Wen p2p Electronic Cash System? by Konrad Urban | Devcon SEA

[Music] [Music] hello cool who knows in which year the peer-to-peer electronic cash system paper came out anyone else I'm sure you know just three people four people okay which year was it 2008 right so we're still waiting for that peer-to-peer electronic cash I think it's fair to say that we've not taken over the peer-to-peer um payments World um Bitcoin has definitely found pmf product Market fit with store of value and um I don't want to argue that there are no payments on Bitcoin but clearly um the last payments you've made to come here maybe with your grab or Bol or Uber were probably not Bitcoin or onchain payments at all just to show how ancient this paper is this is 2008 right so in 2008 GTA 4 came out that's how long ago this was um the iPhone just came out a year earlier people dressed like this I think it's cool but also very very ancient Bitcoin was largely well came out right in time as a perfect reaction to the um financial crisis of 20078 this is how long ago it was right I think we all here know what peer-to-peer means but let's briefly talk about the cash part because I think it's very easy to think of cash as payments but payments are not exactly cash I would say that cash payments are a subset of all payments and usually when we talk about payments we talk about something that's much much more complicated so last time you ordered your grab to get here um you made probably a credit card payment with that there was a very big bundle of services that enabled things like chargebacks um maybe you were using a credit card um and definitely there are some points and rewards so I'm still waiting for the Visa and MasterCard airdrop um but I would just want to talk about the simplest of payments like this very raw um payment which just goes payer to pay without all of these bundled um services so this is what we usually mean by cash payment right like if I give 100 bats to a taxi driver there's no no way to charge back unless I hunt him down somehow um there are also no points or um and there's definitely not a credit system so for today I'd briefly like to talk about why why we haven't taken over the world yet and what's needed to take over the world with unchain payments um so I'll give a mini int about myself and then we'll go through a mini history just to honor our ancestors and then I'll talk through five narratives that were popular um or that are popular to answer like this is the blocker like we can't have payments because of I don't know scalability let's say right so these will be the five um topics that we'll analyze so about me um I'm the peanut brain at peanut protocol um you can look me up here and also DM me here um so let's go and honor our ancestors I think I think it's really important to realize the first wave of blockchains um and and categorize these uh very briefly so we had Bitcoin which I already mentioned and then we had a bunch of payments projects that that were strictly about this cash element strictly about making payments happen so I think Litecoin fits that uh category very well and dash definitely does stellar I would say say too um then we had private payments mono and zcash um the only ones with smart contracts are NEX and ethereum uh by the way so despite all of these huge ecosystems well some of them huge ecosystems we haven't yet moved um cash or payments on chain so um when I was prepping for this talk I had the honor to talk to some of these ancestors and people who are working on these very ancient projects and I asked him like how are you going about trying to bootstrap your payment Network and um one of the guys I talked to he was running a campaign in 2017 trying to convince parking garages and um like very local shops in one local city in the US to adopt their their coin um as one of the payment methods as you might guess it's quite a hopeless Endeavor because you not only have to convince the garages but also you have to convince all the drivers to adopt your thing in an ecosystem where there is the dollar already and people are used to coins and and dollar nodes so what's the advantage of bootstrapping that one token one chain thing I think quite similarly we have um who's been at ECC this year nice cool you might have seen the payments Cafe by base they were selling cappuccinos um where you could just take your coinbase wallet and just just just make a payment for your cappuccino and there I wondered well isn't it the same case what's my reason to switch over from that like opening up my wallet and so on when I'm so used to just tapping my card right um especially that was just usdc on base with which you could pay so here are the candidates one common narrative will be scalability so we need fast and cheap for transactions I'll kind of argue against that then another one is privacy I think highly important in a world where we have full adoption and most payments happen um on chain but I will also argue that we can have a world um where settlement happens on chain but and and stuff is still reasonably private then another argument that is very common is well payments are not on chain yet um or haven't captured a whole like payments um Market in trafi because um stable coins are relatively new I'll also argue against that um and then finally um for the 4337 Mafia um um one common argument is hey we need better account management we have to have account abstraction all these like nice ux um improvements I will also say well that's not the like the main blocker here and then finally we'll go into the interrupt thesis so let's start I think this is a very common thing um especially in the early days of blockchains this was a very very common thing to hear in when people were were pitching l1's but also still l2s right so the pitch goes something like this in order to compete with trafi payments we have to be similarly cheap and fast so Visa has 24,000 um TPS and My Block Chain is so much faster 69,000 um TPS right um I think I think again this kind of it's a bad comparison because you're comparing these very raw payments of just transferring value from A to B with Visa which is this very very complex very bundled um payment solution and then also perhaps more importantly for the argument here is there should be a subset of payments where this doesn't matter right so if I do a $1 million transaction and there are hundreds of thousands of these happening every day or Millions maybe even well definitely Millions then it shouldn't matter whether I'm you know using Bitcoin um which is slow and relatively expensive but by the way what do you think what are current bitcoin fees today if I want to send $1 million um to another country what's the fee on Bitcoin in dollars any guesses yeah $1 yeah that's not much you can't do that in trifire you can't send a million dollars to another country um uh um with one Buck you can't you can't do that not in that order of magnitude