IOSG Ventures
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IOSG Ventures

Source: restream

Streaming Money: future of payments

Automating continuous & risk-free payment management

Today employees get paid at the end of the month (or biweekly if you’re in the US) and receive balloon payments on their bonuses (usually annually). Customers pay the streaming companies like Netflix, Spotify and Hulu annually or monthly for their services. Gamers pay for their PS4 or X-box games upfront in a one-time fee.

Commonality is that consumption occurs continuously while payments occur discretely and regardless of use. Alice watching Netflix for 2 hours/week pays the same as Bob watching it for 10 hours/week.

Programing money as a function of time

Projects like Sablier are trying to disrupt this model by enabling “continuous and automated payments”. Sablier, acquired by Mainframe earlier in July 2020, enables continuous payments using a simple formula, where money is a function of time –

Y is the amount of payment, a is the constant agreed upon by two parties and X is the independent variable. Sablier calculates Y as a function of time (aka X is time).

So a minimum wage worker in Australia will input ‘a’ = 19.84 AUD/hr and the employee can receive their payments in an hourly fashion.

This simple formula can be manipulated to incentivize and reward ecosystem participants in numerous ways as well!

For example:

Scenario 1: Rewarding long-term engagement with promotions

Eq. 2 shows an acceleration in incentives w.r.t time where participant rewards increase as they engage longer with an ecosystem/company. Value creation is known to accelerate with time and greater engagement (also known as network effects). With the use of streaming payments, the value creators can be rewarded proportionally. This is perfect for open-source developers on crypto projects or rewarding activity on DAOs.

Scenario 2: Rewarding Engagement with discounts

Eq. 3 shows a discount in the amount required to be paid by a user in exchange for their loyalty. This is applicable to membership-based platforms where users get rewarded (in discounts) for their loyalty and engagement. Imagine getting discounts from your online shopping platforms as you shop more. The concept is well used today with Grab or Starbuck’s point systems. Solutions like Sablier can help with adoption of such systems in a cheap and convenient fashion to every SME and not just the brand-names.

Who is solving this problem?

Source: Sablier.finance
  • Sablier.Finance is an application with a UI interface for non-technical users. Built on Ethereum’s EC-1620, Sablier is a money streaming protocol in which users can connect their wallets (Metamask, Coinbase Wallet or via Wallet Connect) and use the platform to send/receive payments via DAI, USDC or other ERC-20 tokens.
  • Joule is built on the Bitcoin Lightning Network and is a WebLN-enabled chrome extension that enables payments. It is useful for technical users who are node operators on the Lightning network and can make micropayments as small as 72 satoshis.
  • Superfluid is built on the Ethereum network and is compatible with ERC20 and ERC777 tokens. It is a smart contract framework and can be used to develop applications like Sablier Finance.

Mainframe recently announced a zero-coupon bond system enabling borrowers to offload debt quickly and increase purchase power. Mainframe’s acquisition of Sablier suggests that the Sablier protocol will enable automation of payments and distribution for Mainframe’s borrowers and lenders. Additionally, Sablier’s protocol can provide infrastructure for governance, staking and reward distribution.

Introducing trustlessness, no counterparty risks and improved efficiency in managing finances & payment are big wins. Projects like Sablier and Joule have demonstrated that this can be done and as more building blocks are developed and integrated with one another, new & exciting realities of life should be expected!

Commercializing the technology

Using the technology developed by Sablier has multiple real-world applications. One of the biggest impacts is anticipated to be in HR Payroll systems. A solution like Sablier’s is an essential building block for more sophisticated payroll tech. For example, if integrated with HR payroll systems like Sprout.ph, the system can allow employees to receive payments on an hourly basis as well as draw credit against their future salaries.

Solutions like Sablier improve accountability and transparency of the payment processes as well. Automating payments can be integrated to enable the gig economy workers (affecting 10% of US’s working population) to receive pay checks with immediacy.

Source: gocardless

Benefits of programable payments

Programable payments can be manipulated to reward and incentivize users/employees in myriad ways with multiple variables like quality of work delivered, performance metrics, amount of workload etc. Its real-world applications are numerous too!

It opens avenues for consumers to spend “as they consume” and for businesses to incentivise engagement (therefore retaining users).

Pay-outs:

  • Streaming media: Pay for Prime/Netflix/Spotify as you watch or listen.
  • Gaming: Pay for games like God of War and Witcher as you play instead of upfront costs.
  • Telecommunications: Pay for mobile data as you go (instead of buying a monthly plan!)
  • Investments & funding: Yield farming harvest every second or minute, investors can recover unpaid capital, if necessary.
  • Multi-party contracts: Multi-party contracts (invoicing & settlements) can be automated and made continuous to prevent fraud.

Pay-ins:

  • Compensation: Receive salaries in real time instead of once a month.
  • Content creators: Spotify artists can receive their revenue share in real time as users consume their music.
  • Payments to DAO members: members can receive their payments on-the-go which can be redirected as a % of revenue.

🦄 About IOSG

Founded in 2017, IOSG Ventures is research and community-driven with offices across China, US and Singapore. We focus on Open Finance, Web3.0 and cross-chain ecosystems, investing in teams with top potential worldwide. Our portfolio covers more than 60 projects, including Layer-1 blockchains (Near, Polkadot, Cosmos), middleware (Celer, Raiden, Reach) and applications including DeFi (MakerDAO, Synthetix, UMA). We have been actively involved in various developer & DAO communities. We believe in long-term partnership and we work closely with our portfolios to advise and support them along their journey of entrepreneurship.

If you would like IOSG Ventures to consider your project, please send a summary of your project along with a pitch deck and/or white paper to hello@iosg.vc

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