Qitmeer Open Class II: Why did Qitmeer choose the sector of micropayments
Traditional Financial System
Today, we’ll talk about why Qitmeer accepts micropayments. The central bank clearing system, as well as the commercial bank settlement system and payment instruments, make up the conventional payment system. The central bank of any country serves as the minting unit for this payment network (WeChat & Alipay). The central bank is responsible for printing and putting money called wholesale money, while commercial banks are more in touch with ordinary people in their daily lives and belong to the retail business. The money is processed in several processes. The central bank’s first responsibility is to transmit or wholesale money to commercial banks. Second, commercial banks can grow depending on the money they have to undertake credit approval, insurance, and wealth management. Finally, the end-user, who will interact with the bank via a range of payment tools, will move money between banks using the central bank’s clearing system and commercial banks’ settlement system, as well as terminal payment tools, to create a comprehensive payment network.
For example, I personally have an account in China Merchants Bank and my friend Xiaoming has an account in ICBC. I transferred 50,000 yuan from my China Merchants Bank account to Xiaoming’s ICBC, whether it is with Alipay, WeChat or the future DCEP or Internet banking. I transferred 50,000 yuan to Xiaoming and the money I sent to Xiaoming will be received by his account in 2–3 seconds. Using a mobile application to send money can be a headache too. Sometimes it can reach the receiver within a day or two because there are many authentication and security measures that are being run by the banking system. It will take a long time to have the central bank’s clearance.
(The traditional complete payment network operation process is like this: the business branch of China Merchants Bank of my account to branch to branch to the provincial bank to head office to by the People’s Bank of China or the central bank for the clearing to ICBC head office to the provincial bank to branch to branch to Xiaoming account where the ICBC business network.)
The process is simply an internal transfer between banks to each other. This account is within the bank’s business branch and may be reconciled by the bank on the same day. If it is from the bank’s business branch to the branch, it may take a week to finish the reconciliation. If it is from the bank branch to the provincial bank, it may take a month to finish the reconciliation. If it is from the bank branch to the head office, it may take a quarter of a year to finish the reconciliation.
Therefore, the traditional bank payment network can quickly finish the transaction between the two users in the same bank or between different banks, but the settlement work and clearing work will take a few days, a week, or a year. Only the Central Bank is allowed to give clearance to any bank under its supervision. It clears all the money inflows whether it is a terminal payment, domestic payments, etc.
Benefits of Blockchain
The book of the head office, the book of the provincial bank, and the book of the branch are the three books that make up a bank’s payment system. As a result, the most significant benefit of a blockchain is its speed and the ease with which assets may be transferred. It makes no difference which chain the user is on. Here’s an example: when you transfer using bitcoin, meer, bsc, eth, or another cryptocurrency, the transfer information is packaged by 51 percent of the nodes in the blockchain network through this transfer node, and then the entire network is broadcasted, and after the transfer information is recorded by 51% of the nodes in the entire network, the transfer is cleared.
This is the difference between the blockchain payment system and the traditional banking system in terms of improvement and efficiency. The efficiency of traditional paper checkout or traditional online banking checkout is greatly improved in this aspect of payment after the mobile payment system is released, but the efficiency of the blockchain payment system compared to traditional banking is improved in this aspect of the clearing system. When I transfer an account to you using the blockchain system, my transfer and clearing work are almost synchronized, and the transfer is cleared quickly, whereas when I transfer money to you using the traditional banking system, payment is made, the transfer is made, but the settlement and clearing work may take days, months, or even a year to complete.
The main benefit of utilizing blockchain in the field of payments is its speed and efficiency; once the transfer has been validated by the majority of nodes in the blockchain network, the account and business will be cleared.
Why did Qitmeer choose the sector of micropayments?
Why is Qitmeer interested in micropayments? Despite the existence of a credit card system and an international remittance system, a modern financial commercial bank system combined with mobile payment tools has become a widely used and developed mobile payment system. Only China and Northeast Asia have advanced and established mobile payment systems. In truth, mobile payment is not well established in many European and American countries, as well as many impoverished countries and areas. Many nations and regions with developing economies lack access to a sophisticated financial payment system.