right so clearly there should be some subset of payments where um where it would be more efficient to already use Bitcoin something as simple as Bitcoin as the kind of international settlement thing this is especially true for um rare International pairs where normally be doing many hops between Banks so the way a trat for international payment works is you you're sending kind of they're exchanging these IUS and they have these um very custom agreements between each other to trust each other with these IUS so when you're sending let's say money from Armenia to Chile um it might very well be the case that this payment is going to do five or six hops across the world so first to a more local bank and then to another one maybe then to some US bank and then finally to some Lam bank and then finally um to Chile in the meantime you don't know where the payment is and the fees you don't know how how much each intermediary is going to collect so already this should be more even with Bitcoin something as primitive as Bitcoin like V1 of blockchains um it should be more efficient but guess what here's my startup idea right why don't we do a transfer wise um but with Bitcoin rails right so the way transfer wise works is you have these these bank accounts in different countries and then they kind of just internally settle um the payment so they front it for you they receive it in one country then they front it to you in in the other country well here's the problem for that to happen you would need two Banks to agree not to ban you for your Bitcoin payments right so if you can convince two Banks not to ban you um because you're not fitting their AML requirements or they don't know what you're doing or they're just scared of Bitcoin or they think it's like some shady thing then you might as well just have a normal very classical IOU type contract with these guys to just do a normal settlement so if you've identified this pair where there's a lot of sudden trade happening um and it's not been captured yet let's say I don't know um Chileans suddenly get obsessed about Ethiopian coffee if if suddenly there's a lot of trade happening immediately there will be some some someone who will try to capture those flows to avoid all these inefficiencies with these hops right um and you can do so with IUS for these large transactions so this very convincing narrative on like when you hear it for the first time oh yeah sure let's use crypto rails for the for just for the international part is actually maybe not as uh strong for these like larger B2B transactions especially when it comes to Global Supply chains cool another narrative privacy well we can't have like we can't penetrate the whole Market unless we have privacy obviously if I um go somewhere and I buy my coffee I don't want to broadcast that to literally the entire world that I just bought um a pumpkin spice latte right that's extremely embarrassing and I don't want other people to know um I think well again um that does not much for the just ra thesis because you could have some kind of company that wraps Monero or zcash or some other solution and makes it into a nice U payment thing but also you could just obus skate using centralized means right and that hasn't popped up yet we've not truly challenged payments um uh that way so I don't think that's the main blocker okay another very very common one so stable coins very very hot topic right now um stable coins have found pmf product Market fit mostly as collateral for defi stuff right they haven't necessarily or at least early on they haven't found pmf for payments we haven't seen that much action in terms of um stable coin payments it's changing now I think there's this emerging very n uh stable coin payments Market which is extremely exciting um but that's also not uh the main blocker for these for the crypto rail thesis because I mean if I'm just using it for one hop so I'm I'm I'm selling my my whatever Polo lotties here and then sending them over to um Brazil then like it's just one hop over Bitcoin the next block I'm already selling it so the the the fluctuation of the value doesn't matter too much um and also it's just false that you can't make payments with a highly volatile currency right like hundreds of countries have or dozens of countries have highly volatile currencies and yet somehow people get paid and and have salaries and so on um so another thesis accounts right so here are the ideas that we need something like account abstraction for Mass adoption um better onboarding stuff like account recovery more granular permissions I mean if you think about it like it's kind of crazy that I need exactly the same level of permissions to send $1 and to send a million dollars um but again there should be some subset of payments where all of this doesn't matter because we do have um these professionalized custodians we can have like for for larger uh B2B payments we could have um all of that so what's needed to unlock these payments for everyone to have this pure to- pure cash that is fully on chain so I'd like to argue that it's as simple as interoperability with everything else so um I mentioned early on this guy who was going around garages trying to convince them hey adopt or a coin for parking um fees and unfortunately they weren't very successful well because it didn't it wasn't interoperable with standard ways of paying for parking right um so here's the thesis interoperability is necessary it's a necessary condition for interchangeability which makes what money is which makes money right like money has to be spendable um which in turn is the necessary condition for any new payment Network so essentially the idea of bootstrapping a whole payment network from scratch is kind of like that won't work right so so what does this mean in practice so um in practice this means that we need to slightly defragment parts of our current ecosystem so this is an example from I think a year ago um blog post by falic he post the problem hey I have coins on scroll but I want to pay on Tao what do I do um super annoying if I want usdc 10 usdc on optimism you want 10 usdt on arbitrum super annoying um another one is um maybe I have some stable coins but you want Fiat um that's a problem we recently um asked like how we could solve that and this is what I mean by interoperability so making it such that it's not one chain one token but any chain any token and even Fiat crypto right so um um we have a November challenge which is the No Sex challenge to avoid using um centralized exchanges for a whole month um yeah if you want to uh hit me up I can share the details um later um but back to the this idea how can we how can we achieve this interoperability well it's really really hard because blockchain not all blockchains talk to each other uh very well um and also Fiat and crypto doesn't talk to each other very well so there needs to be some layers of abstraction that let all of this get routed um