10x Faster Money Transaction with 99% less fees, Globally.
On New Year’s Eve of last year, I tried wiring $200 to my grandfather who lives in China to show off my achievements from my internships. By the time when I was done with the process, only $136 remained. It was my first time wiring money back to family at home. I was shook 😱. Did I get robbed? Hacked? If not, what could have costed so much?
Apparently, Chase had charged me $64 for international outgoing and international receiving fees, which was worth 5 hours of my work at the paid internship. It’s not me alone that experiences this problem: China receives up to $70.3 billion in remittances per year and over $1 billion goes toward transaction fees.
Digging a bit more, I actually realized that this problem was a global one which disproportionately impacts people in poorer countries. Specifically, more than $1.1 billion are sent to Armenia in remittances each year from foreign workers wanting to support their families; and for Armenia and other similar countries, remittances account for 10% of the nation’s GDP. According to a survey, 82% of migrants send remittances each year, oftentimes averaging ~$1900 every trip, to support their families.
These very people wiring money back to their family to support their food and clothing expenditures are being charged up to 4% of their sent amount every time. For these millions of people sending remittances, that translates to a total of $33 million to $84.7 million of transfer fees, depending on the service they’re using. For each individual, this means approximately a day and a half’s worth of their monthly salary. These fees are actually low by international standards, which means that there are other places where international transactions are even further drained.
The way people can receive remittances can also be problematic. Before we delve into that, let’s understand the 3-step process through which people receive remittances and its costs
The two out of the 3 ways involve middlemen to deliver the remittance, which presumably has risks of fraud and sometimes consumes fees. In fact, huge amounts of money have already been lost by people attempting to send balances via. Debit instructions. For example, a UC Berkeley Professor wired $920,000 to a fraudulent bank account 6 months ago because a hacker was able to gain access to the emails through which wiring instructions were sent between him and Wells Fargo. In fact, global losses from payment fraud has tripled from $9.84 Billion in 2011 to $32.39 Billion in 2020.
With potential fraudulent transactions and high fees being taken from each remittance transaction, and the fact that the global remittance market is growing at a CAGR of 10%, this is a pressing problem with seemingly no better solution.
Or so it seemed.
A Financially Connected World
We believe in a world that is able to send encryption protected transactions, solely privy to the two parties involved without having to pay any substantial fees. In fact, our mission is to enable transactions of any amount to anyone anywhere in the world without having a third party taking our hard earned cash. Right now, Ethereum has the infrastructure to transfer the money, but no one wants to pay $50 to transfer $50.
OneTouch is a global, peer to peer, streamlined cryptocurrency transaction platform built on the Ethereum blockchain that has 10 times the speed and bandwidth of transactions, while lowering costs to nearly $0. It uses balance verification proofs and identity-based payment addresses to make sure you’re sending your full balance to the right person, every time. Instead of the numerous emails and payment instructions that you have to send to the receiving party for cross boarder transfers, you can now simply select your amount and directly transfer to their payment address by pressing one button. Best of all, network speeds actually get faster the more people get onto the network. Each user opens payment channels with other users, which the network can use to rout payments. The more users there are on the network, the wider range of channels the network can use to rout your payment through to your target. Through this ‘multi-hopping’ mechanism, OneTouch becomes more integrated with the global economy with an infinitely increasing throughput capacity.
Person A can make infinite amounts of transactions with Person B and F without paying any fees.
Person A can also transfer funds to E without creating a direct channel. Instead, when B isn’t using their payment channel, the network is able to rout A’s funds through to E by proxy of B’s channels with near free fees. Person A can also earn fees by letting B rout their payment through A’s channels, further negating fees.
With ETH2 improvements, payment channels will only cost cents to open, allowing a network of infinitely free transactions to take place through the blockchain.
