Xchangecoin is a cryptocurrency brokerage network with local agents in Asia and Africa
In industrialized nations, cryptocurrency and blockchain technology are becoming mainstream applications. Access to cryptocurrency in the emerging markets has barely improved since the early days of Bitcoin. This is especially true from the perspective of the average user. While wealthy and accustomed users around the World may use their credit card or travel abroad to purchase cryptocurrencies, the retail consumer is often left out of the opportunities presented by the blooming industry.
Local exchanges have emerged as the medium through which value discovery mechanism takes place. The exchanges act as clearinghouses in the local fiat ecosystem, and facilitate bidding. This presents the exchanges as market makers.
However comprehensive the exchanges themselves might be, the last-mile connection is often lacking. The situation in developing countries is different to that of the industrialized nations in general in a sense that developing nations are more cash economies. This means that not everyone have a bank account, and not everyone prefer to use the bank account for every transaction every time. It can be slow and expensive to use a bank account, especially for small transactions. Bank wires may take as long as one to two weeks to arrive between different banks. Credit and debit cards are either scarce or underserved with features, and international processors often don’t recognize them.
In recent years despite of the challenges, fintech has successfully penetrated many of these economies in the form of mobile money. Mobile money networks operate under a teleoperator or as independent networks utilizing the networks of teleoperators on technology stacks suitable for older feature phones: They use USSD and SMS for the user interface. The customer deposits and withdraws money over the counter, through counter locations. Books are kept digitally, as well as in paper format for backup.
A similar system could work for cryptocurrencies too, don’t you think?
Xchangecoin approaches this challenge by introducing a network of over the counter cryptocurrency services analogue to the fashion mobile money networks operate. The network is intended to establish itself in Asia. The project floats an expansion plan to Africa as well. India, Kenya and South Africa have been specifically singled out.
Xchangecoin revenue model is simply based on a transaction fee, set in a solid 10% for all currency conversions. The service acts as a broker between the leading exchanges and the customer. There’s no technical specification as to how exactly this conversion would take place, but the conversion is handled with a software suite called Payment Integration 2.0. In the best case scenario, a local exchange would be supported. This would make local fiat conversions easier than converting forex into local fiat in absence of a better option. The service is intended to support the top 100 on Coinmarketcap dynamically, meaning that the basket of cryptocurrencies is subject to change over time. On the other hand, the basket provides the customer with ample choice.
The service is built on a set of smart contracts that maintain services in the token ecosystem. This simplifies the service, and creates a standard operating procedure, which is easy to replicate and easy to adapt to local circumstances or regulatory environment.
The exchange locations are run with partners, much like mobile money services already do in the local market. The agent earning model isn’t explained, but at least in the world of mobile money services the agent is incentivized with a commission.
The token XCC is a utility token, which facilitates transactions within the Xchangecoin network. The token provides data for audits, bookkeeping as well as exchange operations. The token is intended to be traded in leading cryptocurrency exchanges for maximum liquidity. The token is planned to introduce a community governance mechanism. We’ll see what it’s like. It would be useful to have a governance mechanism on a smart contract. This would significantly reduce the pressure to monitor the agent locations for compliance.
The ICO is straightforward for a utility token ecosystem. There are a total of 500 million tokens, where 85% are marked for the token distribution, 5% to the bounty campaign, and 10% to the team and advisors with a six month lock period.
The ICO runs in three stages: Stage 1 carries 100 million tokens, Stage 2 carries 150 million tokens, and Stage 3 another 150 million tokens respectively.
My thoughts:
The idea is fantastic, and definitely needed in the local markets in the countries specified in the whitepaper. However, the operating environment is challenging and requires a closer look, especially regarding business practices and the fast-evolving regulatory environment. While cryptocurrency brokerages remain unregulated today, it doesn’t mean that the situation would persist for long. Kenya and South Africa both are in the process of issuing new regulations for financial markets. Kenya as a front-runner has established a task force to explore the opportunities blockchain technology offers to the local and national economy and socio-economic development at large. Collaborating with regulatory bodies is important in this sense, and researching how established players operate in the market inside and outside the blockchain technology market is paramount for long-term development of the service ecosystem.
The whitepaper doesn’t specify the type of hardware involved with the transaction. Competition such as PundiX and BTM operators use specialized hardware, while similar market players such as Abra focus on mobile apps and connecting individuals. Will Xchangecoin strike a middle ground by providing a mobile app for a POS location or integratge with an existing POS system? will there be hardware support for card readers and receipt printers? all these questions are valid.
I think the project is going to do an ICO in a very early phase, which increases the risk and the opportunity of the investment. If the project is able to secure advisors who know the ins and outs of the local market, and hunt serious talent and partners, I see a potential success story. The risk obviously is that the project flops in regulatory compliance issues.
The project has potential.
Website: https://xchangecoin.co/
Whitepaper: https://xchangecoin.co/whitepaper.pdf
This article was created in exchange for a potential token reward through Bounty0x
My Bounty0x username is starwalkerz