The latest arrival on the platform scene is Monetas, the commercial incarnation of the Open-Transactions (OT) project, which is set to launch as a phone app in beta at the end of the year.
Monetas describes itself as “a smart contracting platform”. It uses legal Ricardian contracts – online contracts, written in a human and computer readable language – allowing maximum flexibility in executing financial transactions.
Because the terms of the contract are fully customizable, the platform can be used to make payments in any currency, including cryptocurrencies that don’t yet exist, or to trade between them.
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| Chris Odom, CTO at Monetas |
“OT democratizes financial and monetary actions,” says Chris Odom, CTO at Monetas. “You can use it for issuing currencies/stock, paying dividends, creating asset accounts, sending/receiving digital cash, writing/depositing cheques, cashier’s cheques, creating basket currencies, trading on markets, scripting custom agreements, recurring payments, escrow, among other transaction types.”
The platform is completely open source, ensuring compatibility with existing technology platforms at banks, hedge funds and corporations, as well as other payment platforms such as PayPal.
“Others have tried to deliver this kind of a service, but based on proprietary technology,” says Johann Gevers, CEO at Monetas.
“We believe in open systems because they are ultimately more successful. We want to link to every other system out there. So our system is designed with open APIs [application programming interfaces], which are easy for other systems to link to.”
Gevers sees Monetas as a trailblazer in a new generation of technology systems that will democratize money and other aspects of people’s lives.
“Our long-term vision, our primary motivation, is the fundamental transformation of society by reinventing the technologies people use to transact with each other,” says Gevers. “Money is secondary.”
Supporting this claim is the group’s commitment to ensuring a simple version of the Monetas platform will always be available to download for free, bringing even the poorest people into the global economy armed with their mobile phones.
Monetas transactions complete in fractions of a second – “an order of magnitude faster than credit card payments, and are experienced by users as instantaneous,” says Gevers – with cross-currency payments facilitated by Bitcoin.
At first glance, the system looks a bit like Ripple, the system backed by Google’s VC fund. Like Ripple, Monetas is a peer-to-peer system, making it decentralized and therefore resilient to attack, one of its key features and a recurring theme in next-generation payment systems.
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| Johann Gevers, CEO at Monetas |
“Centralization makes things fragile,” says Gevers. “Concentrations of information in large centralized databases attract hackers, and concentrations of money in central banks and big financial institutions similarly invite technological failure and political abuse.” A highly decentralized system such as Monetas is less susceptible to systemic risk, he says, and gives individuals greater power over their own assets and personal information. It restores a healthier balance of power and creates a more even playing field.
However, unlike Ripple, Monetas has not set itself up as a quasi-central bank, issuing its own currency, and there are no gateways: individuals will be free to download the app onto their own phones and act as their own gateway. This should make it cheaper to use.
Where Ripple is based on IOUs, with people on the system trading debt contracts, Monetas is an asset-backed system. If Ripple is essentially a highly sophisticated accounting system that keeps track of debts, Monetas is a contracting platform that allows people to move assets electronically.
“The real magic of OT isn’t the ability to make international, cross-currency payments in seconds, but that it can do this with cryptographic integrity,” says Odom.
He cites the fact that balances are unchangeable, even by a malicious server; receipts are destructible and redundant – the only receipt that needs to be kept is the most recent one, which also serves as an account balance; transactions are unforgeable; and cheques are not capable of repudiation.
A transaction on the OT system requires the submission of a signed transaction, including a current balance, which is verified and countersigned by the server. This becomes the receipt, which cannot be forged because the user’s signature is required. Only the latest receipt needs to be kept, because that contains the up-to-date balance.
The system is secured by a voting pool between participating transaction servers. Instead of putting money directly onto a server, the user sends it to the voting pool.
To take funds out of the system, the user must send a signed request to the server and forward the server’s countersigned reply to the members of the pool. The pool members will only release the funds if there is a record/audit of the account and the signatures are verified.
After the launch of the app, an enhanced, enterprise-level version for institutions is due for completion in the middle of 2014.
The system will be rolled out to the Bitcoin economy first, where Monetas’ security features will resolve Bitcoin’s security problems, especially with online wallets.
It will be then be launched in emerging markets, where technology has in many cases leapfrogged the west: Kenya is the world’s foremost mobile payment market.
Western markets, where regulation is tightest and the need for new payment infrastructure is smallest, will see Monetas last.