There are about 7 billion people in the world, but at least 2.5–3 billion of them do not even have a bank card. It’s not that these countries and regions don’t want to use modern financial instruments and payment systems; it’s just that establishing a comprehensive, efficient, and modern payment system necessitates strong economic support, strong trade demand, and strong technical support to maintain and support it. According to this year’s figures, China’s GDP has surpassed $200 trillion. So, what underpins such a massive number of financial transactions? The core pulse that can sustain the functioning of the whole Chinese economy is formed by the central bank clearing system, commercial banks, mobile payments, and payment instruments. Only a faultless, safe financial system and payment system can support the smooth operation of the economic system and therefore make the economy more active, but supporting the operation of such a vast economic-financial system comes at a high cost.
Let’s not even get started on the central bank-commercial bank setup. For example, a China Merchants Bank needs a head office, a province bank, a city bank, a branch, and a branch; commercial outlets require ATM machines and a money transit system, and Internet banking requires an app. This huge bank payment system for China has a large economic volume that must be sustained, but many nations and areas with smaller economic volumes cannot support the operation and maintenance of China Merchants Bank’s large payment system. To provide a comprehensive collection of current payment systems. Even mobile payment systems require substantial running expenses, to begin with.
For many countries and regions in the world, the GDP of a country is not as high as that of a province, a city, or even a quasi-first-tier city in China. GDP is high, but how can it support such a large payment system?
They want a contemporary banking system as well, but they can’t pay the hefty fees, so what are their options? Why is the blockchain payment system the best option? Because the blockchain system does not require the establishment of a central clearing system, a commercial bank settlement system, a money carrier, a vault, or any of these institutions. It just requires a digital currency wallet that is built on top of a set of public chain security and high-efficiency systems. Users’ real names can be verified using KYC ID verification in the DAPP in order to run a compliant digital currency or a compliant stable coin. In addition, the operation and maintenance of the DAPP can enable a payment mechanism.
Consider what would happen if a developing country or region lacked the resources to establish a payment system comparable to that of China’s commercial banks. For example, China Merchants Bank, but can we create a payment system for mobile phones that is identical to China Merchants Bank? Based only on the blockchain system, rather than the traditional bank system. To begin with, the development and operation, and maintenance costs are significantly lowered. Who will afterward look after the network in this nation or region? Not by this nation or area, but by the miners and nodes all around the world, as well as the individuals that keep this node running. So, how much higher can the price go?
To start, a fair estimate of building and running expenditures for a payment network the size of China Merchants Bank would have to be at least $100 million. Why can El Salvador’s payments be based on bitcoin when the cost of generating a stable coin with a blockchain wallet is so low? It is built on Bitcoin’s lightning network, which is a micropayment mechanism, rather than the local currency of Bitcoin. (Although the lightning network micropayment system is off-chain and insecure, it is already far less expensive than our old financial system, which includes commercial banks’ head offices, branch offices, branches, and money trucks.)
Proposal for the Central Bank of Nigeria
When the Qitmeer Foundation was preparing a proposal in Nigeria, it ran upon this issue.
Nigeria’s central bank presented a plan to assist the country in developing a contemporary mobile payment system.
Libra Solution: With the Libra-issued super sovereign currency, Nigeria should not employ the local central bank’s digital currency or fiat currency system.
Huawei Solution: Huawei cellphones are used by all Nigerians since they come with a wallet.
Alipay Solution: Build a payment network hardware like Alipay; the software and maintenance costs are estimated to be around $100 million per year to begin.
Qitmeer Solution: We can create a DAPP based on a safe and efficient public chain network to issue a sovereign digital currency, or sovereign currency stable coin, to the country’s central bank, and then KYC to the people. This project will cost about $200,000 to complete. Everyone, there was taken aback at the moment.
