GAINS Associates
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GAINS Associates

e-Money — Telegram QUIZ & AMA — January 08

On Friday, January 07, we had the pleasure to welcome to our Telegram chat:

Henrik Aasted, CTO.

We asked him questions about the development of e-Money.

Some sentences have been slightly edited for readability but the meaning has been conserved.

Summary

e-Money is an electronic payment system and store of value operating in the financial services industry. They are issuing asset-backed stablecoins that represent value in an actual bank account.

Tokens are backed by collateral in the form of deposits and government bonds held at commercial banks.

e-Money tokens are fully collateralized and audited by Ernst & Young, providing quarterly proof of funds.

e-Money operates in compliance with Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) legislation.

Introduction

Q — Ayeley from GAINS: What did you do before crypto, how did you get into crypto, and did you have any other venture in crypto previous to being involved with e-Money?

A — Henrik Aasted from e-Money: I’m a software engineer and have been working as a consultant for the past 15 years. Primarily in the financial sector, where I was, among many other things, part of creating the national e-identity solution being used in Denmark.

In my younger days, I stumbled into minor fame by founding the Adblock project.

I live in Copenhagen, where I started e-Money with Martin Dyring-Andersen way back in 2017. Martin has spent the past 20 years co-founding a wide range of tech startups, ranging from community-based spam filtering to algorithmic trading in the FX (currencies) market. He is now the CEO of e-money.

Martin has been trading crypto as part of his trading business. I had no prior exposure to the industry before joining e-Money, except for a small, academic interest in bitcoin. I wish I had taken that interest beyond academics back then.😬

Q — Ayeley from GAINS: Adblock. I am sure that many of our community members have used it before. Can you tell us some more about that and how you were able to make it such a success?

A — Henrik Aasted from e-Money: It was mostly an example of being at the right place at the right time. The option of creating browser extensions had just been added to the Phoenix browser (later Firefox) and I was looking for something to do other than homework.

Figured that removing ads was a noble goal and something people might take a liking to. The extension got popular, really fast, so that was a fun experience.🙂

I haven’t been involved for quite a while, though, so if your favorite ad blocker turned out to be spyware, please don’t blame me. 😆

Product

Q — Ayeley from GAINS: Is that a similar motivation that led to the creation of e-Money? Can you tell us some more about it in a few simple sentences?

A — Henrik Aasted from e-Money: Yeah, it’s a bit similar.

The idea for e-Money emerged in 2017 during the Cosmos fundraiser. We realized that the Cosmos “interchain” vision of connected blockchains would be extremely powerful and wanted to introduce stablecoins into this ecosystem.

It’s the hope that you provide basic building blocks such as tokens carrying value. Other projects will be able to utilize and build on them. We have high hopes for the ecosystem that we hope to see emerging from that idea.

For those that did not read up on it before this AMA, the incredibly short version of what we do is that we’re issuing asset-backed stablecoins that represent value in an actual bank account.

We have spent a lot of time talking with regulators, banks, and lawyers. We’ve designed a token model that can support stablecoins backed by currencies with zero/negative interest, which has become a widespread phenomenon for many European currencies.

We’ve implemented this token model using the Cosmos SDK and have also added advanced features such as a limit order book (DEX). This is now running on our mainnet, which launched in March of 2020.

Q — Ayeley from GAINS: How different is e-Money’s stablecoins from other well-known ones like USDC or BUSD?

A — Henrik Aasted from e-Money: First and foremost, we’re based in Europe and are thus issuing stablecoins in European currencies. Our current offering is Euro, Swiss Franc and the Kroners of the Nordic countries.

One thing we had to contend with early is the unusual interest environment that we have in Europe at the moment. Denmark (where we’re based) has long had negative interest rates on state bonds, bank deposits, and mortgage bonds.

We had to deal with the fact that holding a lot of money in a bank account is not a very good business. To address that, we came up with a way to make the stablecoins interest bearing.

Q — Ayeley from GAINS: Did you ever consider any other blockchain and why did you decide to remain on Cosmos? Will you support any other blockchains in the future?

A — Henrik Aasted from e-Money: The Cosmos SDK, which provides us with great properties like fast and instant finalization, a large number of transactions per second (we’ve measured between 200 and 300 in a testnet), and (very soon) Inter-blockchain communication.

I would say that for a long while, it was the most promising of the new generation of blockchain platforms. Some of them may have caught up a bit recently, but so far we have not found a reason to regret that choice.

We’ll be building bridges to other blockchain platforms such as Avalanche, Ethereum, Cosmos hub, and Polkadot. Our roadmap can be viewed here.

Soon, we want to use the BEP3 standard to bridge to Avalanche and Ethereum. On the Cosmos side, the IBC standard appears to soon be ready for prime time, and will also be a (long-awaited) target for us.

