PaymentEye recently caught up with CEO and founder of Credits, Nick Williamson. Credits is a hybrid framework that provides interoperable, built-to-purpose blockchains. We spoke about the misconceptions surrounding the technology, its association with Bitcoin and actual practical applications.
What does Credits Inc. do?
We’ve built from scratch a framework for creating interoperable built-to-purpose blockchain. So you can create your app or service as a self-contained blockchain network, either public or private, and then those blockchains interact with each other so you can take information or functionality from existing blockchain and combine it with other functionality or other information in a separate one.
There are a lot of misconceptions about blockchain – in your own words, what is Blockchain?
We really see it in the 10,000ft view as a new data structure that allows for both attributable and irrevocable statements. You can build a payment system on top of that, you can build a crypto-currency on top of that, you can build asset issuance and settlement on top of that. That’s not really fundamental to the core breakthrough, which is bringing PKI into the 21st century. So just like the cloud, we’ve always had time sharing of computational resources for sixty years, but that was always: you buy $50 million, stick it inside some institution and authorise people inside that institution to time-share. The cloud took the same fundamental way of approaching that technology and it made it more accessible, more on demand and granular. We’ve seen such a proliferation of how that’s affected the industry – the fact that you can basically call the data centre on command and pay by the hour is pretty revolutionary. We see the same thing happening with blockchain: basically using as a way to on-board real world existing trust networks the way you interact with your government, the way you interact with your bank, the way you interact with each other – things that we are fundamentally good at figuring out in a face-to-face physical world, but we haven’t been able to pour it into a software, internet world in a very robust way. We tried to approximate it through doing things like having KYC validation or requiring for bank accounts in person visits, but it’s really putting lipstick on a pig trying to do this stuff. Instead we think that you can directly model these trust networks and software using blockchain, again basically as a more accessible open and interoperable form of PKI.
People tend to assume Blockchain is part of Bitcoin, do you think that association is what was holding it back?
No, I think it helped! The drama and the ups-and-downs, Silk Road and everything else definitely captured the imagination and brought the initial hype. Now obviously there’s a few that are doing some sort of prototype experiments with it [bitcoin] because it’s there, but I don’t think that FIs seriously think that Bitcoin or cryptocurrency is going to end up being a meaningful part of the economy. However, almost all of them, and we talk to them day-in-day-out, that the underlying technology has some potentially revolutionary applications.
Why do you think the tide is turning now?
It’s been a really educational process, first you had to get over the VC investment and the hype around Bitcoin specifically – you had to have some time for that to die down. The stuff about separating the core blockchain technology has only been talked about for around a year now and it’s just taken this period of time for this educational process to go through and make it apparent that there actually is some substance behind that and it’s not just trying to piggy-back on a jumped-up trend.
What are the most appealing features of Blockchain?
The fact that you can reconcile different silo systems without having shared secrets or shared infrastructures. There are a lot of applications that are derived from this that are potentially augmenting the CSD function or even using it internally for reconciliation between different internal systems. That was a surprising use case that we found institutions find very compelling. I don’t think we’re going to know what the first commercially use cases are for a little bit of time, because we are still in the exploratory stage where we’re finding out it’s compelling and not as compelling in different areas.
Blockchain is a decentralised system, what happens when something goes wrong?
You get to choose on the spectrum between completely decentralised and completely centralised and technical decentralisation is separate from political decentralisation. It can be politically centralised where it’s a group of known participants who rely on and trust each other, but the underlying infrastructure they’re putting on the technology is at a technical level distributed which gives you separation security concerns, fail over, ease of deployment, a lot of nice features out of the box.
What obstacles do you see banks and other FIs having to overcome when integrating blockchain?
Integration of legacy is going to be one of the biggest obstacles. It’s one of the things that we’re seeing as one of the challenges. It’s going to be just polishing up the technology. It is very nascent, think of the smartphones before the iPhone – we really haven’t learned the metaphors, the UIs the work flows that are really going to allow it to be fully utilised, but that’s what the blockchain industry as a whole is working to change right now.
Are there any other capabilities for blockchain outside of payments?
We didn’t even start looking at payments until a couple of months ago! A lot of what we’ve been working on is going all the way back to the back of the stack, looking at the actual issuance and transfer of securities that might work in a blockchain environment; how you might do KYC because that’s something that could be a complimentary service to payments. The issue with payments isn’t the payment itself, it’s everything surrounding it. It’s getting the issuing and acquiring banks to talk to each other; it’s getting the customer to be allowed into the system and be a known person. All the expensive process surrounding payment is the issue. What we’re seeing with a lot of this is that it’s about putting a little bit of discipline in the process upfront to where all that data is always there fundamentally. The post-trade, the on-boarding and everything that happens around that is just a view into that source data. It’s a database, a horizontal layer, not a new gadget.
In terms of practicality, where is the Blockchain information stored?
Right now it’s stored with each node that runs it. We are looking at being able to shard that across different networks and computers so that you can split functionality, value and information across different networks and then allow for people that need to use that functionality, they only need to sync up to those transactions and not need to care about anything that has no bearing on what they are doing.
Fresh from its $4.5bn IPO, Nordic payments processor Nets has picked Spire as its partner to help with the physical roll out of mobile payments for Dankort customers.
Square has introduced a new update to its contactless and chip readers that reduces transaction speed to 4.2 seconds.
It seems laptops are about to catch the biometric fever as PayPal, Intel, Lenovo and Synaptics are collaborating to introduce FIDO-enabled embedded fingerprint solution to PCs.
Mastercard is working with Stripe to expedite the payment process for American sellers on the latter's marketplaces using the instant payouts feature from Stripe.