With COTI’s blockchain 3.0 solution, using cryptocurrencies will be as easy as loading up a Starbucks card COTI Follow Oct 31, 2018 · 7 min read

The beta version of COTI Pay, our first app built on the Trustchain protocol, will be released soon. To reign in this exciting milestone, our CEO Shahaf Bar-Geffen and Greg Kidd covered key topics related to the widespread adoption of crypto for everyday use cases. They also discussed the many challenges common to digital currencies and blockchain.

Shahaf and Greg at the San Francisco Blockchain week

From the Federal Reserve to crypto

Greg comes from a background in traditional payment consulting with banks and telecoms. One of his early involvements was with a startup that dealt with payments, which got him very interested in how payments could work better all around the world. On the startup side, Greg was lucky to work with Twitter co-founder Jack Dorsey and later became the risk advisor at Square. He also held a CRO position at Ripple and is an investor in a number of businesses through his investment company Hard + Yaka, including COTI, Coinbase, TransferGo, GlobaliD, Yoyo Wallet and more.

The road to the mass adoption of cryptocurrencies

There are a few main challenges to cryptocurrency and blockchain, including compliance, liquidity, and scaling. To address these shortcomings, Greg believes in regulatory clarity on the path to making digital currency fungible and usable globally. If a country has a ban on cryptocurrencies, much like China, it’s important to be educated with regards to country-specific regulations. In the US, there need to be greater lobbying efforts to ensure cryptocurrencies are not classed as securities.

“Regulatory clarity and a willingness to let solutions work — not just on a national basis, but on a global one — seems critical to make it possible that if there is a success in one country for it to spread to other countries. We’d like to see the uptake rates of China, but in a way that is transborder and works around the world as opposed to such a siloed solution,” commented Kidd.

Greg Kidd

Adding to this, liquidity measurements will ensure a frictionless experience and eliminate the need to pay a margin to get from crypto to fiat. Country-specific lobbying will help with such issues, as well providing a facility known as synthetic liquidity. This is when fiat currency is provided to merchants who are not comfortable with accepting digital currencies. So even if a merchant is not familiar with crypto, the system allows cryptocurrency to be spent by the payer anywhere and it becomes a preferred option if the merchant thinks that the cryptocurrency is at a lower interchange rate.

Watch the full video of Greg and Shahaf’s webinar

As for scalability, proof of history and proof of time are two notable developments Greg has seen in the Fintech space. These modalities can scale well beyond blockchain to process hundreds of thousands to millions of TPS. With proof of time, there is a timestamp that allows you to settle in parallel rather than in a serial fashion, which solves one of the biggest challenges in the digital currency sphere.

“One of the three challenges of blockchain besides compliance and liquidity has just been pure speed. If we can get to a ledger that can process that quickly, it is possible that we can have a universal ledger for the world that everyone is attached to, and it could actually keep up with the transaction processing speeds while not being intensive like the PoW method,” explained Kidd.

Stable coins and loyalty programs are the way forward

Stable coins and loyalty programs go hand in hand. If someone pays with a digital wallet or a QR code and provides a measure of personal information about themselves, a merchant may provide a generous reward in return. This can come in four forms: cashback, points, digital currency or a price stable coin. Both cashback and points are limited as a currency balance will need to be maintained for 200+ countries, while points cannot be sent to other people. Digital currencies like BTC, ETH and XRP are volatile and are treated more as an investment, rather than a currency. Stable coins, however, are the most viable rewards system because they are price stable, universal and can be sent from person to person, as Kidd explained.

Rewards systems have been around for a very long time. Back in the day, Green Stamps were a type of rewards currency used by over 70% of merchants. This secondary currency was like bonus money that consumers could spend on things that they normally wouldn’t have. It was likened to ‘happy money’ and had a big impact on consumer behaviour. The same goes for frequent flier programs that have become a thriving economy and ecosystem.

The goal is to create something similar for digital currencies by tying usage to rewards and making it portable around the world. Price stable coins are also a significant factor, having less volatility than even USD/EUR and a lower tendency for inflation and the possibility of being debased. This is why, according to Kidd, price-stable digital currencies may have a significant place in the future of our lives.

Identity is key

One of the many reasons Visa and Mastercard have been around for so long is that they are a great trust network for identity. Merchants who can accept Visa and Mastercard are known to Visa and Mastercard, while people who pay with credit cards are known to the banks that issued them.

Greg suggests creating an infrastructure where everybody in the world has an identity and attached to that identity is a hot wallet which holds fiat and also has cross liquidity with cryptocurrencies or other assets of value like stocks. Once people have a compliant identity tied to a stored value account, then a balance can be held in their native currency, and it will be much simpler to convert, receive and hold another currency. Adding cryptocurrency won’t feel like a daunting step and will be as simple as loading up a Starbucks card.

“Part of the reason for our investment in COTI is we see that as a lead alternative to Visa and Mastercard in creating another trusted network between payers and payees that has speed of settlement, low costs and is really open to everyone. Because Visa and Mastercard still exclude a certain class of payers and payees,” said Kidd.

Long-term outlook of crypto

According to Kidd, everyone will have a hot wallet although traditional banks will still be around, as will Visa and Mastercard. Visa and Mastercard are a great trust network for identity, although they will have to sharpen their pencils. Because if their interchange rates are too high, or if settlement times are too slow, then people will have bypass arrangements that will go around Visa and Mastercard.

“COTI in our minds solves a real problem. COTI feels very real to me, so we’re in for the hunt with them because we think that in the future an alternative form of currency and an alternative form of payment rails will exist,” commented Kidd.

With an increase in settlement rails, you can either increase the richness of data passing between merchants and buyers or have a proxy for setting how much private information the buyers want to share. Such options allow merchants to have tailored programs and to better serve users, while users have better privacy options. This service has not been available in the past few years.