The Central Bank of Nigeria ultimately declined to adopt Qitmeer’s solution, not because they are concerned about Qitmeer’s technology, but because the Central Bank of Nigeria believes that the sovereign currency requires the control of the central bank, which cannot be provided by the public chain network at this time. They must continue to monitor the public chain network’s development and application. After all, only a few nations in the world offer central bank digital currencies, and the People’s Bank DCEP is still under testing and has yet to be officially introduced.
This is due to the efficiency and, most likely, the security, it’s been down on two occasions already. The Swiss central bank has produced a white paper on its digital currency, which has yet to be launched.
Understandably, Nigeria’s digital currency’s central bank isn’t ideal when it initially begins.
The blockchain-based payment system is a high-performance information technology tool for a developed country, but it is a very effective means for economically underdeveloped countries and regions to improve the efficiency of economic operations, improve financial inclusion, and strengthen the central bank’s monetary sovereignty.
The underlying Qitmeer network is completely decentralized, with PoW consensus to maintain the network’s security. Qitmeer’s micro-payment network is positioned to serve countries and regions with underdeveloped financial infrastructures, where mobile payment systems are in immediate demand, and the underlying Qitmeer network is completely decentralized, with PoW consensus to maintain the network’s security.
Blockchain payment system solves the problem of the financial system in underdeveloped areas
The Qitmeer Foundation has submitted suggestions for financial payment systems to around 16 central banks and is actively exploring and experimenting in a number of nations. In historically poor nations and areas, a reliable blockchain payment system can help them move from having no financial system to having a stable and secure payment system. The issuance of central bank digital money is, of course, both a technological and a political matter. As a result, the Qitmeer network will begin by issuing fiat stable currencies in these nations and areas. Then, in collaboration with payment businesses, banks, and financial institutions in these nations, issue stable coins that are controlled by the central bank, and employ the stable coin solution to solve the problem.
If Qitmeer is restricted to the crypto-digital currency circle, the consensus will undoubtedly be inferior to Bitcoin. The smart contract will not be able to do the same functions as Ether, but in the sphere of micro-payments, once a nation or region can utilize the stable coin based on the Qitmeer network to conduct mobile payments and micro-payments, the smart contract will be able to do so. The circulation of Qitmeer will rise at an exponential rate.
When the mobile payment system was originally introduced in Wa, the locals presumably had no idea what Qitmeer or Meer meant, but they needed to have GAS fees (MEER) on hand in order to utilize the system. Why? Because gas fees are payments made by users to offset the computational energy required to process and confirm blockchain transactions. The greatest quantity of gas (or energy) you’re prepared to spend on a transaction is referred to as a “gas limit.”
Stable Coins in the Blockchain World
On the Qitmeer network, there will always be more than three sovereign digital currencies or fiat-based stable coins. The first is for mobile payments, followed by micropayments, and so on.
So, what does the increase in addresses of bitcoin users imply? We can look at the global data of valid addresses of coin holders: bitcoin has more than 20 million addresses, Ethereum has about 100 million addresses, and their current application is still limited to the level of crypto digital currency, not breaking through the crypto digital currency circle; we can also look at another set of data: who is using the currency transaction amount or the largest single currency transaction amount in crypto digital currency? In terms of trading volume or individual coins, the USDT and USDC are the largest cryptocurrencies, with a combined issuance of almost $140 billion, but what is the trade volume? Only one stablecoin, USDT, has a trading volume that exceeds the whole market value of the top few cryptocurrencies. Why is there such a big trade volume? It’s because USDT is currently acting as a trading medium for crypto-digital currencies and fiat currencies, and everyone is trading in and out of crypto-digital currencies with this stablecoin, which is only used by tens of millions of people in the crypto-asset circle, which is close to 100 million.
What type of a number of transactions would there be if USDT or one of the stable currencies, such as WeChat and Alipay, could be used for micro-payments in everyday life, such as paying phone bills, purchasing groceries, noodles, and oil, and transferring money between each other for daily payments? Qitmeer’s positioning is based on the fact that the micro-payment market is large enough, and a micro-payment system built on a high-performance network and a compliant stable coin is in demand in these developing nations and regions, and this demand is based on a totally decentralized network. The Qitmeer network’s scalability and decentralization will enable it to be widely used in the future. It is based on a fully decentralized network that can be used by any country or financial institution, and the underlying layer of this network is not controlled by any person, institution, or country.
