Cryptocurrencies for e-commerce revenue: when card payments are already too bulky and bank transfers are slower than an airplane

    The head of Nextury Ventures, Ilya Laurs , a venture capitalist from Lithuania, rose to the mobile application market when he was just in his infancy, lived and worked in Silicon Valley and returned to Lithuania to invest in fintech startups in his homeland.

    XXI century: a plane flies to America 10 hours, a bank payment lasts two days

    . Last week I posted a part of our conversation with him, where it was about bitcoins . Today is the time of dessert, a conversation about how cryptocurrencies can change the payment market in particular and make the whole banking system change - this is directly the area of ​​professional interests of Ilya and concerns everyone who has ever dealt with payment from abroad or monetization of projects by micropayments.

    How cryptocurrencies will change e-commerce

    Cryptocurrencies are necessary for e-commerce, the market desperately needs them, and when the moment comes, they will swallow them instantly. Because bank payments and credit cards, just like physical money, are incompatible with the virtual economy, none of these tools meets its requirements. This is nonsense when, in the twenty-first century, in order to buy a button for me, it was necessary to fill out the form more difficult than to get the rights: where do you live, what address, what phone number, credit card number, to whom it is registered and so on.

    Moreover, the degree of fraud and risk, and the files, is also inadequate. In e-commerce, the number of frauds - that is, the use of other people's credit cards - is off scale. Inconvenient, bulky, unreliable, and most importantly - a lot of theft. This is in a segment where, it would seem, sorry, guys, banks could try better.

    Therefore, all Internet commerce, virtual payments, they simply beg: "Give us a convenient, reliable, simple tool to use." I'm not talking about the fact that the latest achievements in the field of virtual commerce do not even require micropayments - nanopayments, when you buy not just a button, but for the digital tailcoat of your avatar in some second universe. The cost of payment in physical money can be a third of a cent, and for this, launching the entire credit card mechanism is so cumbersome!

    Having talked with the guys from the gaming industry, you understand that due to the heaviness of payment instruments, up to 90% of profit is lost: that is, they could make ten times more money if all this would be cool and convenient. This is a whole class, let's put it this way: micro, nanopayments, normal payments, reliable for all online commerce. This is a gigantic market.

    Now they talk a lot about the Internet of things, when things themselves communicate with each other. Naturally, trade and market relations will arise between them: the bulb, relatively speaking, declares to itself how much energy it has consumed, while selling directly to itself, it may have some kind of digital balance, and wherever it is turned on, it pays for its but energy, as it burns, is written off from itself. Or are you a designer, your computer requires a three-week render, it immediately gets access to the virtual machine - while still comparing the workload of the main supercomputers and at the auction it chooses which one is less loaded at the moment and can offer the best price - and it’s instantly paid for using resources with bitcoins - and all this without human intervention.

    These self-financing on the Internet of things are already asking for themselves. Because, in principle, it is more convenient for people to wave a mobile phone or something else, and you should be considered the normal number of Euro rubles, as they say, rather than a godless course changed - this is also adequate to expect in the twenty-first century. Because now the conversion on the same credit card is predatory: in the same America, restaurants and shops pay the bank up to five percent for servicing a credit card. When converting, the user loses up to three percent. In our digital age, this does not make any sense at all, it is beneficial only to banks, and not to the market.

    Bitcoin and the State: Cheering Leviathan

    While the development of cryptocurrencies is very dependent on how the state will look at bitcoins. Now there is a lot of gray zone, and the traditional reaction of all regulators to the gray zone: we can punish and close, and we will not understand what and how. Nevertheless, money is an area where the presumption of innocence is most often not applied: either you act as allowed, or a step to the side is taken as an escape. That is why one of the main parts of our work now is a kind of evangelism, work together with the State of Lithuania - the Central Bank, the Ministry of Finance, at the level of both the city hall and the ministry of economy: what it is, how it works, what potential risks, or, conversely, It brings benefits. We now probably spend more than half the time clarifying, regulating and engaging in such projects with the state,

    And then you can return to specific businesses. Here is an illustration for an example: America passed the law that bitcoins belong to the class of physical goods, that is, like, say, oil, they are subject to regulation as exchange goods. Europe so far conditionally holds the point of view that it is simply a foreign currency. That is, accounting, changes in the balance sheet must obey the same rules as in the presence of foreign currency on the balance sheet. China passed another law that for them, bitcoin is a digital commodity.

