iStock Photo — csheezio

by Bernd Lapp (Edited by Matthew Carano)

In this Business Hive update I would like to talk about how payment processes work within Swarm City. Swarm City has created its own token “SWT” for making payments within the platform. This means that every user has to have SWT in order to use a service.

Let’s look at the overall payment process inside Swarm City:

Step 1 — Acquire SWT

In order to use services within Swarm City, users must have Swarm City Token. SWT can be acquired by exchanging cryptocurrencies like Bitcoin, Ether, and many others. SWT can also be purchased with FIAT (USD, EUR, GBP etc.) through exchanges, or even peer-to-peer.

Step 2- Use SWT in Swarm City

As services are used, SWT will be transferred as payment to service providers. The platform does have a FIAT currency indicator built in, so users may see the cost for services expressed in their home currency. This should make it easier to judge the value of a service.

Step 3 — Spend SWT in real life

If you own SWT you can use it to pay for services within Swarm City, but sometimes you will have to pay for services outside of the platform (groceries, rent, phone bill etc.). You can do this with debit cards that allow you to upload SWT and spend them in your local currency.

These steps are pretty self evident and in order to make using the Swarm City platform easier for onboarding new users, it would be helpful if Steps 1 and 3 are seamlessly available.

That’s why the Business Hive has reached out to several service providers early on, to gauge if they were interested in creating these steps. This worked out very well, and in the last couple of weeks the milestones we have set to make these payment steps possible for Swarm City users have been toppling like Dominos.

The first Domino (which took the longest to accomplish) falling was when “Bittrex” added SWT to their exchange. This gave users the ability to purchase SWT from an exchange. As consequence it allowed Changelly (the second domino) to add the token to their service, as they exchange through Bittrex.

The people involved in Changelly are closely connected to “Jaxx” (which is actually the fourth domino) and pushed Shapeshift to integrate SWT into their instant digital asset exchange, (which became the third domino) , and now makes it possible for Jaxx to add SWT.

Even though the Business Hive put effort into these integrations, we realize that Shapeshift, as well as Jaxx have decided on a huge strategy shift, by massively adding promising tokens to each of their services.

It seems that we are surfing on a wave that has just begun to develop in the crypto space, where a lot of projects are gaining momentum and are creating the payment service ecosystem that Swarm City users will benefit from.

As mentioned above, the dominos for Step 1 (Acquire SWT with Crypto) have fallen into place. In addition Step 3, (Spend SWT in real life), is being solved on a massive scale as well. Starting with Tokencard, a number of Crypto Debit Card providers are gaining traction and will have products available in Q3 of 2017. Although none of them have announced a roadmap showing the exact timing of adding SWT, it is in my opinion only a matter of weeks that each of them will do so. The list is quite robust and contains names like, TenX, Uquid and Monaco. But, also established players like Xapo and Wirex, will start to add more cryptocurrencies following the strategy of Jaxx and Shapeshift.

The interesting part about these cards is that they differ in how they approach mitigating volatility risk. Several cards like Xapo or TenX will not immediately exchange tokens uploaded to the card into your local FIAT currency. The exchange happens the moment you buy something with your card, and it will use the exchange rate at that moment. For a lot of people that are not used to the huge volatility that crypto currencies have, this will seem risky as the value of the token could shift considerably between the time a user funds the card and when they make a purchase. Therefore I assume that many Swarm City users will prefer a debit card that makes the exchange immediately. If we look in the context of ridesharing for example, a driver most likely has carefully calculated their fixed costs and therefore can always negotiate in a range that fits those costs. If they do not convert the SWT immediately after the ride, this calculation could get out of hand.

Another approach would be for debit cards like the ones mentioned above to allow users to determine when they want to make the exchange.This would make it possible for less risk averse users to exchange SWT to Fiat instantly until they have reached their fixed cost amount. Once they reached that goal, they can keep the SWT as is until they decide that it makes sense to convert it, or use it within the crypto ecosystem itself, and never have this crypto touch FIAT at all (this is when we will have the ecosystem in place that I am looking for).

However, there is one milestone that seems more difficult to accomplish, and has not been accomplished in a useful way to my knowledge. Can you guess what step that is?

