Visa Europe Collab and Epiphyte are building a working Bitcoin payment system. In a conversation with MiningPool, Jon Downing and Edan Yago explained what they've learned from their 100-day proof of
Visa Europe Collab and Epiphyte are building a working Bitcoin payment system. In a conversation with MiningPool, Jon Downing and Edan Yago explained what they've learned from their 100-day proof of concept and why competing blockchain projects fall short.
The two executives see Bitcoin playing a sustained role in payments infrastructure, whatever emerges next. "The major innovation is a consensus mechanism allowing for immutable shared transactions," Yago said. "While in theory there are a number of ways to do scalable consensus, in practice there's only one which has been proven, all of the others are at this point vapourware."
Visa Europe Collab launched at the start of 2015 as an independent innovation arm, reporting directly to the CEO's office despite operating separate from headquarters. Its 20 staffers investigate five domains: smart city applications, reducing friction in consumer retail, simplifying identity and authentication, deploying blockchain technology for payments, and reimagining existing services. That last mandate led the company to partner with Epiphyte after discovering them at the Digital Catapult event. Remittances became the pilot's focus, a market where lower costs and reduced complexity could help underserved populations and financial institutions alike.
Jon Downing, innovation partner for emerging payments, framed the mission this way: "Our mission and passion is to identify some of the new payment opportunities which can make everybody's lives easier in the future, whether that's consumers, merchants, banks, or other key parties in the payments ecosystem."
Edan Yago, Epiphyte's co-founder, echoed the ambition but expanded the scope. "Everyone who is part of Epiphyte is part of the company because we want to bring the advantages of Bitcoin and the blockchain and the related technologies to the people who need it most," he said. "The people who need it most are a broad audience of the underserved around the world, but this can be anyone from a grandmother in Kenya who needs funds, or financial institutions who don't have good tools for settlement. Our sense is that Bitcoin and the blockchain is the most important innovation since the internet itself."
Financial institutions pursuing Bitcoin work have been rare. The technology carries disruptive implications, after all. Yet Downing and Yago come from different worlds and speak a common language about how new and established payment systems can coexist, each serving distinct needs.
Yago explained the strategic logic: "There is a real challenge to provide people with the advantages of the technology, and the only way we are going to see mainstream adoption is if the key financial institutions of the world are able to utilise the technology and provide it to their customers. For this to work, we need to be able to make this work for their business model and enhance their business capabilities and for their customers, this needs to be friction free, invisible and as simple, or simpler than what they are using today and in the currencies they are familiar with. Our goal is to integrate with these financial institutions and make Bitcoin disappear into the background where it should be as it's a technology. Our work with Visa is an excellent example of that."
The proof of concept has two components. First, it moves real value across existing Bitcoin infrastructure rather than testing theories about what blockchains might do. Second, it leverages existing ecosystem services that have already integrated with Bitcoin. "We are using Bitcoin as an open standards, open network that will be the glue between different propriety financial networks of which the biggest in the world is the Visa payment network," Yago said.
Downing and Yago expanded on the technical details in conversation with MiningPool.
On blockchain diversity, Downing noted that the Bitcoin work remains "our principal proof of concept that we are ready to show to the wider community," though internal testing of private blockchains and multichain systems continues. The push for Bitcoin emerged from years of groundwork. "Ourselves and other companies have been talking to financial institutions since early 2013 at least," Yago said. "I think it is due to the pace in which large institutions decide that they are going to make investments or strategic moves into a new space and so, given the conversations began in 2013, it makes sense that over the course of 2015 we would begin to hear more about this."
Downing attributed the acceleration to convergence. "My perspective is that it has been accumulative and more and more companies have been spending money, sponsoring projects and initiatives. In parallel, we have seen more conferences which have been raising awareness, bringing communities of people together." He cited Consensus 2015, which assembled financial institutions, government agencies, and startups in shared space. "The third factor is that the technology has been more talked about in mainstream, serious journals. We all saw the Economist article at the start of November, probably the most visible and prominent of its kind and a publication that we know is read by business and political leaders around the globe."
The Bitcoin blockchain's transaction capacity raises obvious questions. Visa Europe processes 1,500 transactions per second. Downing dismissed scaling as a present constraint: "We recognise that the Bitcoin blockchain network has no current mechanism to deliver services of that scale, but in reality, nor does it need to at this moment. We are not looking to replace the already established, reliable and integrated payment network that we have today anytime soon, more what are doing in the Bitcoin and Blockchain domain is to explore and look at something where we can potentially spin up or test new services and new proof of concepts quickly to learn about the opportunities as well as the constraints which would have to be overcome for any future scaling."
The 100-day project moved from concept to working prototype. The front end exists in a sandbox environment with test accounts, test banks, and currencies. When a payment converts to Bitcoin, the blockchain records it. For this test, the recipient receives an M-Pesa credit on a SIM card. The team will showcase the work next week at Unbound Digital 2015.
On whether Bitcoin faces displacement by Ethereum or private chains, Yago drew an analogy: "When you connect to the internet, the vast majority of the world still use phone lines, so we don't see older versions of technology disappear, rather they become base layers in an ever more complex and growing infrastructure of digital tools that we have available to us. These binary outcomes tend to exist more in fiction than reality."
Downing added context from the developer community: "Over the last 5 years, we have seen that as different problems have needed to be solved, the community of core developers have come together and looked to solve them. They've challenged each other, had different opinions at times but also as those real elements need to be resolved for the growth, or survival they've proven that they have a desire for this to continue. Also, we know for a fact that the Bitcoin market capitalisation is in excess of ten times the nearest, biggest cryptocurrency and I feel that will continue to hold weight and interest for people."
Technical obstacles remain. Yago identified the primary one: "The biggest issue we encounter is there is still a lack of standards and tools that allow different services that aren't utilising any blockchain to talk and interface with each other in a seamless way. If you think about the way that you perform transactions today, they are still often performed with non-human readable addresses that only contain information about the destination address, they contain no information about the value being sent, or who the beneficiary or senders are. What Bitcoin does, it does very well, but there are no mature standards for Meta Data which is a crucial part of payments and so part of our challenge is building out the tools to allow that to happen. We are working with others in the community so that eventually these will become available to others in the eco-system."
