HODLer’s Playing VISA / Mastercard
Making Passive Income from your Crypto Holdings.
NOTE: This is not financial advice, only my observations of new technology.
Have you ever wanted to be the bank, or better yet, be the credit card company making a % on every transaction of your customer’s money?
Visa’s market cap as of this writing was $380.74 Billion Dollars. Their Payment Volume is over $2 Trillion per quarter.
That is $8 Trillion a year!
Visa Surpasses $2 Trillion in Payment Volume in Its Third Quarter
Jim Daly July 25, 2018 Acquiring, Credit Cards, Debit Cards, News, Transaction Processing
With economic conditions generally healthy in most of the world, Visa Inc. racked up $2.1 trillion in combined credit and debit payment volume in the quarter ended June 30, an 11.1% increase from $1.87 trillion a year earlier on a constant-currency basis.
WOW, I mean just WOW. Sixty-one (61) years ago, they were just a Startup called BankAmericard. Now the financial power that they wield is staggering. The credit card wars of the 60’s is synonymous with the crypto wars of today. Those early adopters have become the big banks that are so threatened by Bitcoin, Ethereum, Altcoins, and especially Facebook/Libra today.
History
In mid-September 1958, Bank of America (BofA) launched its BankAmericard credit card program in Fresno, California, with an initial mass mailing (or “drop”, as they came to be called) of 60,000 unsolicited credit cards.[10] The original idea was the brainchild of BofA’s in-house product development think tank, the Customer Services Research Group, and its leader, Joseph P. Williams. Williams convinced senior BofA executives in 1956 to let him pursue what became the world’s first successful mass mailing of unsolicited credit cards (actual working cards, not mere applications) to a large population.[11]
If I am reading this right, the first “Airdrop” of a digital currency on a network was BankAmericard (VISA) in 1958. This was part of the financial revolution of the 1960’s leading to a major portion of the world moving away from checks on to digital currency (Credit Cards). What was the SEC’s reaction to VISA’s Airdrop in 1958?
Wouldn’t you love to become your own transaction facilitator, generating a fee from every transaction you help facilitate? True, that is what the “miners” do in a way, however, in a full working ecosystem, the miners are just part of the solution. Most people do not want the hassle of keeping up the mining equipment, the electricity cost, and having to join with a Major Miner Consortium to stay up with or ahead of the profitability curve. Most people would just like to store their money in a way it can make them money without having to become a mining expert —they want a passive income from parking their assets that is over and above just riding the market.
The miners are like the engine that ensures every transaction happens, is valid, and is secure. Think of them in this analogy as a modern version of the Electronic Funds Transfer (EFT) part of the Banking ATM/SWIFT network. What also is needed is the bank or “Market Maker” for an ecosystem to always maintain “Liquidity”, someone there to trade the X asset you have for the Y asset you want.
For video games in the early 2000’s, this was Brock Pierce’s Internet Gaming Entertainment (IGE), a company which pioneered the MMORPG currency-selling services industry. IGE used the non-secure method of Ebay and PayPal to facilitate transactions. (Who else here has their horror stories of getting ripped off selling virtual goods over PayPal? It is a major problem for all of us gamers right!) Yet there exists such a large demand for those transactions, the industry, or rather the game playing public consumer puts up with the 70%+ fraud problem to transact over this less than perfect exchange.
I have been analyzing this process for the Crypto Currency ICO market, and now the IEO market since 2017. Since 2014, we have been working on creating the Silica neXus Project to re-imagine the entire video game industry. “ONE FEATURE” to it, and I want to stress this is only one of many features, one feature to the project is the ecosystem of a universal currency and the different video game items that players collect and want to trade. Think of World of Warcraft (WOW) Gold vs the WOW Rare Items — OR — better yet — Magic: the Gathering Online (MTGO) digital trading cards vs MTGO Tournament Tickets (TIX) MTGO’s currency. MTGO has had a vibrant thriving ecosystem with tens of millions of players trading online digital cards and packs of digital cards since 2002. That’s 18 years. MTGO has given birth to thousands of merchants who created trading bots to handle their stores in the MTGO Marketplace, so they could go sip mai tais on the beach while their robot workers made them money with a dynamic BUY/SELL price on every item in their online store. Their bots always balance themselves with the rest of the market as players’ demands change. With nothing like it prior, this was a very clunky, yet wonderfully elegant solution that grew up in a digital world by modeling the paper Magic ecosystem you can watch happen with merchants buying paper cards from players in bulk at every MTG Grand Prix.
