Ethereum DApp Creators // Issue #06 WeTrust
Last issue we discussed decentralized organizations and companies coming to life with Luis Cuende from Aragon in Issue #05 of the series.
This time it’s all about financial inclusion and personal finance with Patrick Long from WeTrust.
For all the past issues of our Ethereum DApp Creators and Ethereum Contributors Series, read the articles at https://blog.status.im
This interview series is about the people who work hard to develop decentralized applications on top of Ethereum.
Screenshot from the WeTrust ROSCA
WeTrust has created Rotating Savings and Credit Associations, or ROSCAs, as their first product. Vision of WeTrust is to use Ethereum to create an alternative financial platform that improves financial inclusion on a global scale.
With the token-sale of Trustcoin (TRST), WeTrust is now building on their MVP and advancing on their roadmap. This new actor in the personal finance sector using Ethereum is something we wanted to learn more about.
Hello Patrick. What is WeTrust and what is your role in the project?
My name is Patrick Long, I’m the COO and one of the co-founders at WeTrust. WeTrust is a collaborative savings, lending and insurance platform that utilizes the Ethereum blockchain to create a full-stack alternative financial system. WeTrust leverages existing social capital and trust networks, eliminating the need for a “trusted third party”, allowing for lower fees, improved incentive structures, decentralized risks, allowing a greater amount of capital to reside among the participants, and ultimately improving financial inclusion on a global scale.
What’s the story behind WeTrust? What is your past experience and what did you do before the project?
Went to UC Berkeley, graduated with a Bachelors in Economics
- Worked at Ernst and Young, earned my CPA
- Worked at RMS (insurance modeling), Accounting/ Financial Reporting
- Crypto experience: Invested in many crowdsales in late 2015 and 2016
I met George [Li] through a college roommate who rented a room from George, after a few beers, discussed lots of investing strategies and did quite well in 2016, also learned a lot about the potential of Blockchain technology and wanted to use it for good to benefit society as a whole.
Ethereum is a decentralized world computer and allows developers and entrepreneurs to create their own programs. WeTrust addresses an issue of a fragmented financial system and allows community members to support themselves. Both these issues are important to me. We saw inefficiencies in the way Financial Markets work, wanted to reduce friction and started WeTrust.
is incredibly exciting to create an alternative financial system that
is supported by the people, rather than a centralized authority. Once
upon a time, we’ve supported ourselves through our “grassroot”
communities, but financial innovations have separated us away from our
roots. WeTrust aims to create a financial system inspired by age old
traditions, but leverages cutting edge blockchain technology as the
George Li speaking at the Blockchain Fintech Summit 2017
What is the end-goal, how will people’s lives come easier by using WeTrust?
Enable an alternative, community driven grassroots financial system that retains interest in the community, allows fairer evaluation of risk profile and therefore fairer interest rates.
Savings and lending is a foundational building block of modern society, serving as both funds in times of financial need/insurance purposes and fuel for funding economic growth.
For thousands of years, people around the world have created mechanisms within the communities to save money, lend and borrow from each other and create financial safety nets.
One of the most widespread communal financial institutions in the developing world are Trusted Lending Circles. We plan to amplify the strengths and reduce the weaknesses of these groups such that the mini 10–20 person “credit union” can now compete with a suite of tools to help scale leverage while mitigating risks, and ultimately compete with traditional banks based on the quality of the product.
Are there some requirements that people need in order to be able to use your services?
In our current iteration of the Trusted Lending Circle, end-users will be required to have some knowledge of Ethereum particularly with obtaining the crypto-currency, wallets, and basic technical know how to use Chrome and Meta-mask or the Mist Browser.
In the future, our mission will be to abstract away as much technical know how as possible. Users won’t have to know they’re accessing the Ethereum blockchain, similar to how users of Facebook don’t know the detailed protocols and software that serve as the foundation.
So ROSCA is your first product. What’s the next step, how are you planning to grow the platform during 2017?