Practically free and superspeed transactions are enabled by balance proofs. People participating in the network make sure that transactions are not tampered with by processing these balance proofs. The validity of these proofs are protected by a unique fingerprint called a hash. To create a payment channel for infinite free transactions, both parties would deposit a set amount of funds in the payment channel, then perform transfers without exceeding the total funds deposited. Each transfer within the payment channel is cryptographically protected and are fully secured by previously setup on-chain deposits. Since nobody else other than the two participants has access to the tokens deposited in the payment channel’s smart contract, the transaction remains private. Once all transactions are set, they can close the payment channel by settling the transaction state. Instead of paying the whole sum in one time, payment streams can be set up, allowing remitters and buyers to transfer portions of the promised amount. Think of this as just like AfterPay, a system that splits your payments into portions that won’t be a burden to your bank account.
Currently, because of the very high gas fees on the Ethereum blockchain, it does not make sense for the user to create a new payment channel every time they have to make a transaction with a person they haven’t previously made one with.
Instead, the network removes barriers with single-target limitations of transactions by routing your payment through others’ payment channels to reach a target outside of your familiar network. This accounts for the infinitely expanding throughput capacity. The capabilities of these payment channels will be improved when block validators on the Ethereum blockchain switch to ETH2, which helps remove the bottleneck on transfers in the network.
The Life Cycle of a Payment Channel
A typical transaction happens as such:
1. A and B deposit funds into the payment channel smart contract.
2. A sends B transactions while verifying the total balance of funds in the contract.
3. When A or B want to pull out of the channel, a settle() function is ran to settle all balances and both parties come out with the prescribed amount of tokens. The tokens withdrawn cannot exceed the total balance put into the contract initially between the two parties.
4. Rinse and repeat.
Each transaction uses the other person’s unique ENS or ETH address. An ENS address is a unique domain owned by the holder of a specific Ethereum blockchain account address. Funds can be directed toward the ENS address, which ensures that you send your money to the right address every time in a convenient way. The ENS records permits updates to the owner’s account only by the owner. This way, when a transaction is sent to an ENS address, the platform searches the registry for the owner’s particular Ethereum account address and transfers the funds.
So… what’s getting 10x’d here?
Gone are the days when wire transfers are limited to specific time intervals per day. The reduction in opportunity cost of multi-day transfers and security against wire fraud risks also serve as significant incentives to abandon the status quo. The transition to cryptocurrency based transactions would give users also get access to up to an 8% APY return from depositing their tokens on protocols like Aave. The transaction costs, which we will reduce by 10 fold, serve as a primary reason to switch. Since our team believes in creating a non-leaky transcontinental money pipeline, we currently plan on monetizing by donations and grants. In the future, we may introduce a freemium model where premium members get access to extra features.
Project Timeline
April 2021
Create content to display to the public as a form of marketing and gather volunteers to beta test
May 2021
Reiterate on all aspects of OneTouch, including marketing, technicalities, features, etc. & present to a panel of judges to validate TouchGold.
June 2021
Begin developing OneTouch
January 2022
Release OneTouch beta to testers and facilitate our first global transactions
November 2022
Integrate OneTouch with major goods retailers increase throughput capacity and speeds, as well as facilitating a transition to free, global transactions using a stable currency.
January 2023
Publicly release OneTouch.
The Bottom Line
We shouldn’t have to pay a third party 3–5% of transaction fees simply for getting the transaction from one party to another. Especially for people living at or near the poverty line, or even low-wage workers like me who just want to upkeep a family tradition, there’s no reason for charging immense fees for transferring your hard-earned cash over multiple days. Right now is the time to desert the leaky pipeline of wire transfers, and embrace the transition to a global network of instant money transfer from anywhere, to anywhere in any amount, anytime. It’s time to put billions of dollars back in the people’s pockets.
I’m Xiangan — a 17 year old blockchain developer passionate for learning, and I appreciate you for reading! If you enjoyed the article, please feel free to follow me on my LinkedIn, Twitter, or check out my BitClout. Drop me a line and let me know your thoughts!