Working with and watching how these video game ecosystems have worked for decades, then stepping into the ICO/IEO world, I have become extremely skeptical of small, newly formed crypto exchanges. I am especially skeptical of the sudden overly abundant supply of “Market Makers” and “Liquidity Merchants”. These providers bombard me daily. Once you are running an IEO project, they come out of the woodwork over every type of medium known to humans: Telegram, Whatsapp, Wechat, Facebook, and LinkedIn. It has almost gotten worse than the unsolicited telemarketing Robocalls I receive on my phone 50 times a day. (What was that Government “Do Not Call” list we registered for anyway? But, I digress.)
Once you do discuss the process and terms with the Market Maker / Liquidity Merchants, the conversation ends up with something like: “List your token on X Exchange and then give us 500 BTC and 500 BTC worth of your token, THEN pay us $YY,YYY per month, and we will provide your token with ‘Liquidity’ and ‘Volume’.” What is not said, but my gut tells me is true: “Now keep in mind that once you stop paying us, your token will tank in the market…” This almost feels like, (its not,) but it sure does feel like paying “insurance” to the neighborhood mobster.
Who really knows how or what they do with that money to create and maintain your market? It brings up images of them having 10,000 wallets that they move your tokens back and forth from to show daily volume all the while burning up gas fees.
Where is the Transparency and Accountability of the blockchain in that?
Someone should turn that job into a Smart Contract on the blockchain where everyone can see what is happening and how the sausage is made.
Bancor to the rescue!
I must clarify for full transparency, that I do not work for and am not paid by Bancor. I only found out about Bancor’s Relay Tokens a week ago, and have dived fully into their protocol, experimented with other tokens on their network and talked with people who listed with them. My CFO, Emerson Galfo, even found the negative arguments against Bancor to look at both points of view. Even Bancor’s detractors agree that for an ecosystem designed like the Silica neXus Projects is designed, the Bancor Protocol will work well over their smart contract driven Relay Token Network.
Bancor states in their August 6th, 2019 article about Staking Liquidity:
Staking Liquidity on Bancor Protocol
· Everyday users can now store their idle assets in transparent liquidity pools, known as Bancor Relays, and generate fees from autonomous token conversions.
· Users stake liquidity simply by buying a Relay Token, which is a tokenized version of their stake in a Bancor Relay.
· Relays generate fees with each conversion they process, and Relay Tokens can be sold at any time to withdraw a proportional share of the Relay’s liquidity.
Since Bancor Protocol introduced on-chain liquidity pools in 2017, we’ve seen a wave of innovation in the decentralized finance space. In particular, the act of “market making” or providing liquidity to digital tokens has become increasingly easy for everyday users.
Users can now store their idle assets in transparent liquidity pools that generate fees from autonomous token conversions. This has created new models for decentralized asset exchange and unlocked incentives for users which have historically been reserved for institutions and exchanges.
Using the Bancor Protocol, hundreds of independent liquidity providers have locked up millions of dollars worth of ERC20 and EOS-based tokens in on-chain liquidity pools known as Bancor Relays. Relays are designed to perform token-to-token conversions that also accrue value for liquidity providers.
Each time a Relay processes a conversion, a small liquidity provider fee is taken out of each trade and deposited into the Relay’s reserves. These fees function as an incentive for liquidity providers who can withdraw their proportional share of the reserves including the accumulated fees at any time. The larger a Relay’s reserves, the lower the slippage costs incurred by traders transacting with the Relay, driving more conversion volume and, in turn, more fees for liquidity providers.
The staked liquidity on the Bancor Protocol is accessible by any third-party application and has been used to process nearly $2 billion in non-custodial conversions in the last two years.
Here are some videos on how Bancor Relays work:
Enjin’s view of Bancor
Enjin has the Bancor system working on the exchange portion of their Crypto wallets. I will say Enjin has done a great job on their wallets. They did an article about their ENJ token releasing on the Bancor Network, how it would work, and how there is a unique way their HODLers could make “Passive Income” from Bancor Relay Tokens:
Enjin’s Conclusion
When our Enjin Coin Token Relay launches later this month, it will provide anyone with the ability to purchase ENJ directly from the Bancor web app, and also provide an interesting passive income opportunity for anyone wanting to become a liquidity provider. {Added emphasis}
At this point I am a Fan!
It does make a great deal of sense to turn the middleman into an incorruptible, transparent smart contract on the blockchain. That does not eliminate the risk of storing your assets on the blockchain. You are susceptible to the market conditions, the emotions of the crowd, the rise and fall of the market. However, if you are going to sit them there, would it be better to have them make passive income?
Bancor’s Relay Tokens allow Convergence to generate revenue for the Silica neXus Project and a few chosen backers, while at the same time they are extremely beneficial to the Silica neXus ecosystem. If you are interested in learning more of what we are doing with the Bancor Relays and how we are working to remove even more of the inherent risk while retaining the upside, contact me on LinkedIn or email and let’s talk further.