Our first step is to improve upon the prototype and make the product more accessible to consumers such that the user does not need to know much about blockchain or cryptocurrency. This requires making our application usable on mobile, integrate the use of stable cryptocurrencies, and much more.
After refining our product, we plan to collaborate with NGOs [Non-governmental organizations] in both the US and abroad, such as Gates Foundation that have a strong focus on addressing the challenges associated with the lack of financial inclusion through technology. Michael Casey (advisor at MIT’s Digital Currency Initiative) is also on our team and has strong ties to NGOs — specifically Financial Inclusion organizations globally — who we can choose to work with when ready.
And how about the second product, could you tell us a little bit about what that will be?
WeTrust’s second product is credit identities. Credit identities can be created based on several factors such as adherence to Lending Circle terms and the quality of tethered social media accounts. Responsible individuals will be able to build up a strong credit identity, which will enable greater trustworthiness and eventually more powerful features such as the ability to vouch for other members (e.g., loan guarantor), serve as ‘connectors’ between different social groups, and potentially build trust with individuals formerly outside their social circle.
In addition, upon request, credit identities could be shared by the identity owner with external entities (such as traditional banks) to show proof of credit history. Identity is a critical component that enables Lending Circles to scale and become larger savings groups, thus enabling improved credit supply/demand matching and better interest rates for the marketplace.
Will you have your own reputation system for the credit scores, or will you integrate with some other DApps for that?
Currently, we are still in the process of finishing the Trusted Lending Circles — once we finish this product and iron out all the kinks, we will move to the reputation scores and tracking user histories for credit purposes.
Because the Ethereum ecosystem is changing so rapidly, we always have to constantly evaluate and keep tabs on all upcoming projects. If there are projects where we can collaborate/ integrate with, we will do so, as there is no reason to re-invent the wheel.
How does personal saving work in WeTrust?
If you’re a saver and have no need to access or use the money during the Lending Circle epoch, you would simply be the last person to “receive the pot”. In this scenario, you would receive distributions for each period you don’t claim the pot and then your entire amount at the end.
So why PayDay loans? How does the ROSCA fit in there?
PayDay loan users are subject to massive interest rates and thus have a strong need for an alternative solution. Because the dollar amounts for PayDay loans are typically small and manageable amongst a small group of people, these users could tap into their social networks with whom they have a good reputation. In many parts of the world, people rely on their friends and family for support, and default rates are significantly lower when there are social ties involved with borrowing.
Everybody gains in this scenario, the payday loan users save on exorbitant interest costs and their communities receive compensation for helping them out.
One of our team members documents his experience here, running a ROSCA with some friends who have used payday loans in the past.
Do you see WeTrust as a disruptive force and which industries could it disrupt in your opinion?
Traditional Banking and Insurance industries. If WeTrust can successfully find users and establish trusted lending circles that operate on a regular basis, users may view our savings and lending circles as an alternative to traditional banks and insurance companies.
Provided that they have a good experience and our product offering is more competitive and fair versus the alternative, WeTrust has a potential to disrupt a major industry and scale up a currently large but fragmented Lending Circle industry.
Example of a ROSCA, the first product of WeTrust
How does Ethereum fit into this, what differences does it bring compared to non-blockchain platform similar to WeTrust?
A blockchain-based financial-social platform reduces the friction (high fees, low liquidity, accounting records, potential fraud from organizers) and automates an existing concept already proven in communities worldwide.
We foresee that blockchain technology will impact the financial sectors in the following core areas:
- Efficiency and Automation. Smart contract technology enables end-to-end automation of payments, efficient risk model estimation, and decentralized claims processing. This substantially lowers operating costs.
- Greater Access for the Underbanked/Underserved. A more connected world will enable those in developing markets, low-income businesses, and new product verticals to leapfrog into cutting edge technology. For example, in Kenya, M-PESA has created a simple banking system on feature phones, completely bypassing the need for brick and mortar bank branches.
