How Swiss Fintech is Disrupting International Transactions
The purchase of a token is a bet on its future adoption and use. But in most cases, token ownership offers its holder no access to the underlying profitability of the issuer. And there is no guarantee on how markets might perceive further token emissions and how that will impact price development.
It seems as if the new crypto revolutionaries are even hungrier than the old fashion capitalists they claim to replace. You take all the risk, they keep all the upside. It is important to propose a more reasonable offer and recognize that for certain crypto projects, part of the revenue should go to those willing to bear part of the initial risk? This initial consideration should become more widely discussed in the community.
We should avoid building markets even less fair than the ones we want to disrupt. Long-term crypto investors require new investment options not only heavily discounted tokens. Why not combine the potential benefit of long-term equity holding with some future token offering?
This is a new model that is gaining acceptance in the market: a combined package of equity and tokens, with weights on the two elements chosen depending on the risk profile and investment horizon of the prospective investor/token holder. PrepayWay, a fintech held by the Swiss firm PrepayWay AG, is a project that is pioneering this model, is arousing the interest of both crypto backers (through its InBit token) and traditional crowdfunding contributors (through its equity offering).
Sleeping Giant: Blockchain for Digital Contracting
In a crypto world increasingly infected by short-termism, hit and run strategies, and speculation, it's important to target developments that can easily yield the most organic uses of blockchain technology.
A problem permeating all industries and firms, large and small, is business contracting: a boring mix of legal, financial and economic issues, is the underlying mechanism governing any transaction with economic finality. The challenge of how to split the pie among many parties, or governance of commercial transactions, is as old as commercial law itself.
Contracting does not capture the spotlight because it’s considered a nuisance, part of the necessary paperwork that accompanies any deal. But it becomes essential when disagreement creeps in, when things don’t go as planned or when external events force the contracting parties to change course.
The document workflow necessary during contract negation is one of the biggest logistic challenges when multiple parties are involved. Different levels of information confidentiality need to be balanced against the common goal as maintaining strategic flexibility of one party may imply loss of profit for another, monitoring of performance, and dispute resolution. All these issues conspire to make paper-based negotiation, formation, and enforcement a slow and very expensive process. Outdated workflow management practices and lengthy legal approval process hamper business processes and drive up costs, opening also numerous possibilities for human error.
All these processes—negotiations with partners, contract negotiation and signature, payment execution, and dispute resolution—occur across regional and national borders and involve multiple authorities and institutions and differing legal frameworks: lawyers; banks; courts.
The Magic Ingredient: Integrating an Arbitration Network
Templating smart contracts for increased adoption by businesses and individuals is one part of the puzzle. The challenge is that human interactions often lead to disputes that cannot be handled simply by inflexible logical conditions present in code.
The immutability of a smart contract is not designed for handling disputes that may occur within real estate payments, supply chain deals, and/or collateralized loans. For this reason, all smart contract templates available on PrepayWay’s platform integrate SmartArb, which is an open network of arbitration experts.
SmartArb (established in 2018) is a network of industry and legal experts that provide arbitration and mediation services. PrepayWay ensures that disputes, an inherent part of business transactions, will be resolved swiftly and cost efficiently within the ecosystem. While smart contracts ensure that a third party is not constantly needed to monitor interactions and transactions made by the parties involved in a deal, SmartArb will function to arbitrate any potential disputes.
Innovation: The Engine Boosting Business Growth
Just as smartphones have changed the way we interact and communicate by combining multiple functions in a single device, PrepayWay aims to change the way businesses function.
PrepayWay is an all-in-one solution for international contracting, financing, payments, and dispute resolution. The solution combines the functions of lawyers, banks, escrow agents, and arbitral institutions, offering a unique bundle of services within the same platform.
It leverages smart contracts programed to reflect the underlying logic of the legal, jurisdiction-specific contract. As long as the smart contract remains in force and effect, the service fee paid in tokens is locked as part of the smart contract providing so a natural demand for the token. The more contracts are in use at any point, the more tokens are locked.
Proof-of-Use: A New Governance Model
As price volatility of tokens limits the abilities of decentralized ecosystems, an innovative Proof-of-Use mechanism is proposed to govern token issuance and prevent bouts of price volatility. Preventing extreme price swings benefits the long-run development of the Ecosystem by providing predictability in the cost structure of the offered services.
Voting rights are assigned to the Ecosystem participants in relation to their utilization level of the Ecosystem (PoU). One of the key drivers of the utilization level is the volume of business conducted within the Ecosystem, implying that more business volumes will provide more voting rights: it’s important to stress tokens themselves and/or a fact of owning InBit tokens does not result in any voting rights, making this distinct from PoS. Another aspect which drives the utilization level of the participant is the breadth of the interaction within the Ecosystem. Proportion of the voting rights will constantly change in response to the changes of the centrality relative to other participants.
Proof-of-Use is a new governance model that recognizes ecosystem users as the true stakeholders of a development.
The PoU is employed as an overarching governance mechanism. PrepayWay proposes a release of additional tokens, which is then voted by the Ecosystem participants. A proposal passes only if it receives 50% + 1 support votes.
PrepayWay holds no voting rights. PrepayWay will hold the right but no obligation to propose the amount to be released which is either accepted or rejected by the Ecosystem participants. This mechanism ensures that management of the Ecosystem is decentralized and shared with the service providers. Typically, a large portion of premine is held by project developers and this initial auto-accumulation imposes a limitation on the decentralization of ecosystems. However, preserving rights of token emission entirely in the hands of the Ecosystem participants, particularly those who actually use it, is a novel solution.
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