How it was. Evolution of Minexcoin payment system. (Part 2)



The first element of the ecosystem was MinexBank, but rate volatility control wasn’t its initial function. Even after the development of other elements, its core function hasn’t changed; it is proved by the project positioning in media at the beginning of the ICO.

Bridge between economies

At that time, the main function of the bank was to become a bridge between the existing fiat system and crypto economy. Using debit cards, we planned to reduce the barrier between these two economies. With the help of debit cards people could buy anything for minecoins in any place where Visa or MasterCard is accepted, and do it on the same day when they got a card. The operation principle is quite simple: if you replenish the bank account with the minecoins, the funds are automatically converted into the national currency of the holder; if the holder wants to buy a product or service for the minecoins, he replenishes the account in national currency and the bank automatically converts it to the minecoins at the current rate.

ATMs

The pace of the process of blockchain technology implementation into the economy is influenced by the speed of circulation of new digital money. Special ATMs for such coins would reduce the costs of using the terminals of fiat banks and would increase the circulation speed of the cryptocurrency assets. But at the same time, there was a probability of full or temporary failure of bank to service the network of crypto coin ATMs because of the actions of national financial market regulators. Considering these aspects, we tilted toward our own ATMs.

Crediting

As well as today, at that time crypto economy was developing rapidly. Many people started to build their own mining plants or buy ASIC. Many of them had access to cheap electricity, necessary premises, and specific knowledge, but in order to develop the farm, they needed financing. To take a loan in bank is not an option, since on the one hand high interest rate would make business less cost efficient, and on the other hand bank can turn down an application for credit, just because it doesn’t understand what mining is. As the result, there was a lack of financing sources.

So the next function of the bank was crypto economy financing. Crediting was divided into two types: large credits (for mining farms, hardware and software crypto projects) and microcredits (consumer crediting).

The main task of microcredits was to give those, who have no access to traditional banking services, an opportunity to get financing. A distinctive feature of regular microcredits is high interest rate, but we aimed reducing it by cutting costs due to decision making automation. Analysis of loan debtor should be carried out on the basis of his activity in Minex Ecosystem, i.e. analysis of the volume of coin circulation within his minecoin account, history of created/bought/sold assets on MinexExchange, and other features. It would help to determine the level of financial solvency and probability of credit default. To reduce the credit default, the legal presence of bank was necessary. But we also faced the problem of credibility of potential depositors to the bank. Since without quite long history, credibility level would approach zero, and we understood that.

Deposits

Holders of funds on the accounts could choose on their own how the bank should use their funds. Unlike traditional banks, where it is the bank that makes decisions on how to use money, we offered a choice. Bank clients could keep money on deposits — in such a way this money would be used for financing the above mentioned projects and microcredits, while clients would receive interest due to interest payments on the loans; the second option was a simple freezing of funds without giving the bank the right to use them.

Conclusion

Summing up, it can be said that initially MinexBank wasn’t designed as an algorithm for volatility control, but rather as a regular banking institution with updated functions.

Reasons why we decided not to create an analogue to a regular bank, even a blockchain-based one:

1. To use bank as an intermediary in the process of crediting and acquiring is a short term outlook, rather than a prospect for many years to come. We believe that the future belongs to P2P payments using mobile gadgets. That is why we came to a conclusion that a simple substitution of one intermediary by another one, even by a blockchain-based one, would be ineffective.

2. Another problem that pushed us for the decision made is human factor risks.

In this post, we’ve shared our thoughts occurred during the creation of MinexBank. Taking into account the fact that the idea of volatility control occurred much later, in order not to break the chronological order, later we will tell about the arguments that have formed a basis for the decision to give such a function to the bank. And in the next post we are going to talk about MinexPlatform, and why we believe it to become a catalyst for economic development and innovations in the world.

How it was. Evolution of Minexcoin Payment system. (Part 1)

https://blog.minecoin.org/how-it-was-evolution-of-minexcoin-payment-system-part-1-f3510a5c0b09