Step one of course! Entering into crypto ecosystems from Fiat. This occurs when a user is interested in using the Swarm City app, but does not have any SWT, or even any other cryptocurrencies. This is where the old world clashes against the new world and I will explain why this clash exists next.

We all use Credit Cards frequently. If we want to make sure that we have even more control over payments we make, we use Paypal in e-commerce payments. The convenient part for the customer is, that they can reverse any payment they have done. Meaning they can be sure that if the product is not what it should be, or never arrived, they can get their money back.

This is great and definitely needed in the non-blockchain world. In crypto though, customers don’t need that reassurance. The blockchain inherently provides reassurance and on top of that, smart contracts are an extra layer of protection.

Swarm City as an example has an escrow-like system built into the platform. Only once both parties agree that the deal was completed as agreed to, the payment will be confirmed and executed. And it cannot be reversed by any side after it was approved.

This is why the FIAT to Crypto exchange is so difficult. If a payment with a credit card can be reversed, but the crypto exchange can not, anyone can game the system. They could pay with a credit card, wait for the crypto to arrive and then reverse the credit card payment, receiving the crypto for free.

This means the SWT issuer either needs to have access to the crypto currency after it was paid out (which sounds very centralized, even if they use a smart contract that is triggered if the credit card payment is reversed) or they don’t use credit cards for acquiring cryptocurrencies.

Here are three examples the Business Hive came up with that would make it possible to get SWT if a user doesn’t have any:

Through a peer to peer service

We are a p2p platform and therefore it should be possible to have people sell SWT for cash. For example, #Cash4SWT could be the hashtag for that.

Here is how it might work: A user enters Swarm City with no SWT. The user opens the hashtag and places a request to buy SWT for the cash amount they have available. The hashtag offers a calculator with the current exchange rate. They can also see a map of people in their area that answer the request. The user then picks the closest one and they both meet in person. How crazy is that? Blockchain tech brings people together in real life!.

Now the user can choose to give the cash first or receive tokens first. It’s a live escrow just like buying bread at your bakery. It’s revolutionary!

Business Model:

The #Cash4SWT will have a minimal fee.

The service provider will receive the fee which is created by adding a small percentage on top of the Exchange rate.

Anyone that has SWT can be a service provider and will make a small ROI if they invest the time to give some of their SWT to another community member.

Even the consumer wins, as they do not have to pay fees to a credit card provider. The fees charged by the service provider will be much lower. Prepaid Cards for onboarding

Many services like iTunes uses prepaid cards. There is even an Ethereum Card made by Nick Johnson (https://ether.cards/)

How it works is, this prepaid card has a public and private key printed on it. The public key is revealed openly and the private key is under a scratch field.

Any service provider can order these cards, which come empty. The service provider uploads SWT onto the public key that is shown on the card. This public key can be verified and anyone can see that balance on it.

Service providers can now use it to onboard new users to swarm city. All they do is hand out, or sell this card to users. The user can insert the private key to swarm.city and automatically has the card amount of SWT in their wallet.

Business Model:

These cards usually are distributed by large companies and can be sold at retail locations and convenience stores.

A service provider can find a retailer that agrees to add their card. The retailer may then sell the card for a small fee. The service provider may also take a fee.

Overall the fees of Model 1 (#cash4SWT) and 2 are the same, the difference in this case is just the inclusion of a retailer that allows not have to actively sell the cards. Work for SWT

The solution here is that the community pays services that they would use anyways, but in SWT. The person giving the service will receive SWT “in person” like in Case No1. This time it won’t be for cash, but for being a service provider. This is where the community should really get involved and offer “jobs” that will be paid in SWT.

You may recruit new members into the community by paying them for services you already use. This can be any service from contractors to dog-walkers, to babysitters, and everything else. Pay people with SWT and help them set up their account and by that increase the community.

Business Model:

Pay what you would pay anyways and create more active users, which will increase transactions. More Transactions in a scarce coin economy, will increase the value of the token as well as give your community more options to use the Swarm City ecosystem.

These are just a few thoughts on how we can overcome the bottleneck of onboarding new users. I would like to hear your thoughts on this. Use the comments below or even better visit our #bushive channel on slack and take part in our discussions.

The next Business Hive update will be close to our Boardwalk release. Exciting times in front of us.

Talk to you in slack.