you enjoy a round of moon golf and a crazy night out at Club Luna, just hit settle and let FiD do all the difficult, tedious calculations for you, determining who owes how much to whom. Or, if someone drank a little more moonshine than the rest of you, split the group costs manually.

Of course, you might expect Venmo not to be equipped for a trip to the Moon, but what about a nice vacation to Europe? Not only is Venmo limited to transactions in US dollars, but you can’t even sign up for Venmo without a U.S. bank account. Enjoying the coffee shops in Amsterdam? I hope you brought a credit card. Need to repay a friend for a few licks of his hallucinogenic toad in Guatemala? Gonna have to pay in cash! FiD, by contrast, supports debt tracking for all major currencies and cryptocurrencies, and even allows for easy conversion between them. So go ahead, take that last lick.

Limited Capital Punishment

Finally, Venmo is completely useless for any sort of transactions involving moving even relatively large sums of many. Venmo’s weekly transaction limit of $3,000 may seem to limit risk, but that’s only because the platform is risky. On a more secure platform, like FiD, which move funds between accounts almost instantaneously, such restrictions are unnecessary.

$3,000 may seem like a lot of money, but if you’re engaging in many transactions, it’s not a tough limit to bump into. In fact, just this week I was thrown into a small crisis because of Venmo’s conservative limit. I’m in the process of moving to New York City, and anyone who’s done that knows what an incredible, mind-melting hassle it is. After days of searching, my roommates and I finally found a place we liked and signed the paperwork, but we still needed to pay significant upfront fees — first month, broker’s fee, and security deposit — which totaled over $3,000 per roommate. However, because only one of us had a bank in New York and the payment had to be given in cashiers check, which must be requested in person, two of us needed to transfer our money to the third roommate to consolidate the payment. That’s when I received this message:

While we were eventually able to consolidate our payments through a series of complex financial and social maneuvers, Venmo’s spending limit nearly through my life into turmoil.

JUST THE BEGINNING

The coolest aspect of FiD, however, is that we haven’t even discovered its limits. Because the application is entirely open source, future developers can implement any number of innovative applications that use FiD data and protocols, including the development of credit scores or business reviews on the blockchain. The best is yet to come!

Stay tuned for Round 2!