Today we cover the Request Network, a decentralized network that allows users to create requests for payments. In our previous articles, we have touched on ChainLink and Raiden Network, which each focus on solving a specific limitation of the Ethereum blockchain. Request Network focuses on the strengths of the Ethereum blockchain, and how to make full use of that in daily life.
What is Request Network?
Request Network (price as of writing REQ $0.28) aims to be the ‘backbone of world trade’. It is an extension of Ethereum, which enables payment requests to be conducted within the legal framework. Users of Ethereum are able to request a payment, also known as a Request Invoice, and the other party is able to pay securely through the Request Network.
How it works (Layman Usage)
Request Network aims to simply all the electronic payments that occur today. In their whitepaper, they state that more than 5 trillion USD is exchanged daily, yet the flows are poorly optimized. Speaking from personal experience, that is very much the case when performing actions such as wiring money to an account.
1. Long delays: it takes 1–5 days for the wired money to appear in the other account
2. There are middleman fees from the banks that are involved in the transfer (personally I paid about 50 USD in fees for a transaction of 500 USD)
Request Network aims to solve all these problems by making the path of the money transfer as smooth and seamless as possible.
When a user (Bob) creates a Request Invoice, the other party (Alice) is notified via their e-wallet or application. From there, Alice is able to pay securely to Bob with minimal hassle.
There are several benefits that come from using the Request Network to perform payments such as these.
1. Secure: there is no need to share banking information, so there is no chance of the information being leaked
2. Simple: Alice is only required to tap a single button to accept the invoice and pay Bob
3. Cheap: Unlike PayPal and Stripe, there is no middleman in the Request Network. Therefore, the fees can be reduced to 0.05%-0.5%, rather than 1.5% — 7%.
As individuals, this function alone would be enough to make Request Network a must-have in the current Ethereum ecosystem.
How it works (Corporate Usage)
Financial institutions have a whole web of checks and due diligence, which is part of what makes them so secure. The flip side is that it is a tedious process that takes up large amounts of time, and are not always transparent.
With the implementation of the Request Network, checking and monitoring becomes significantly easier, as all the information is collated in the ledger. It enhances the fairness due to transparency, and allows for easier enforcement of trade rules.
Request Network’s General Ledger is prepared for a time when direct transactions might not be done with traditional stores of value, such as fiat or gold. A blockchain ledger is ideal for recording down these types of transactions.
As can be seen, things such as ‘Energy’ can be used as a form of payment, something that is not possible today. By recording such transactions on the ledger in this format, it opens up new possibilities of how payments can be made in a legal manner, even with non-conventional mediums of exchange.
Request Network Layers
So far, the article has only covered the Core Layer of the Request Network. The core consists of 3 main components.
Immutability: no one can change the information within the invoice
Open Ledger: all parties involved in a transaction have access to all the information
‘Smart’: Request Network is able to verify that the transactions took place in accordance to the rules of the invoice
This Core Layer is free, with the only cost being those that are demanded by Ethereum (gas). By doing so, Request Network achieves 2 benefits.
1. It will encourage mainstream adoption. A regular user would not be willing to pay to use a payment channel, but a user-friendly, free of charge platform would likely be enticing.
2. If mainstream adoption happens quickly enough on a large scale, keeping the Core Layer free reduces the chances of a competitor arising to challenge them.
The Extension Layer is built on top of the Core Layer, and it serves to handle more complicated transactions than a simple peer to peer transaction. For companies and corporations, the Extension Layer takes into account rules for taxes, payment terms, escrows, advances and more. These are built into the invoice, and the transactions are carried out in accordance to the rules.
This layer is not free to use, as developers have to be incentivized to create such functions. As such, a REQ fee will be charged. Part of the fee is given to the developers as payment for their work, while the other portion is burnt. This makes REQ tokens more and more valuable, as supply will dwindle over time.
To prevent the problem of such extensions becoming more and more expensive, the amount that is charged will decrease as the network increases. For example, when there are 10,000,000 REQ tokens, the use of the extension layer could be 10 REQ. However, if the supply drops to 10,000 REQ tokens, the fee for use would reduce to 0.001 REQ.
The top-most layer of the Request Network, the Application Layer is the customer facing end of the Request Network. Conducted off-chain, payment systems that connect to the Request Network will use the Application Layer to access the invoices and required information.
The Application Layer also contains a Reputation Application. This is a layer that is built in to guard against bad actors in the network. Acting like an online rating, it warns users of bad actors and drives traffic to good actors. It can also be used as a way to reward these good actors by granting them lowered fees, or possibly even giving them access to unique and custom extensions in the Request Network.
While the whitepaper seems good, it is always good to look at the team developing the cryptocurrency. Among others, the Request Network team consists of CTO Etienne Tatur and CFO Christophe Lassuyt, who were founders of Moneytis, a company that raised about half a million during the seed round. Having successfully created and sustained a company since 2015, they are not newcomers to running a business, which is always a major plus point when it comes to cryptocurrencies.
Request Network has also been backed by Y Combinator, which has backed projects such as Stripe, Reddit, Dropbox and Airbnb, amongst others. The backing of Y Combinator speaks volumes about the potential of the project as well as the faith in the founders of Request Network.
Request Network is a cryptocurrency to look out for in 2018. As part of the Ethereum Ecosystem, it plays a huge part in bringing it into everyday life by allowing both individuals as well as corporations to transact money effortlessly, quickly and securely.
Stay tuned for our Final Article rounding off this 4-part series. It will be coming out on 8 February 2018! This Final Article introduces the final cryptocurrency that we are looking at for Ethereum in Everyday Life, and will only be available to our Discord Members.
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As always, safe investing!
6 February 2018