A compliance model is emerging from P2P to P2P transactions.
Bartering was the first way of doing commercial business.
How does it work? We exchange goods or services. There is no money. Its core concept is so strong that even after thousands of years, it still exists in the present days. The agro-industry still uses it.
Imagine that you are a corn farmer. You’ll need more than only corn to live, and I bet that you probably got some production surplus. As your neighbor, I produce milk, and I’m not able to drink all my production. Instead of throwing it away, you and I decided to trade these leftovers.
So far, so good, but you are a super-efficient farmer and started producing more corn that your family and mine can consume together. Many problems arise from this process:
You have a time frame to sell it. Otherwise, it will rot.
It wouldn’t be smart to walk around the neighborhood with 300 pounds of corn on your back, trying to negotiate it for another thing.
What are we going to do with it? How to represent this excess (and also carry less weight)? Well, the bear concept of money as we know today has passed through many mutations over the years. One of these representations that we are most familiar with is as gold or silver coins.
Super cool, now your spine is happy, but new solutions come with new problems. Before for a burglar to steal from you, they needed to carry a lot of weight. From now on, the only thing they need is to take from your pocket these little light coins, and all of a sudden you are broke.
This small piece of metal represents something. Either as coin or paper, it has done its job so far — facilitating trade — . However, we were left with many questions:
Where does this piece of paper come from?
Does it have ballast?
Can we track all its history?
As a good herd, we delegate this harsh task to our governments.
If you are wondering why gold was picked as a currency, one reason is its rarity. It’s impossible to copy. You can’t print gold (at the time I typed it, not even with nanotech). After all, gold is a metal that can only be found in nature, in its solid-state.
It is so rare that the jewelry that your partner is wearing is made of something thought to have been produced in supernova nucleosynthesis. Putting it simply, that was formed with planet Earth itself at the very beginning.
Mainly, it was a new way to represent value for a group of people. The civilization moved from direct trade to indirect trade. From synchronous to asynchronous, and every async process brings a whole set of new problems. Consequently, between paying and receiving, or vice-versa, there is a hiatus, a gap of time.
Have you ever paid for a product that was never delivered? These are problems related to this gap, and they can quickly become more damaging. The settlement is a problem in the present model. However, many jobs are out there because of this gap, ask lawyers.
Think about a car-buying transaction, the payment is not the only issue, but as well the ownership transfer, pending fines, financing, etc. There are a lot of async tasks that must be performed that can go wrong.
Instead, what if we could represent property and rights, securely, using technology? That’s where blockchain takes place.
There are two terms that we need to understand before moving on, cryptocurrency and digital asset.
Cryptocurrency
Cryptocurrency is digital money. Every blockchain has its currency. For example, Ethereum blockchain uses Ether as fuel, represented by ETH symbol. We will need it to perform transactions, whether directly transfers or more complicated things.
Digital asset
Crypto-asset or digital asset is an electronic representation of something that has value. Ex. Your shares of a company, a building that you own, your car, a physical cat, a digital cat, etc.
The cryptocurrency is a digital asset.
A digital asset is a bunch of numbers and letters that can represent anything literally. Unfortunately, sometimes all technology and cryptography are not enough to assure an asset, especially when it is a physical one, to make it trustworthy. When a digital asset represents a real thing, we expect it to exist and to be legal.
Who can prove to us that a digital representation of a car, legally gives it the car ownership? That’s not easy, because most of the time we talk about ownership, we need government acknowledgment to accomplish some achievements.
It is pointless to build a digital asset of something that for the government is not legal or misses precise regulation from the correspondent agency.
Default P2P
The P2P default model, as we know today, accepts anything, and there is nothing that any government can do to stop it. It works well when both sides can rely only on technology as the warranty. Nevertheless, we have a considerable amount of money flowing on the decentralized exchanges every day. Decentralized exchanges use the software as an intermediary, and both sides trust in this software.
The big question in P2P free model is: If something goes wrong, what we can do? Whom are you going to call? How we scale the issue to another level of support? Like it or not, we need to be backed by the government and appeal to public services to rescue us.
Compliance P2P
The P2P-CM, the compliance model, aims to remove this complexity and to add warranties that are missing in the P2P default model. Sometimes it might be attached to a government endorsement, but there are many other situations that it won’t be required.
Unlike default P2P, inside this contained model, the digital asset is controlled, the peer is verified, and the currency is backed.
When we talk about P2P, it is not restricted to a person-to-person transaction. The peer (P) can be either a person or a business. Hence, boosting B2B, B2C, B2C, etc. The way that this model is emerging from many projects is around these group of functionalities.
The P2P compliance model
There are many other responsibilities performed by these groups.
Many opportunities are popping out of this emergent model. Apart, there is nothing brand new or unique. However, when we plug everything together, we got a fast, secure, and robust ecosystem — empowering a new way to do complex business transactions.
A good example is an Initial Exchange Offering. It puts almost everything mentioned above to work together.
Imagine that you have found the perfect apartment. Although you don’t have the entire amount of money to buy it, you own some properties that you’d like to put into the deal. That is a complicated process that involves a lot of documentation, signatures, and checks to make all things right. It is costly and slow, and often impossible.
This new model allows us to go back to the origins of commercial trading, bartering. We will carry on cellphones all our properties: equity, car, house, etc. Furthermore, we will be able to make one atomic transaction that automatic transfer ownership and rights. It is just the beginning.
The governments could be working on protocols to allow this type of transactions for public transportation, on-street public parking, public schools, etc.