correctly and I think one approach is um to lock up the funds and then let them be routed where they need to go and this is something we've been researching for the past um one and a half years um but also I'd like to very briefly mention that um it might be the case that payments are currently being eaten by visa and MasterCard uh crypto pay are being eaten um by that because there's this huge emergence of cards of crypto cards which I'm using too by the way uh I think they're extremely convenient and a great tool um but we also need to ask ourselves well maybe we can maybe we can skip that step right um maybe we can somehow uh be interoperable in such a way that the merchant receives um this raw simple payment without all of these um extra things like um the reward points chargebacks because not for all payment types they are needed right so maybe we need to unbundle the payment a little bit um as one of the final notes I'd like to this is a quote I F found when I was researching for this um for this presentation and it's from 2014 um and this was from someone from the Bitcoin foundation and essentially she said um that you can send money over the Internet um for which is super useful for especially the unbanked right so maybe the it's it's really interesting for me to see that this was the narrative 10 years ago and still um it's a really really important part of what we're doing um so to summarize we have briefly discussed scalability where we discovered that um for some subset of payments it shouldn't matter um but if it doesn't matter for these payments you need these um Banks to any way agree then you might as well um go directly through the banks and not use the crypto rails right we've discovered the benefits of account abstraction and easy onboarding for like a mass payment um we briefly discussed stable coins and what role they could play in the payment space then we briefly discuss privacy and the needs there and like is it going to happen um and then finally um we discussed what interoperability means on a technical level but I'd also like to briefly touch on the regulatory level where um essentially by having regulatory Clarity we can convince more and more of these trafi um institutions to be well interoperable with um our payment systems so yeah long story short I strongly believe that the next generation of banks um will simply skip the Neo Bank stage so if you think about the Western World um we had traditional Banks then we had revolute monzo and so on um I think in a lot of emergent economies we will simply skip that stage and the next type the next generation of banks will be partially onchain banks that are interoperable with try yeah um if you want to to payments uh if you want to exchange memes please DM me uh these C details um yeah open to questions all right okay and now we come to the Q&A session you guys see the QR code on the screen any question for for the speaker please scan okay here we go man the first one coming all right what are your thought on agents using stable Co for our live purchases and agents agent to agent just the death thing I guess human payments let's go yes let's do it I mean uh I think I think you know the idea of intense is much much broader than um just intense for a swap or cross-chain swap um intense can be you know just um orders for something and I can just Express something like hey I want a pizza for so for so and so many Bitcoin um and someone should be able to go around the world um whether that's um a human or an auton auton well a bot um or AI agent um and solve that for me right um I think I think that's um clearly something that will happen um where all these searches will be done by by BS all right we have a second question second question is uh privacy a blocker for widespread do option yes but also um we don't have widespread adoption yet right so if you think about your payments that you've made probably this week you've made several dozen payments uh for coffees Ubers U maybe to landlord maybe you've received a salary um that were not on chain and um and privacy yeah simply it's too small of a percentage of payments to matter um in a big way so I think it will be a huge problem it will be a blocker but just just not yet um and we have a path forward right like we we we know how to at least have soft privacy without getting jailed um more questions coming all right there's a third one right there how important is uh financial literacy I think hugely important in emergent economies right so um if you think about emergent economies the the financial products that they have access to um that people have normal people have access to are extremely primitive a lot of people are still saving their um salaries in dollars rather than I don't know something like the S&P 500 or ethereum um and and they simply don't have access to more sophisticated Financial products um all of this will need a lot of Education um but for now I think also we can make uh more sophisticated Financial products accessible um to emerging economies through crypto we have the fourth question can monopolies do anything well I'm yeah I'm I'm that's that's a very very good question I think um the the main challenge uh right now is that um visa and MasterCard have a very very lucrative reward system which the uh Merchants pay for right so if you think about a credit card payment versus a debit card payment if you're using credit card and you're getting like some cash back or some other rewards um you essentially getting subsidized by old the people who paid um in cash um or with a debit card I think that's a cycle that's very very hard um to break and that's why I think the first um widespread um onchain payment system will emerge in emerging economies where penetration of Vis and MasterCard isn't that high and we will have to build our own um similar reward system maybe you know maybe some crypto native um dist distribution methods like um Future air drops and stuff like that might be a very good way to bootstrap a payments Network we have one minute left for the Q&A so maybe we can get this two or three question yeah go ahead sure so what specific domains or use cases for payments do you think are most promising in the near term I think um we have this incredible explosion of remote work and Global work and Global teams in crypto um almost well the majority of teams is is is somehow globally distributed payments are frankly pain and a bu to manage I think um we will see um uh a huge emergence of um onchain payments that then use some kind of localized um off ramps um yeah what this is the last question what yeah uh at what level is adoption oh super low like I mean we don't know right well we don't know but um because it's very hard to to estimate but I mean it's it's definitely Sub sub 1% and and um if you account for all payments and definitely and probably sub 0.1% um all right all right thank you you guys so much Applause to the urban please