We’re doing stuff on our blockchain that we do not believe would be possible in a smart contract environment, eg. continuous interest and dynamic block times. Also, having our blockchain allowed us to include a DEX, which is primarily for supporting easy exchange between our stablecoins, but will be available for listing any token that comes across the bridges in the future.

What I promised Martin to say about the DEX is that it doesn’t have listing or execution fees. Find out more here.🙂 The beauty of the next batch of blockchain platforms is that they have throughput capacity that should keep fees down for the foreseeable future.

Q — Ayeley from GAINS: What is the role played by the $NGM token in making stablecoins bear interest? Also, how do you make sure it captures the value of the ecosystem you’re building?

A — Henrik Aasted from e-Money: First of all, it is important to emphasize that we have two kinds of tokens in our model: The stablecoins, currently eEUR, eCHF, eNOK, eDKK and eSEK, and the NGM staking token.

The NGM is a staking token similar to the Cosmos ATOM, as it helps secure the e-Money chain by placing value at risk (staking).

The NGM token comes with 3 kinds of rewards/benefits:

  • Staking rewards from inflating the NGM supply by 10% per year (similar to ATOM)
  • Transaction fees from payments and trading on the DEX
  • Buy-back of NGM tokens based on stablecoin inflation by 1% per year

The first two are similar to Cosmos ATOMs, but the last part is unique to e-Money and all asset-backed stablecoins that I am aware of. We like to refer to this as a “3 layer cake”.

The very short version is that the NGM both secures our chain, but also thrives as the issuance of our stablecoins grows. This acts as a powerful incentive mechanism for community and partnership.

As for the stablecoins, their value proposition is simultaneously simpler and infinitely more complex. They have value and can be transferred freely among the connected blockchains, so they can be used in pretty much any context.

A very important property of the value capture model is that it does not rely on our tokens being used in our blockchain. It is equally effective for NGM holders if the stablecoins are in use on Ethereum, somewhere in the Cosmos ecosystem, Avalanche or Polka.

A shorter version, the value capture does not rely on transaction fees.🙂

Q — Twitter user @Ontortk: What is the core technology that e-Money is using? The transaction per second (TPS) element is very important for global payment platforms. How does e-money improve it?

A — Henrik Aasted from e-Money: We’ve built our software on the Cosmos SDK, which provides us with great properties like fast and instant finalization, a large number of transactions per second (we’ve measured between 200 and 300 in a testnet), and (very soon) Inter-blockchain communication.

Another nice property is that it does away with the proof-of-work paradigm, and is a lot more sustainable and environmentally friendly.

The Cosmos stack has also enabled our blockchain to operate with dynamic block time, where a block is created as soon as a transaction is waiting to be committed. This provides for very fast transaction finalization (usually in the order of 500ms), which gives a user experience that can compete with in-store credit card payments. This is super important for the future we envision, where blockchain tokens will be used for payments in the real world.

While the e-Money chain is built using Cosmos technology, we expect to support more networks through bridging. We are currently working on Avalanche and Ethereum. Hope to find a way to also bridge Polkadot in the not too distant future.

And then, of course, IBC, which is Cosmos’ proposal for blockchain interoperability.

Q — Telegram user @Howardsilk100: I read that there is no governance mechanism built into the e-Money chain. What are the reasons behind that?

A — Henrik Aasted from e-Money: Like all asset-backed tokens, ours are dependent on a legal entity operating somewhere. In this case, we’re operating out of Denmark. This, unfortunately, limits the influence that can be offered to the community through governance.

There are simple features that cannot be offered for legal and regulatory reasons, so it would not be constructive to give people the option of coming up with governance proposals that we are incapable of following upon.

That being said, we have a great dialogue with the community and are very open to suggestions and opportunities that emerge from there, so in some ways, e-Money could be considered more agile than the governance mechanisms seen on other chains. 🙂

Q — Telegram user Koko20: Do you have a guarantee that the bonds are trustworthy? Junk bonds currently exist.

A — Henrik Aasted from e-Money: This is true. We’ll be solely purchasing government bonds in the same denomination as the stablecoin, to avoid exchange rate risks. There will be no speculation with the assets that back the stablecoins.

Also, worth mentioning, is that we’ll publish periodic proof of funds stamped by our auditors at E&Y.

Q — Telegram user V Λ C U U M: How solid is your technical base and token model compared to other fiat stablecoin projects? Are you ready to change quickly with an ever-changing global economy?

A — Henrik Aasted from e-Money: We feel it’s very solid, but I may be biased. I find it interesting that we so far appear to be the only asset-backed stablecoin that addresses the issue with zero or negative interest environments. It’s no longer a good business to hold a huge sum of money in a bank account and live off the interest.

Q — Telegram user Ivan Letov: What blockchains can you use interblock communication (IBC) with?

A — Henrik Aasted from e-Money: IBC is being developed by the good folks of the Cosmos ecosystem. I believe it’s probably the best offering for inter-blockchain communication at the moment. We’ll work on integrating that in the not-too-distant future and connect to the Cosmos hub. Hopefully, a large number of other blockchains will do the same, and enable the free exchange of tokens and value across all of them.

