Payments remain the largest unsolved use case for the Internet. When we buy something online, we typically use a traditional payment method, like a credit card, that is not “native” to the experience. Your ability to transact with a merchant is verified by a third party (like a bank), which increases costs and adds a lot of inconvenience for buyers and sellers.
Despite the enormous growth in online commerce over the past three decades, most transactions take place outside of the browser. Marc Andreessen, who created Netscape, called this the “original sin” of the Internet. “You might think it was the most obvious thing to do to build the ability to spend money into the browser, but you may have noticed that that didn’t happen,” he said. -he said in 2019. “I think the original sin was that we weren’t actually building the economy, that is, the money, at the heart of the Internet.
This is important because the cost is enormous and borne by all of us. Economists have estimated that the total cost of U.S. retail payments could reach 2% of GDP, almost as much as the U.S. defense budget. Merchants frequently cite the cost of processing credit cards among their highest operating expenses. This is why many will ask you to pay extra to use a card in a store, or set a minimum on the amount you spend. The United States, for all its ingenuity, has among the highest social costs of payments in the developed world, according to numerous studies.
We tend to forget that bitcoin was first proposed by Satoshi Nakamoto as a “peer-to-peer electronic payment system” because many cryptocurrencies today do not focus on this use case . But perhaps the next iteration of crypto development will help solve this problem.
This is certainly the hope of Tyler Spalding, the founder of Anvil, a new decentralized finance (DeFi) protocol that reconceptualizes credit, the basis of all monetary systems.
How it works
Anvil is an Ethereum smart contract system that manages collateral and secures credit. It allows individuals and businesses to create letters of credit (LOC) instead of traditional forms of money. You use it by locking Ether or USDC in the Anvil vault and receive LOC for the specified amount. In fact, the system is a lot like a bank check cashing your account, except there’s no paper work, delays, or worries about whether the money will clear.
Spalding sees Anvil as a new form of crypto-backed money. “By issuing transparent and generalizable credits, Anvil provides sustainable liquidity, essentially creating reliable money for the global economic system,” he said. “Decentralized permissionless technologies can transform the way collateral is managed by making the process more secure and transparent.”
At the protocol level, there are no fees to transact with Anvil, Spalding said, and the technology is open source. It is owned by the community and 60% of the governance token distribution is distributed to partners and users, who can vote on operational matters. Spalding, who previously co-founded Flexa, a blockchain-based payments network, sees use cases for Anvil in traditional lending, DeFi counterparty credit (for exchanges or liquidity providers), bridging assets and payments. Three partners have indicated interest in building services using the protocol: Amdax, a digital asset trading and custody provider; Empowermint, which offers retail cash loans; and Flexa, which uses the protocol to secure assets against payments on its network. Since Anvil is open source, these partners freely use the protocol and create their own services.
Anvil has no investors. The protocol was started by Spalding and colleagues over two years of development. Its systems have been audited by Open Zeppelin and Trail of Bits, and Immunefi has organized two bug bounty programs to find flaws to fix. Spalding is confident that the system is safe for its ambitious goal of disintermediating banks from traditional payment and credit issuance processes.
“We’ve been doing this for a long time. We love this stuff,” Spalding said of his goal to bring native payments to the internet and atone for Andreessen’s original sin. “We want other people to use it. This is a real use case. It’s the only thing that matters to me.
