Payments remain one of the biggest unresolved challenges on the internet. Typically, online transactions rely on traditional payment methods such as credit cards which aren’t seamlessly integrated into the digital experience. This reliance on a third party, like a bank, incurs additional costs and inconveniences for both buyers and sellers.
Despite the surge in online commerce over the last thirty years, the majority of transactions occur outside the web browser. Marc Andreessen, the creator of Netscape, once called this the internet’s “original sin.” He noted, “One would think it was the most obvious thing to do to build into the browser the ability to spend money, but you may have noticed that didn’t happen.” This oversight results in significant costs for all users. Research indicates that retail payment processing in the United States could be as high as 2% of its GDP, nearly equaling the defense budget. Merchants often view credit card fees as substantial operational costs, prompting them to impose surcharges or minimum purchase amounts.
We often overlook the fact that Bitcoin was originally proposed by Satoshi Nakamoto as a “peer-to-peer electronic cash system.” Yet, much of today’s cryptocurrency focus deviates from this purpose. However, there’s optimism that upcoming advancements in the crypto sector may redress this.
Tyler Spalding, the founder of Anvil, a decentralized finance (DeFi) protocol, hopes to reconceptualize the credit system that underpins monetary structures. Anvil is a collection of Ethereum smart contracts designed to manage collateral and facilitate the creation of letters of credit (LOCs) as alternatives to conventional monetary methods. Users can lock ether or USDC within the Anvil vault to obtain LOCs against their held amount, resembling a bank check but without paper trails or delays.
Spalding describes Anvil as a new form of money secured by cryptocurrency. He stated, “By issuing transparent and generalizable credit, Anvil provides sustainable liquidity — essentially creating trusted money for the global economic system.” He emphasizes that decentralized technologies can revolutionize collateral management, enhancing security and transparency in the process.
The Anvil protocol imposes no transaction fees and is designed as open-source. Its governance structure allocates 60% of its token distribution to partners and users, empowering them to vote on important operational decisions. Spalding, who co-founded the blockchain payment network Flexa, envisions multiple applications for Anvil, such as traditional bank loans, DeFi counterparty credit, and payment systems. They have secured interest from several partners looking to build services around the protocol, including Amdax, Empowermint, and Flexa.
The protocol is entirely self-funded, developed over two years by Spalding and his team. They’ve ensured its reliability through audits by Open Zeppelin and Trail of Bits and have organized bug bounty programs with Immunefi to identify and rectify potential vulnerabilities. Spalding is confident in the project’s potential to eliminate the intermediaries currently involved in payment and credit issuance.
“We’ve been doing it a long time. We love this stuff,” he remarked on his mission to integrate native payment systems into the internet, addressing the original sin mentioned by Andreessen. He concluded, “It’s a real-world use case. That’s the only thing that matters to me.”