- All-Inclusive Digital Identity. Digital identities on Blockchains create opportunities for individuals to transact across international borders without the bureaucracy of conflicting governance.
- Transparency. On most blockchains, transparency is a platform-level feature. All data in a smart contract based system is publicly auditable and can be freely analyzed by third parties, while preserving privacy as required.
- Experimentation. With open source code, permission-less usage, wide array of customization options, and ease of accounting, groups of trusted associates can experiment and create unique structures/rules according to their circumstances. Groups with a common cause, ranging from university alumni groups, volunteer groups, veterans associations, social activists, political groups, religious groups, etc… can use a simple app to leverage and engage their respective communities with tangible financial impact.
Earlier you mentioned making your application usable on mobile and now the M-PESA system on phones, what are your plans regarding mobile use?
WeTrust wants to enable lending circles around the world particularly in areas where computers and infrastructure are not as strong. For these markets, it is critical to have a mobile-first approach towards our customers, and having a user interface that is accessible to as many mobile phones as possible, and even feature phones, if possible.
What do you see as the biggest challenges for your project on the journey to mass adoption?
Key challenges to growth include: accessibility, usability and cryptocurrency volatility, anti-fraud measures, and defensibility of the platform.
Addressing accessibility and cryptocurrency volatility through Stablecoins: The MVP version of Trusted Lending Circles currently supports usage of Ether and is built on Ethereum, as it is currently the most mature blockchain to implement smart contracts. Trustcoin and additional tokens such as stablecoin will be supported in the future as well.
Stablecoins are crypto-tokens whose value is tied to a fiat currency, which we believe is required to gain mass adoption. In addition, users do not want to deal with cryptocurrency volatility. Several stablecoins are under development or are in active usage, including MakerDAI, String Labs Phi, and Tether. Colu and Waves also are working on projects that enable the support of digital tokens that are linked to fiat value. WeTrust will integrate stablecoins into its platform as it is critical for large scale adoption and is an important step in abstracting blockchain/cryptocurrency from customers.
Addressing fraud through incentives and legal measures: A critical foundation of security and well-designed incentives are required in any financial ecosystem that intends to deter bad actors. Governance tools such as legal contracts, collateral risk, loan guarantees, mediation, and more will be available for each organization to utilize as they see fit. See more information here.
Addressing defensibility through open and close source strategy: WeTrust operates in an open-source and decentralized economy, where much of the technology stack is public and auditable by the community. In this spirit, advantages developed within businesses and technology will be openly shared with the community. However, in order to ensure sustainability in our ability to continue dedicating resources to improving the platform, we will open-source the smart contract to keep WeTrust products transparent and secure and close-source the frontend to create a barrier to simply forking the project.
Which DApps do you think that WeTrust can benefit the most from?
Mobile Ethereum browser, very important if we are to onboard users from around the world and they only have a smartphone. Even with users that have access to a computer, easier access via mobile will be very important.
Tom, our lead frontend developer has worked closely with the Status.im team and WeTrust has also spoken briefly with Andres from Consensys about how uPort could potentially be used in conjunction with WeTrust
Identity is also a cornerstone in terms of importance for WeTrust. As we build a credit scoring system, identities kept track in say… Uport, would be wonderful to have. Our histories could be attached to Uport profiles and could add another dimension for Uport’s identity management tool.
Could be a partner to facilitate the on/off ramp problem. Network of tellers will allow general more widespread use of crypto-currencies and drive increased general interest
Could be used to have more and more folks use in developing countries (overall ecosystem boon)
Reputation platform led by Consensys — could be great to integrate with as we build real financial transaction history
Which other Ethereum projects are you yourself most excited about and why?
Status.im because a browser on mobile is critical for the usage of dApps.
And the last question; What are you looking forward to from the year 2017?
Launching WeTrust to the greater public and delivering value using Ethereum!
Thank you Patrick, we hope people will find many uses for the WeTrust platform, and we’ll be following the project closely in the months ahead.