The fundamental reason for Qitmeer’s decision to position micro-payments is that, based on the premise of complete decentralization and security of the underlying network, it has been chosen to be promoted and used in regions and countries with immediate needs, so that the value of Qitmeer’s underlying network can be brought into play and the technology can truly solve the problem of financial inclusion for people in more countries and regions, while also saving them money. The performance of Qitmeer’s network is now on the chain, that is, the performance of the pure chain, which is predicted to reach 3000 or even 6000 tps based on current statistics. Qitmeer not only employs Block DAG technology on current chains, but it can also do lightning network technology (chain plus chain), allowing the network to run 10 times or even 100 times better.
The Qitmeer team is passionate about high-performance network applications, as well as total decentralization of the underlying layer and security. To perform micro-payments on this basis is to allow this technology to be used effectively. Only by combining these performance and application scenarios will individuals in undeveloped nations and areas be able to address the payment system challenge. Running in this direction, technical qualities have the potential to ensure that the above will be applied throughout time. The number of practical users continues to rise as the network is put to use. The value of the Qitmeer network can be really played out, or truly exploited, in the future and then by other nations, regions, financial businesses, and organizations to use.
Next Generation Payment Network Infrastructure
Qitmeer is positioned to be the next-generation payment network’s infrastructure. The purpose of this infrastructure is to create a compliant fiat stable coin based on the network, not to bet on how hot this coin is. In accordance with local policy regulations that can help local governments, local countries, or local financial institutions handle challenges. This approach is totally decentralized, has a cheap cost, and is quite effective at solving issues. It is expected that certain technologies and applications will be the first to become feasible in a specific nation or region and that this will encourage more people to utilize them. This network will eventually attract a big number of apps for stablecoin mutual settlement as well as a large number of applications for micropayments. When assets are not controlled by specific institutions or groups, they can be used by anyone. In comparison to traditional payment systems, this system is not only practical and low-cost but also very efficient in meeting the immediate needs of those financial institutions. It is a very good payment tool, and the value can be played out.
It could take a while to understand why the Qitmeer team is aiming for security, decentralization, and high speed in the underlying network. Because high performance must be accomplished while ensuring security and decentralization, this is the case. To discuss high performance directly, there is no security or decentralization. Certain organizations and groups wield considerable influence upon probability. Diverse financial organizations from many places and countries will be able to use the landing only when the security and decentralized environment improve.
Of course, the Qitmeer network is utilized for more than just payments; it also serves as network architecture. When it comes to micro-payments, this is the most noticeable and cost-effective performance. It does not imply that the Qitmeer network can only do micropayments or cross-border payments; in fact, any cryptocurrency can make payments if it can transfer funds. To really implement micropayments, two factors must be met: security and efficiency, as well as a cheap cost to support micropayments.
Qitmeer Underlay Gas Fee
“In the future, the Qitmeer network will have more users, the transaction volume will be enormous, the coin price will grow, can we still maintain excellent performance? Can we still keep the cost low?” a friend said. If the underlying currency of Qitmeer (MEER) reaches $10,000 (about $1500). The underlying network of second-layer tokens transmits Gas amongst each other at a low cost of roughly 0.1$ each transaction. Because Qitmeer’s gas fee consumption threshold is at least 0.0000145 (MEER) per pen, the charge should be slightly higher when transferring huge sums, but even if Qitmeer’s underlying coin (MEER) climbs to 1500$, the transfer cost might be 0.0000145 (MEER) per pen (MEER). The cost will remain low, but the efficiency will remain high.
The hardware of the physical network nodes can be upgraded, the TPS can be raised, the block size has been enlarged, and the bundled transaction volume of a single block can continue to rise, in addition to the performance of Block DAG itself.
