Request Network is more than just PayPal 2.0 — It could revolutionize the finance world
The Request Network isn’t just a new payment service. It is an advanced finance network that could change the way we do business
The Request Network is a decentralized payment platform. It allows people to securely request payments without needing a central authority. But it is also much more than that…
To understand the potential for Request, we have to understand what they are aiming to disrupt. Perfect systems can’t be disrupted…but our financial system today is far from perfect.
The Simple Transaction
Let’s play a game called “what is wrong with our current financial payment system?” Today, for simple transactions, we need to use PayPal, Venmo, or some other centralized payment service.
If I use one of these services, I’m trusting them to effectively and safely secure my information and identity. I’m also trusting them not to distribute or sell my information. We all know how well that usually works out. Second, with these platforms I either sacrifice transaction security, or I pay a fee. If I am looking to buy a new pair of skis on eBay, I can pay with PayPal gift or Venmo and not pay a transaction fee, great! But if those skis are not delivered to me, or if it was a scam, then I can’t open up a complaint. It’s like transacting with cash. By not paying, but instead gifting my money, I sacrifice my legal rights. However, if I use PayPal’s payment feature, the recipient — the dude with the skis — pays 2.9%. Since the skis cost $300 on eBay, he isn’t going to foot the 3%. I’m going to have to pay him an additional $9.
With credit cards, Visa charges 1.51% on every swiped transaction. That fee is footed either by the seller, or by the buyer when they pay a higher price for those boots that everyone is wearing. These middle men hurt both me — the buyer — and the store — the seller.
In addition, I have to provide proof of identity for internet transactions. I can’t just buy. I have to sign up, create an account, and give my email and personal information. I need to give them my credit card information. All of this opens me up to potential hacks and illegitimate uses of my info. Google and Amazon are going to maximize the profits they can make off me; and they are well within their legal rights to sell some of my information because of those long “terms and conditions” sheets that no one reads. But we’re also forced into signing them. What choice do we have? Those services are so critical for modern day life that surrendering them is not an option.
TLDR: High fees for credit cards or PayPal, the lack of identity protection, and the need to include your private information makes peer-to-peer transactions expensive and unsafe.
Accounting is the backbone of industry. Companies must keep careful records of their accounting history, otherwise the whole trust system collapses. We use accountants to prevent fraud, to prevent wasteful spending, and to enable effective budgeting. Investing would be impossible without these records because we wouldn’t be able to effectively evaluate companies. Governments need them so they can properly collect taxes.
Accounting is critical. But today’s accounting methods are brutally inefficient. The centralized systems have no set universal standard. They rely on doublebook entry methods, recording both inputs and outputs in their ledgers. From a practical example, let’s say I have a company, The Incredible Bulk (name credit goes to my friend Avi Altschuler), that sells bulk wine to local stores, I would have a ledger recording the incoming money and a separate ledger recording the outgoing wine. My own accountants could then ensure that the two records matched. My buyers would have their own doublebook system. With invoices being sent and received, mistakes would certainly be made. I also would need to ensure that I have a record system recording issued invoices so I can be sure that the invoices are paid, and can penalize buyers if they’re not. Third party auditors provide verification for all these records…for a cost. And what an expensive cost it is.
Audits can run into the tens of thousands of dollars for just small businesses. The one hundred biggest companies in the United States paid $2.5 billion in audit fees. The Big Four (the top four accounting firms in the world) account for 133.8 billion dollars in revenue a year. That could buy a lot of my bulk $10 wine — 13 billion bottles to be exact. With today’s system, companies have no choice but to cough up the expensive fees.
This system is also totally incompatible with the coming Internet of Things (IoT) revolution (read more later).
TLDR: Because there is no all encompassing, standardized platform for issuing invoices, accounting, and auditing, companies must spend millions of dollars on third party services.
People have long thought that blockchain could streamline this accounting system. The system could conceivably be entirely automated. If your car can do it, why can’t your tax program? The reason this can’t happen now is because there’s no standardization of accounting methods, platforms, and information. I can’t trust your records and ledgers until they’ve been verified by third party auditors. I need to pay a whole accounting department to handle inputing all my invoices and expenses. But blockchain could provide the solution.