    That is, you can buy, store, invest and so on. But then the options begin: do you need or do not need a monetary license, do you need or do not need the permission of the Central Bank, is the liquidity law in force or not, and so on.

    Cryptocurrencies to replace banks

    I hope cryptocurrencies simply replace the current financial system at some point. There is nothing to reform here, a quantum leap is needed: just like there was a quantum leap at one time, for example, gold-secured currencies into economically secured ones, physical paper into digital money. That is, such leaps in the history of mankind took place. Now we walk with our pieces of gold and still hold on to the number of grams in gold while we just need to take, take a deep breath, turn cold water, feel the first turbulence, it’s painful to get on the head, because the first experiments always hurt, but then get used to and live in a normal world.

    But the only possible way to do this is from below. I would give, perhaps, five percent the probability that one or two upstart states like Estonia will appear, who will see this as an opportunity, like Japan, to step into the technological future at once and instantly transfer from a pawn to the ladies. But 95% because it’s just that at some point the use of crypto will become so massive that it will be impossible to ignore, and yet states and banks will submit to pressure from below.

    Bitcoin-based international transactions

    One of the companies in which we invest and announce this is engaged in the transfer of payments abroad. Now, in the twenty-first century, payment to America travels two days, costs fifty dollars, up to five percent is consumed on currency conversion - this is completely inadequate, because technologically it is sending a ridiculous number of bytes - less than in email. We do not live in the Stone Age, we do not send messengers with a bag of gold to justify two days for the transfer of money. I can fly the cache twice as fast on a scheduled plane as I can through a bank payment.

    And it is already possible to collect on bitcoin that the transfer of euros from Lithuania to dollars in America takes thirty minutes, costs one dollar - this is for the end user, its cost is a couple of cents, and currency conversion is practically zero.

    It will be a business adjacent to Bitcoin, which will use Bitcoin as an intermediate protocol, that is, you send euros to a Euro account, which determines the essence of the payment, understands where, which final sender, instantly converts itself to Bitcoin, transfers bitcoin to America, to America exchanges bitcoin for a living dollar in the American account, and sends it to the end point already on American rails.

    And inside Europe (all the same, Europeans are good fellows), this year a sepa-scheme began to operate - these are interbank European payments. Therefore, the whole of Europe can be served from just one account.

    That is, from the point of view of users, this is the same local payment as any other, and the same local receipt of money, but in the interim it acts on the Bitcoin protocol, which is used purely for transporting money, that is, it is not used in any way, except for the transmission of information. And by the way, in such services, you can easily use bitcoins, altcoins in parallel, whatever, because in between the transport layer, it is a hidden layer, no matter what is inside, it is not exposed, so to speak, to the risk of fluctuations, because in half a second Bitcoin exchange rate will not change terribly. Even if the risk, expressed in probability and multiplied by losses, changes, it is nevertheless justified and if it saves up to twenty percent of its own payment, then we believe that such a service is simply necessary in our century. We expect,

    Of course, we are not the first here: there is TransferWise, Lithuanian TransferGo, etc. They are built a little on different models. For example, the most common model is mutual credit, that is, classical clearing: the amount of payments in America is accumulated, the amount of payments in Europe, the difference between the amounts is usually quite small, and only it is cleared, and even then it is aggregated along the way. That is, one hundred debtors in America and one hundred debtors in Europe through one transfer, which makes up ten percent of the total mass, is physically forwarded, cleared, and due to aggregation and clearing, efficiency is achieved. This is a classic international payment scheme. But specifically on Bitcoin rails, companies have not yet publicly announced themselves. Most likely, I predict there will be a couple of dozen startups, and everyone will have a non-zero chance of becoming a dominant player. Including, I hope, and ours.

    The most difficult part here is not technological, but regulatory. Therefore, we are not considering the Russian market right now. I’ll just say at random that most likely we would come across strict rules and restrictions if we wanted to launch such a service in Russia now. That is, we spend ninety percent of the effort on legal clarifications, and only when we know for sure that, for example, Europe-America, the euro-dollar, such countries, such countries, we just get into the space correctly and do not affect regulatory restrictions, only then we open it. Therefore, most likely, Russia, although it is on the list, will not be the first and will not be soon.

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