In the previous post, I highlighted the biggest challenges standing in the way of a decentralized crypto-commerce future, namely that: (1) most people store their money in banks [1], not crypto (2) crypto doesn’t work in eCommerce where payment is made before product/service delivery[2].
In this post, I explain how we overcome these challenges and our strategy for the next 24 months.
1. Integrating with fiat (Verify Payments)
Since most people store their money in banks, it follows that we must find a way to integrate with banks. Our solution, Verify Payments, does just that: integrate directly with banks.
We’re releasing an alpha version of Verify Payments this coming week. Essentially, we integrate with banks through their own private APIs (since most banks don’t have public APIs) and provide a quick, low cost bank-to-bank transfer solution to move funds from buyer to seller.
This description begs many questions, so let’s address the major ones below:
Q) Why bank transfers and not credit cards?
A) This is detailed in the previous post; the primary reason is that credit card transactions are reversible (and bank transfers are not). Accepting credit cards would expose Verify to huge risks [3][4] even after a transfer is “completed”[5].
Q) The primary challenge with bank transfers today is that they are both slow and expensive. How do you address this?
A) Our Verify Payments solution provides instant, low-cost transfers. We achieve this through a combination of two techniques. The first involves integrating with banks, either through an official partnership or a direct integration with their online banking interface. The second technique is not one we can disclose publicly yet; the concept revolves around creating a layer above the banks that would enable low-cost transfers between banks on this network.
Through an early version of the Verify Payments API, we were able to conduct a bank-to-bank transfer in just over 20 seconds. That’s the total time it took to actually move funds from one account to another in the UAE (This demo ran on Emirates NBD, one of the largest banks in the UAE):
Before Verify Payments, no UAE bank-to-bank transfers could be concluded sooner than next business day. This is game-changing.
We’re already beta-testing the solution out with various prospective customers. As you can imagine, a solution like Verify Payments would be incredibly useful to crypto exchanges, marketplaces and various other customer segments.
We’re also working with our attorneys at King & Spalding and local regulators to ensure that Verify is fully compliant with the relevant financial regulations.
2. Reputation (The Verify Protocol)
As transaction volume grows on Verify Payments, we’ll begin using the underlying transaction data to fuel the reputation protocol. This data will provide immediate benefits to users of Verify Payments: 100% buyer protection from the get go, and credit to sellers on the Verify Payments platform (in proportion to the reputation they’ve accumulated thus far).
These benefits will drive more transaction volume, further enhancing the reputation data we collect in both quantity and quality. This is the core network effect behind Verify. Verify continues to improve for existing users, while also creating a moat that becomes increasingly difficult for potential competitors to cross.
It is at this stage that CRED fees are instituted, requiring 1% of any transaction to be paid in CRED. This fee is paid in CRED regardless of the medium of the transaction (fiat, crypto or any other medium).
With time, Verify would become the de facto reputation protocol upon which financial blockchain applications will be built.
3. Reputation Platform
We’re designing Verify with this end goal in mind: to open the Verify Protocol to developers, enabling them to leverage the reputation data that we’re collecting to build their own applications.
This is a symbiotic relationship: Developers would be able to leverage our reputation data, while also feeding transaction data of their own — this magnifies the scale of data collected. Verify would soon become the de facto “credit score” of any blockchain — allowing buyers and sellers to interact seamlessly, thanks to the power of reputation data and the built-in credit facility that Verify offers.
Enabling access to third parties also means that participants aren’t held hostage to a particular platform, enabling secure access to authorized parties [6]. This could support a myriad of applications — everything from micro-payments to business loans. We only disclose the data relevant to external 3rd parties, protecting sensitive customer transaction information.
Roadmap
These 3 steps collectively represent our high-level roadmap:
A detailed roadmap for each stage of the above will follow. While discussing this grander vision, it is crucial to reflect on one important fact:
A maniacal focus on execution is absolutely key to get us where we need to be.
A persistent challenge, especially for an early-stage company like ours, is concentrating our efforts to avoid getting stretched too thin in various directions. For now, this means 100% focus on Verify Payments.
We will take time to regularly assess our overall progress against our roadmap — a review we plan on running quarterly. These will be announced ahead of time, and will include a live presentation with a review of key metrics, progress on this master plan and an open Q&A session.
We look forward to sharing our alpha release of Verify Payments with you in the next few days!
References
[1] Starr, R. M., (ND), Money: in transactions and finance, Dept. of Economics, University of California, San Diego. Available at: http://econweb.ucsd.edu/~rstarr/Money%20in%20Transactions%20and%20Finance.pdf [Accessed March. 2018].
[2] This is principally because it requires trusting the counterparty to provide a service after payment has been made. This explanation is covered in the whitepaper and in the previous post.
[3] Butaru, F. et al. (2016). Risk and risk management in the credit card industry. Vol 72. Journal of Banking & Finance. pp[219–239]
[4] Zhao, Xi and Sun, Yingjun. (2012). A Study of Third-party Online Payment: Risk Control and Supervision Analysis. Eleventh Wuhan
International Conference on e-Business. Paper 95. Available at: http://aisel.aisnet.org/whiceb2011/95
[5] The magnitude of this risk is equivalent to the sum of all of the transactions processed within a 180-day period, in addition to the chargeback fee associated with each individual transaction. This would result in a combined potential risk that is greater than 100% of all transfers processed!
[6] Today, large Internet companies (e.g. Google, Amazon, Facebook) own the “highways” that customers tread to reach sellers. This centralized oligopoly puts sellers of all sizes at the mercy of these few centralized players. Further, there have been several documented cases where these companies have exercised this imbalance of power to their advantage — acting against the interests of the sellers they ostensibly serve.
Special thanks to Aaron Oliver, Pierre and Ibrahim for reviewing early drafts of this post.