Imagine a system where buyers could be issued digital invoices that are secured and recorded into the blockchain. Terms could be encoded via a smart contract including late fees and other penalties. Or maybe there are incentives for paying early. When a payment is made, the funds are automatically recorded into the decentralized, immutable, universal accounting system — all stored on the blockchain. The system is universal meaning that it can support any type of invoice and currencies, and is standardized across all industries. Companies can then fully trust one another’s records without audits — because no one can change the information that is automatically inputed. Automated audits would then be possible because the same ledger is used by everyone and an advanced program could be written to evaluate said ledger.
No more invoices — the invoice becomes the transaction when paid. No more long paper trails and huge overhead to account for those trails. No more expensive accounting fees. No more cooking the books.
Governments would benefit because the information would be sent instantaneously to them and taxes could be collected immediately. Or at least they would have a record of all the business transactions and it would be easy to verify that companies weren’t committing tax fraud.
Businesses — especially charities and nonprofits— could offer to become fully transparent in exchange for the trust of their customers.
Consumers would benefit because the fees would be lower; there is no centralized banking or payment company profiting. For some cases, users might have to provide verification of their digital identity on the Request Network. But unlike today, no company can see that identity without a user’s confirmation and users don’t need to trust anyone to keep their identity safe, but businesses can still abide by KYC (Know Your Customer) laws.
Investors would have an updated, trustworthy record of all the company’s financial dealings.
The use cases are endless. Request enables all of them.
TLDR: A standardized payment system that is trust-less because of the blockchain enables a whole range of new financial services. With a verifiable ledger, automated accounting and auditing becomes possible.
The Request Network
I think there’s a misconception that the Request Network is just a simple payment-request application (maybe it’s the name?). A PayPal 2.0. But Request is far more than that. It is a payment platform. Other decentralized applications can develop in tandem with it enabling possibilities not imagined by the Request team. It’s not unlike how Ethereum is a platform enabling a whole new decentralized internet. Request is a platform that could enable a whole new decentralized accounting system.
The fact that Request is a platform and not a DApp is one of the main reasons for my interest. Platforms enable innovation. While there are other projects attempting to be simple decentralized payment applications, Request transcends this one specific use case. In addition, as the blockchain begins to develop and disrupt our existing industries, it’s quite possible that new use cases and new companies will develop better products than the current decentralized applications. Platforms can coexist with the unforeseen. They aren’t in competition with all the innovation and revolutionary developments. They enable it. It’s the difference between Pets.com and the Microsoft operating system. Pets.com was outcompeted. Microsoft wasn’t.
TDLR: The fact that Request is a platform and not a simple DApp gives them far more potential.
Request enables sellers to issue payment invoices as part of a universal payment system. Anyone can issue a payment request on the Request ledger. The wallet and other applications will detect the payment request and present an option for the user to pay.
For example, let’s say I still need a pair of skis. It is wintertime in Alaska. I go to eBay and find that pair of wicked skis by someone called TheSki’sTHELimit. I send him a message, he opens up a request on Request, and I get a notification on my phone. I click the button and voila, the skis are mine. No need to use fee-for-use services like PayPal, no need to give him any personal information, no need to use a credit card. And if TheSki’sTHELimit wants to update his financial accounts, as long as his accounting software is compatible with Request, it can update automatically.
Amazon would benefit from using this system because they would save enormous money — both in accounting and audit fees — as well as by not paying the credit card transaction fees.
Gateways enable automatic currency conversion. Buyers can pay in any currency and sellers can be paid in any currency. Gateways act as middlemen APIs that convert currency between buyers and sellers. The genius of this is that neither buyers nor sellers need to hold Request tokens. They pay and receive in whatever tokens they would like and the gatekeeper pays the token (REQ) fee (and likely charges an additional fee as well). Kyber Network — a decentralized exchange with an interface that supports this — will act as a gatekeeper.