Layer1 + Layer2 Expansion
Even if all of the chain’s options have been exhausted, you can still use Bitcoin’s Lightning Network (Layer1 + Layer2) to solve your problem. The Lightning Network sends key data to the chain or sends key data to the chain every hour, which means that all transactions do not have to be on the chain in real-time, and it may dramatically increase TPS and be used for payments.
Qitmeer network positioning micro-payment is a long-term business exploration, not a blind positioning. Choose a job in this discipline to play a role once the technological architecture and the foundation’s commercial resources align. Qitmeer network micro-payment scenario, primarily in the financial base of underdeveloped countries and regions, particularly in the “Belt and Road” countries, such as Southeast Asia, South Asia, and Africa, which have a large newborn population and a relatively high smartphone user penetration rate.
We will undoubtedly state that the smartphone has evolved? It’s impossible; it’s a joke! Everyone wonders how these places’ smartphones evolved, and this may be a circumstance that we don’t fully understand, owing to a Chinese company: the smartphone isn’t developed.
One is Huawei, which has installed a big number of infrastructure communication network base stations in these nations, resulting in excellent 3G, 4G, and even 5G network conditions in these telecommunications operating locations.
There are other mobile phone firms in Shenzhen, Transin and Xiaomi cell phones, particularly Transin cell phones, which sell well in Africa and South Asia. Why is that? Because these cellphones are inexpensive (about $50), the most costly (around $100), multi-card multi-stay, photo beauty impact is very strong, and the sound is extremely loud.
Because of Huawei’s mobile communication network infrastructure construction and the popularity of smartphones, these countries and regions can quickly use the mobile Internet and modern communication tools, as long as the user downloads a wallet, KYC can scan the code, and then, the development of a DAPP application can be these countries and regions to promote mobile payment work.
People in these countries and regions need commercial banks with head offices, provincial banks, branches, sub-branches, net banks, ATMs, and money carriers to use a bank card to access money, and the cost of establishing and maintaining this system is prohibitively expensive for these countries and regions. Just a mobile payment system based on blockchain technology can make these running expenses borne by the public chain’s maintainers, miners, and nodes, and users in these nations and areas need only utilize this DAPP to send money.
Then, on top of Qitmeer, these countries and regional governments pay a very cheap price. To solve the building of mobile payment systems, mobile payments, and financial inclusion, a secure high-performance public chain created by the compliance of stable currencies is needed. The cost issues are minor; this payment method and cost are perfectly compatible with their budget, and they are also fully capable of supporting them in establishing a payment network of this nature. At the same time, in addition to the underlying network’s maintainers, there are actual business users, network users, and code maintainers, and we all work together to create a distributed network. The network code developers could be in Europe, the United States, or China, and the underlying computing power could be in Canada, Northern Europe, or South America, but the underlying network’s users could be in Africa, Indonesia, South Asia, or Bangladesh, but they’re all part of a payment network. For example, a miner in China or North America may be transferring money to a coffee bean farmer in South America to sell coffee beans, or a hotel may be transferring money to buy groceries, and this is the true reason why Qitmeer is performing micro-payments and the market where it truly counts.
I believe that thanks to the Qitmeer network’s solid underlying technology, the Qitmeer Foundation’s commercial exploration over the past four years, and the community’s joint promotion, the Qitmeer network will be able to combine the value of the network with the advantages of commercial application and solving practical problems, allowing it to solve the financial inclusion problem for more people and bring the value of the network to more people.
About Qitmeer
Qitmeer is the next-generation public chain based on BlockDAG which is dedicated to serving the ecosystem of Islamic Finance, ethical finance, and socially responsible investment, thereby enhancing financial inclusion and creating social impact.
In contrast to the competition model, BlockDAG’s collaboration model in the mining achieves a desirable balance of typical blockchain metrics among the security, openness, fairness, and scalability.
Qitmeer adopts a classic POW consensus and UTXO data model and designs a unique asset issuing mechanism which requires the reserve of native currency, which is in line with core ethical financial values.
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