Our approach to solve the Cryptocurrency Volatility problem

Photo by Chris Liverani on Unsplash

When we started thinking about our retail payments platform and how will it work with our ICO, we knew that we needed a solution that will not let one affect the other. Simply put, with TillBilly’s ICO we want our token to have the flexibility of a decentralized token, while the mass adoption of our payments platform can only come with Value Assurance.

So we designed our payment solution around the following non-negotiable guiding principles of value assurance for both shoppers and merchants:

1. The value of “credit” stored in the Shopper’s account with respect to the Fiat currency cannot fluctuate due to cryptocurrency market movements. (e.g 100 USD credits will always allow a shopper to purchase goods and/or services upto US$100 )

2. The merchant must be able to receive the assured settlement value in fiat currency (i.e sale price — transaction processing fee)

Volatility is a function of time, i.e the longer the time a free market cryptocurrency sits in a user’s wallet, less predictable becomes its price with respect to fiat.

One way to achieve this would be to convert Fiat to cryptocurrency immediately before the purchase, But the challenge is that there is no instant (and cheap) mechanism to exchange Fiat currency for cryptocurrencies.

• If shoppers want to exchange their Fiat currency for crypto-tokens via crypto exchanges through bank transfers, they have to do it well in advance as it can take days via bank transfers or clearing houses to deposit Bitcoin into a shopper’s account. The process takes even more time and hops if the token is not traded for Fiat currency directly on exchanges.
• The instant option is buying cryptocurrency with Fiat is with a credit/debit card, or via Cryptocurrency ATMs, but generally with this option the shopper gets a poor exchange rate as the high transaction processing fee is passed on to the shopper.

To overcome this problem, we designed our unique Two Asset Model using the Stellar blockchain infrastructure

For some context:
TillBilly is a retail payments network on the Stellar blockchain infrastucture, coupled with our proprietary integrated point of sale terminal (hardware) for contactless Payments, Digital Receipts and Reward Points.
The goal is to break into the monopolised intermediaries in the retail card processing space and provide merchants an ultra low fee alternative to accept payments, and share a part of that processing fee back with the shoppers.
Our target audience are average users i.e everyday shoppers and merchants who do not understand, or at worse distrust digital currencies. Hence our focus is to abstract the complexities of acquiring and managing digital currencies, eliminate the fear of volatility (w.r.t fiat), and build a system that is as seamless and familiar to users as paying with a card or Apple Pay.
More infomation on TillBilly.com

TillBilly’s Two Asset Model

Our two asset model offers a unique solution, where users can easily fund their wallets via low/no fee bank transfers in advance, and hold that credit without the risk of price volatility.

1. We provide shoppers an easy way to trade their Fiat currency for a Fixed Value Credit (Fiat_Asset). This records the traded value on the distributed ledger for full transparency and auditability.
2. The value of the Fiat_Asset does not fluctuate (e.g 100 USDC = USD 100)
3. During a transaction at the point of sale, these Fiat_Assets are traded “just in time” by TillBilly for the equivalent BILLs required via the Stellar Distributed Exchange. By doing so, we secure the “transaction value” and the risk with volatility of BILLs is mitigated.

TILLBILLY’S PAYMENT TRANSACTION MODEL — SIMPLIFIED OVERVIEW

1. Think of it as if a shopper buys a “TillBilly Gift Card” worth for example 100 credits by paying $100 from within the app. These 100 credits are now stored in the shopper’s (stellar) account.
2. Just like gift cards, these credits can be used at any participating store for buying goods and services.
3. To make a payment, the shopper simply “taps” a registered NFC card or a phone on the TillBilly Terminal and enters the secret PIN. This authorises the transaction for the purchased value (e.g if purchase value = $100, 100 credits will be deducted from the account)
4. Behind the scenes, these credits are used to purchase BILLs (TillBilly’s tokens) at the market rate via Stellar’s Distributed Exchange. These BILLs are then sent to TillBilly and in turn TillBilly deposits the settlement amount into the Merchant’s bank account.
5. A part of the merchant’s transaction processing fee is shared with the shopper as reward credits that will be used to discount the next purchase, so in this example if the shopper had reward credits from a previous purchase, they for example will pay $99.5 instead of $100
6. At the end of the business day , TillBilly settles the end of day transaction amount, minus the fee in Fiat currency (e.g $99) into the Merchant’s bank account via bank transfer.

The best way to see it in action (as an example) is to check out our Transaction Example and Simulation document

http://bit.ly/tillbilly_tx_example

And for those who are really interested in the details

TILLBILLY’S PAYMENT TRANSACTION MODEL — TECHNICAL BREAKDOWN

Note: The section assumes that the readers are familiar with the concepts and terminologies used by the Stellar distributed payments infrastructure. For more details please review Stellar’s documentation

1. The shopper deposits FIAT currency into TillBilly’s bank account via the TillBilly app
2. Every shopper’s TillBilly (Stellar) account will hold trustlines for at least two assets issued by TillBilly as the Anchor. a) A “fixed value credit asset” (Fiat_Asset) representing shopper’s account credit value equal to the amount purchased in Fiat, specific to shopper’s country. E.g $1 = 1 USDC (USD Credit Asset). This is an internal token which is only used for TillBilly operations. b) The “BILL” asset. Upon the receipt of Fiat currency, TillBilly deposits the same value in Fiat_Asset (100 USDC in this case) into Shopper’s Stellar account.
3. When the shopper pays at the terminal, the NFC_ID and PIN are encrypted at the terminal and sent to the TillBilly Server to execute transactions. Appropriate multiple signatures are retrieved or required operations.
4. The TillBilly Server creates an “offer” using shopper’s account on the Stellar Distributed Exchange to sell Fiat_Asset for BILL at the market rate.
5. The TB Server also creates another offer using TillBilly account to buy the Fiat_Asset by selling BILLs at the market rate. (Only TillBilly account can buy or sell FIAT_Asset)
6. The BILLS are then transferred from shopper’s account to TillBilly’s account. The transaction is marked as completed
7. At some point in time during the day, the merchant’s bank account is settled with the settlement amount

Now we are not financial experts, but engineers who have applied logic and mathematics to solve a problem. However we would love to hear from the experts in the finance industry on what they think about this solution. Please leave a comment here or email us at hello@tillbilly.com

Disclaimer: A BILL is intended solely as a mechanism for using the services offered through the TillBilly payment and digital receipts network. BILLs are not for speculative investment. No promises of future performance or value are or will be made with respect to BILLs, including no promise of inherent value, no promise of continuing payments, and no guarantee that BILLS will hold any particular value