This allows a site like Amazon to issue a request and a user to pay it. Neither needs to have any blockchain understanding; neither needs to purchase or store any REQ tokens, and both can pay or receive in whatever currency they want. REQ is still burned in the transaction ensuring that the token remains a vital part of the ecosystem.
The layers of the network:
What do onions, ogres, and the Request Network have in common? Layers. The Request Network is broken down into definitive layers, each enabling a whole range of advanced financial actions. These layers are what makes Request unique. As I said before, what makes Request unique is not just the ability to pay and request on the network, but also the availability of a wide range of financial possibilities. To understand these possibilities, it’s important to understand how these layers work and interact.
The Core Layer: Built on the Ethereum blockchain, the core layer manages the ledger and smart contracts. It handles currency conversion and can interact with other applications built on top of it. It instantaneously processes when a request has been paid. The core layer also supports refunds, discounts, tips, and other basic additions or subtractions. This layer is sufficient for most simple transactions: like those eBay skis. This is free to use, minus only the Ethereum gas cost.
The Extension layer: But what if you need more complexity for more advanced transactions? What if you want to enable late fees, down payments, escrow (a contract that holds money and distributes it conditionally), or pay taxes automatically? The extension layer enables these functions. Anyone can build extensions.
Imagine you agree to pay your rent. Your landlord enacts a late fee penalty of 10% if not paid on time. You however, don’t want to have to budget for a large chunk of change leaving your bank account, so you use the extensions layer to pay your rent in small daily segments, automatically. Tax is taken out from these payments and transferred to the correct parties. But the money is also held in escrow and only released when your landlord transfers the appropriate money to the electricity company. You can also pay your deposit into escrow to provide safety to both you and landlord. All of this is possible on the Request Network.
This layer costs fees, paid in REQ. The more extensions one uses, the higher the cost. However, these fees will be low —anywhere from .05% to .5% depending on many applications one uses. Anyone creating new extensions can charge a fee for them. This encourages people to develop additional applications.
The Applications Layer: This layer happens outside the blockchain and connects with Request to access information or create requests. Virtually any financial service could be connected to Request, including accounting, auditing, and taxation. APIs will be developed to make this easier.
Imagine that you have a small business and all your payments and invoices are on Request. Quickbooks could potentially be compatible with Request. With the push of a button you could integrate all the data into Quickbooks.
Included in this layer is a reputation system that improves or decreases as a result of network behavior such as payment timeliness. Think of it like eBay feedback except it’s automatically updated by the network. This allows everyone to see the days overdue for all of a company’s contracts and adds another consequence in addition to late fees. I would be less likely to work with someone who I saw never paid invoices on time.
All these layers work together to make up the Request Network.
TLDR: Gateways like Kyber Network and the three Request layers (Core, Extension, and Application) work together to make the Request Network capable of far greater applications then just paying for your pizza in ether.
Automatic Accounting — Because Request uses a universal system, automatic accounting becomes possible. If all incoming and outgoing payments process through Request, then compatible accounting software can update in real time. No more late night pre tax day marathon sessions.
Salary request — companies can provide automatic salary payments with Request, all of which are reflected in the accounts. This form of request enables additional payments like overtime and bonuses.
Loan Request — when a loan is made today, there are several unconnected payments. You need to provide an initial payment, make payment installments, and pay the interest. Request enables all those payments to be made on one loan request.
Accountability — nonprofits and other companies can display a fully transparent record of their accounts for all to see. No need to guess where UNICEF is sending your donations.
IoT — The internet of things won’t use middlemen or third parties. It needs an irrefutable and accessible payment system. With Request, Amazon’s delivery drone can order new parts for itself and pay 20% upfront, with the rest being paid upon delivery. Machines can transact directly with each other.
Professional expenses — Request makes it easy for employees to be reimbursed for incurred company expenses.
Automatic Auditing — With fully transparent transactions, an instantly updated ledger, and automated accounting, digital auditing becomes possible. The cost savings and improved efficiency of this can not be overstated.