Q — Telegram user El Golfo: How do you coordinate the next-generation banking system for global payments with a single blockchain layer? How did you build a bridge between the blockchain ecosystem and the banking system?

A — Henrik Aasted from e-Money: I’m not gonna lie. It was a lot of foot-work and talking to people in the FSA, lawyers, auditors, and regulators. I feel like I have talked to more lawyers by now than I expected to do in my entire life.😆 The result is great, though. We’re fully compliant and will dedicate a lot of resources to staying that way despite an ever-changing regulatory landscape.

Q — Telegram user 👽 Mars Crypto Community 🌔: Do you have an ideal stake rate for NGM? How often do you see it being traded?

A — Henrik Aasted from e-Money: Above 50% would be nice. We have not seen it traded yet, as the first CEX listing is in the future.

Team

Q — Ayeley from GAINS: How many people are on the team?

A — Henrik Aasted from e-Money: We’re currently 8 people working across business development, legal, compliance, marketing, and software development. We’ll be expanding that shortly.

Finance

Q — Ayeley from GAINS: How did you make it through the bear market? Did you raise funds so far? If so, how did you handle them? And are you planning to do any future raises?

A — Henrik Aasted from e-Money: The first 2 years of work were self-funded, so the bear market did not impact us then.

When all the regulatory work was finished, a banking relationship had been established and the mainnet was launched in March of 2020, we raised a small round in a seed round token sale.

This was followed by a larger private token sale in August. These token sales have enabled us to secure a listing with a reputable exchange, enlist market makers, etc.

Q — Twitter user @pr1ncesscrypto: About your “low and fixed” transaction costs, what strategies are you employing to achieve this goal? What guarantees do you give to your users, that in the future these rates will not rise?

A — Henrik Aasted from e-Money: The technology we’re building on (The oft-mentioned Cosmos SDK) supports a very high transaction throughput, so we do not expect that to be congested soon.

Performance tests have indicated that the chain supports in the range of 2–300 transactions per second. That can be contrasted with the Ethereum network, which I believe currently supports in the range of 20–30 transactions per second.

Further to that, our token model is designed to be sustainable across blockchain networks, so we expect that a lot of transactions involving our tokens may not even take place on our chain, but rather chains like Cosmos hub, Avalanche, or Polkadot.

Q — Telegram user Ross: e-Money tokens are backed by collaterals in the form of deposits and government bonds held at commercial banks, isn’t it contradictory to hold funds in commercial banks, when the cryptocurrencies are an alternative to traditional finance?

A — Henrik Aasted from e-Money: I think there’s room for both. I love the innovation taking place in algorithmic stablecoins, but there are also a lot of features of asset-backed stablecoins that are very desirable.

Security

Q — Telegram user Frühling kommt 🌷: Many stablecoins are supposedly backed up, but are not. What is the backup of tokens in e-Money?

e-Money has AML/CTF legislation. Is it necessary to do some kind of identity verification (KYC) to be able to use the platform?

A — Henrik Aasted from e-Money: Great questions!

We’ll publish periodic proof of funds to ensure trust in the system.

AML/KYC is something we take very seriously. It will be relevant whenever a user is moving between real-world fiat currencies and our stablecoins.

Q — Telegram user Zihni Kaftancıoğlu: Security & user interface are very important aspects for users. How has e-Money worked on this? Is the platform suitable for newbies in the crypto world?

A — Henrik Aasted from e-Money: Security is paramount to us, and we had a huge security audit of our platform before launch.

User interfaces in crypto are for the most part still rather rough. We’re some ways away from mainstream adoption, but we expect that to improve over time and will do our best to always have a good user experience in mind when building end-user UI.

Q — Telegram user Alice: e-Money is audited by Ernst & Young, where can we see the results of this audit and when are they performed?

A — Henrik Aasted from e-Money: We’ll be publishing the first one in the not too distant future. We want to do them quarterly after that.

Business Development

Q — Telegram user Keptwaq: What can we expect to see from this project in the short-term?

A — Henrik Aasted from e-Money: You should take a look at our roadmap and our announcement channel.

Q — Ayeley from GAINS: Will you have a credit card in the future?

A — Henrik Aasted from e-Money: We have plans to allow for purchasing of stablecoins using credit cards in the not too distant future. We do not currently have plans to issue a credit card.

It was a pleasure having you in our community today Henrik! It was great learning about e-Money. You have built a great product and I know you will build on the great foundation you have to make it a world-beater. Anything else you’d like to say? Where can we follow you? — Ayeley from GAINS

Thanks for reading along! If you’re interested in learning more, please join our Telegram chat or read up on our website. Also, if you’re interested in our upcoming token sale, keep an eye on our announcement channel. And thanks for hosting this, GAINS. You have an awesome community. — Henrik Aasted from e-Money

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