Revolutionizing the way we think about payments, Anvil’s blockchain-based letter of credit solution aims to reduce costs and increase efficiency in online transactions. By creating a decentralized finance protocol that manages collateral and secures credit, Anvil hopes to bring native payments to the internet and overcome the limitations of traditional payment methods.
Revolutionizing Payments: Anvil Launches DeFi Protocol for Letters of Credit
The cost of traditional payment methods is massive, with economists estimating it to be as much as 2% of GDP in the United States. This burden is borne by both buyers and sellers, making online transactions cumbersome and expensive.
The Need for Native Payments
Marc Andreessen, creator of Netscape, has referred to this issue as the internet’s “original sin.” The inability to build economics and money into the core of the internet has hindered its full potential. Bitcoin was first proposed as a peer-to-peer electronic cash system, but many current cryptocurrencies have strayed from this use case.
Introducing Anvil: A New DeFi Protocol
Tyler Spalding, founder of Anvil, aims to change this with his Ethereum-based smart contract project. Anvil reconceptualizes credit, the basis of all monetary systems, by creating a decentralized finance (DeFi) protocol that manages collateral and secures credit.
How it Works
Anvil allows individuals and companies to create letters of credit (LOCs) in lieu of traditional forms of money. This is done by locking up ether or USDC in the Anvil vault, which then issues an LOC for the specified amount. The system is similar to a bank check, but without the need for paper, delays, or worries about whether the money will clear.
Benefits and Use Cases
Spalding sees Anvil as a new form of money collateralized with crypto. With no fees to transact at the protocol level, Anvil provides sustainable liquidity and creates trusted money for the global economic system. The technology is open-source, community-owned, and governed by 60% of the governance token distribution going to partners and users.
Anvil has indicated use cases in traditional loans, DeFi counterparty credit, asset bridging, and payments. Three partners have already expressed interest in building services using the protocol: Amdax, Empowermint, and Flexa.
A Safe and Secure Solution
The Anvil system was bootstrapped by Spalding and his collaborators over two years of development. It has been audited by Open Zeppelin and Trail of Bits, with Immunefi organizing two bug bounty programs to ensure its safety.
Spalding is confident that the system is secure enough for its ambitious aim of disintermediating banks from the payments and traditional credit-issuing process. With Anvil, Spalding hopes to bring native payments to the internet and atone for Andreessen’s original sin.
- coindesk.com | Anvil Launches DeFi Protocol for Letters of Credit