Crowdfunding: Requests can be created that can be funded by many people. This could potentially be utilized with upcoming ICOs.
Request has several interesting partnerships and affiliations that both provide additional functionality to their network, as well as cement their reputation in the industry.
Kyber Network and 0x: Both these projects enable decentralized trading. That means they enable easy conversion from one currency to another. Read about them here. 0x functionality will allow users to convert their money easily before they send it. However, the partnership with Kyber Network is the most interesting. The Kyber Network will enable automatic conversion; I spoke about earlier. Kyber will receive payment in one currency, exchange it (while burning REQ) and send along the currency to the seller. Simple and easy. If Kyber works well, it will make 0x’s contribution to Request obsolete. Request needs to be simple to use, especially for users who don’t understand blockchain; Kyber enables this.
Civic: Civic brings digital identity to Request. By having your digital identity on the Request Network, it becomes possible to use the accounting, reputation, and audit systems. In addition, if Request wants institutions and governments to use the network, they have to have integrated digital identities.
Aragon: Aragon provides tools for organizations that assist with governance and maintenance. They enable organizations to use many different complex organizational structures made possible by the blockchain. Request can provide the streamlined accounting services to these companies.
iEx.Ec — iExec is a decentralized cloud computing company. It’s a really fascinating idea. On one hand, Request will provide a solution to iExec in the form of accounting services, streamlined auditing processes, and the ability to regulate the financial interactions between buyers and sellers.
In return, iExec will assist Request in developing a decentralized auditing algorithm that will help companies run their own financial audits.
In addition, the iExec CEO is an advisor to the Request team.
Read more about iExec here.
Quantstamp — Quantstamp provides an auditing system for smart contracts. Quantstamp audited Request’s ICO.
TLDR: Request is partnering with several other companies in the blockchain space. Because they envision themselves as a financial platform, this integration and cooperation is very encouraging. It demonstrates that they are willing to collaborate with other projects for the good of the ecosystem.
Y Combinator — this is huge. Y Combinator is a start up incubator. It has incubated companies like AirBnB, Reddit, and DropBox (source). Every year, they pick a select number of startups, invest 120K in them, and invite them to Silicon Valley for a 3 month crash course on developing and pitching their product. Y Combinator has a 2% acceptance rate (source). Then again, with ideas like Washboard — quarters mailed to you monthly; $20 in quarter for…$27! — 2% might not be that low.
Regardless, Request Network was chosen as part of Y Combinator’s 2017 incubator class. This is incredibly validating for Request and provides them with not only additional guidance and advice, but a significant amount of recognition and reputation within the community.
ING Group — the Request team, when they were working on a different financial product, Moneytis, were backed by ING Bank’s startup accelerator. They received the backing from an applicant pool of over 60 projects. ING Group, because of legality and regulation cannot back Request due to their ICO. However, the fact that their team received that recognition and distinction is significant.
TLDR: Request has backing by one of the most prestigious startup incubators: Y Combinator. The Request team was backed by ING Group.
Token Details: REQ
REQ is the utility token for the platform. While the token is built on Ethereum now, Request wants to fork in the future to enable more advanced functionality. They hope to use proof of stake in the future.
All network fees are paid in REQ. Once paid, that token is burned. So REQ is a deflationary token.
Total Supply: 1,000,000,000 tokens
50% released in ICO
20% to early contributors
15% held by Request for network incentives and development
15% held by the team and advisors. These are vested for 2 years.
Because there is a maximum supply of tokens, as demand for the network increases, so will the price of the token. Network fees can decrease to account for an increasing token price. Lots of users will help keep the cost of the network low and the platform competitive.
The ability to charge a fee for developing additional extensions incentivizes an expansive network.
The REQ token allows the holder to participate in the decision making process of the network. However, this is not available yet.
Things To Come:
Their roadmap offers fantastic short term potential for Request. At some point over the next two weeks, Request will launch their core platform and the API, known as Colossus on the Ethereum testnet (the Ethereum testnet is a Ethereum blockchain created for test purposes where the ether is not real). The platform will allow for simple requests (only in ether) to be issued and accepted.
