Distributed Autonomous Banks (DABs)
What Balance is trying to buidl and why we are trying to do it.
Bitcoin gave us unstoppable digital gold. Ethereum gave us unstoppable digital contracts. 0x Project gave us unstoppable digital exchange. Dharma gave us unstoppable digital debt. Aragon hopes to give us unstoppable digital organisations. All of these projects are creating incredible buidling blocks.
Balance is buidling a Distributed Autonomous Bank.
We think it is really important that there is an open source interface to the open source financial system. We have seen what happens when centralised companies are built on top of decentralised protocols. GitHub is one of the most powerful interfaces to Git. They tell everyone to embrace open source. Their source code is closed. 🧐
The same thing is happening in the world of economic protocols. Closed source companies with lots of funding are storing huge chunks of people’s funds. We are sinking back into the old system of closed source banking. We need DABs.
There are loads of parts to a bank. They provide people with a place to store and manage their money. In the world of open economic protocols, the largest closed source bank is Coinbase. I wrote about their work here:
Whenever I hear someone complain about Coinbase, I like to ask them how many support requests they have responded to…medium.com
They have done an incredible job of keeping the regulators and bankers at bay as people pour fiat money into the open financial system. As I put it:
One of the common complaints about Coinbase from hardcore HODLers is that the company is centralised and antithetical to the mission of these protocols. I find this argument pretty hollow. First up, it shows an absolutely incredible lack of gratitude for what Coinbase has done for them. Nearly all of these people could knock a digit or two off their net worth if Coinbase didn’t exist. They made it easy for normal people to buy, store and manage Bitcoin. Secondly, if someone can point me to a single piece of decentralised, non-custodial wallet software that is easy-to-use, I will be singing from the rooftops about it.
We want to create piece of software that is both easy-to-use and non-custodial. It should be beautifully designed and simple enough for regular people to use without needing to read a knowledge base. Ideally it will be infinitely better than banking on the closed source financial system.
People should have control of their funds without having the fear of losing them. This means that people should have no idea that it’s running on a set of smart contracts and protocols. They should be able to go to Balance.io and get access to incredible financial services that are powered by unstoppable economic protocols. We are not sure if this is possible but we are trying.
We think that one of the most critical pieces of infrastructure is the ability to reset your password. The team at Gnosis have created the most robust and widely used multi-signature wallet. It hodls billions of dollars of funds.
They are currently working on the Gnosis Safe, a multi-signature wallet for regular people. After that, they plan to start working on improving the mechanisms for a key recovery network. At a high level, the idea is that we should be able to trust a network of identifiers instead of a single identifier.
These identifiers could be Know Your Customer (KYC) providers initially, and eventually become machine learning based systems. They could ingest your identity information and help you regain access to your account. There are so many interesting threads to this. One of them is finger vein print technology:
A new way of accessing bank accounts is being launched which identifies individuals through the unique pattern of veins…www.bbc.com
All of this is deeply linked to the problems of identity and security. No system will be perfect and so insurance for mistakes will be crucial.
I will begin with a promise, if you build this service I will use it.medium.com
(Disclaimer: We are investors in Nexus Mutual.)
All of this work will give us the tooling to deploy banking infrastructure for everyone. People can store and spend their capital with verifiably trustworthy financial institutions. You can follow the early research into recoverability here:
fund-recovery - Recovery mechanisms for multi-signature wallets beyond backing up private keys.github.com
We think all of this is possible but not inevitable. There is an enormous amount of work to be done to make this happen. At Balance, we are trying to help speed up the transition from closed source banking to open source banking. We think that scalability, recoverability and usability are the biggest blockers to this happening. If we can make some contributions to the interface that people interact with then hopefully this big shift can happen sooner.
The protocol layer is getting really competitive now. Thousands of people at hundreds of projects are trying to make unstoppable digital computing work. We do not see the same level of competition at the interface layer. There are lots of wallet apps around, but most of them are unmaintained and unprofitable. In the real world, wallet companies do not make much money, banks do. I think the same is true in the world of economic protocols. The projects that provide full service banks to customers will be rewarded with strong revenue and brand loyalty.
The transition to open source banking is going to be fascinating. To me, it feels totally inevitable but to most people it seems unfathomable. If we do our job right, the switch should be simple and seamless. No ones cares that Gmail runs on SMTP or Google runs on HTTP. They just like sending and searching.
If you would like to follow our thinking and research on this topic, please check out our application to Aragon’s Nest Program. We plan to use the Aragon Network to help us govern and control the functions of the DAB.
Aragon Nest Proposal: A Bank Built on Protocols Abstract Banks are not inherently bad things. They have facilitated and…github.com
If you want to help us, we would love to welcome you to our community:
Designers, thinkers, translators and operators: Balance’s Forum
Engineers: Balance Manager’s Active Issue Feed