(UPDATE: 12/27) — Request released Colossus onto the Ethereum testnet.
The API, for those who don’t know, is just the simple interface that allows non techies to utilize the Request platform. So everyone gets to share in the fun. The above interface is the API.
I think this update, a real working product, could really drive Request’s valuation. Not many platforms and DApps have working products at this time. I’m honestly excited to try it out for myself.
Additional roadmap goals: The main launch will occur during the first quarter of 2018. They will also enable compatibility for other ERC20 tokens (tokens built on Ethereum). They plan on releasing a “Pay With Request” button that websites can integrate — similar to the “Pay with PayPal” button.
Future updates will include support for physical stores. Imagine a QR code popping up when you checkout. You scan that code and pay the request.
Additionally, they plan on supporting complex payments. Let’s say I’m paying Dan and then Dan is paying Bob. With Request, I could just pay Bob and the network would process that the money went through Dan as well.
Request has an impressive “mind map.” It basically lays out all their steps and goals for each and every project development. It is beyond the scope of this article, but I appreciate their organization and transparency.
TLDR: Request’s demo product is releasing within the next two weeks. In Q1 2018, the main product will launch officially. They have lots of additional plans on their roadmap.
Request is more than just a DApp. DApps can be phased out by new technology. DApps are trying to innovate but ultimately, they have specialized use cases that are vulnerable to competitors and new innovation. Request is a platform. Request enables an advanced network of financial tools. Thus, it is less likely that Request gets phased out by new innovation because Request enables that innovation and provides the tools for it.
- Simple and easy to use interface that allows payment in any currency
- An industry ripe for disruption. The value spent on physical audits and financial services is huge. This means lots of potential for Request.
- Advanced payment features such as loans, escrow, late payments, and internet of things functionality.
- Automated accounting and automated auditing for companies
- Users can finally transact online without compromising their information.
- A really strong team that engages with the community — they release biweekly updates that are enticing and easy to understand. They have responded quickly to any questions I’ve asked. Their transparency regarding their mind map is terrific. They have incentive programs for network development and finding bugs.
- Backing by Y Combinator
- A launch of a working product that I anticipate will bring many new users and investors.
While I am excited about this project, there are also concerns I have. It’s also very important to understand the risk with investing in early projects.
- A reliance on Ethereum — Ethereum has its own scaling problems and uses what I believe is an outdated proof of work protocol. This limits Request. Request anticipates that new Ethereum developments such as proof of stake, sharding, and sk-Snarks will greatly benefit Request. However, there are no guarantees that Ethereum delivers on these goals. The success of Request is dependent on the success of Ethereum. Although this is true for all ERC20 tokens.
- Which comes first, the chicken or the egg? — Request needs a lot of users to provide a robust network. Industries won’t adopt it if accounting software isn’t compatible; accounting software won’t be compatible if industries don’t use Request. Fees need to be low for users to come; users need to come for fees to be low. However, I think that if the product is developed and supports all the aspects that the team anticipates it will, the users will come.
- Competition with other crypto payment solutions — there are many other projects trying to offer a way to pay in cryptocurrencies. However, as I stated earlier, no one is doing what Request is doing. No one is enabling a standardized accounting and auditing system; no one is creating a financial platform. In that, Request is unique.
Request will be very interesting to watch over the next few weeks in regards to their demo launch. With a working product, we will have a much better sense of what to expect with Request. When I look at blockchain projects, I want to invest in ones that I could foresee myself using. Request is absolutely one that I will use.
A thanks to Ron Grinberg, Nir Kabessa, Tal Kabessa, and Ben Mogerman for their pre-post comments
You can buy REQ from Binance if you’re interested: https://www.binance.com/?ref=10928176 (Referral Link)
Donations and support are greatly appreciated
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Disclaimer: I am invested in Request. This is not investment advice, merely my opinion on the platform. Do your own research.
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