The world of cryptocurrencies has often been criticized for being exclusive and catering primarily to speculators and crypto-savvy people. Despite this, many advocates believe that the underlying decentralized technology has the potential to benefit society as a whole.
Gnosis, a blockchain project well regarded in the developer community, is working to demonstrate the broader applicability of web3 by bridging the gap between self-custodial crypto wallets and traditional payment methods like Visa. Its latest product, Gnosis Card, is a Visa card that allows users to spend with their funds in self-custody wallets anywhere the payment method is accepted.
While Gnosis Pay launches at the main Ethereum community conference EthCC in Paris, the goal is to reach a broader audience beyond the crypto community, according to Dr. Friederike Ernst co-founder of Gnosis.
Since the FTX implosion revealed the misappropriation of customer funds, there has been a seismic shift in the crypto industry, where users are moving their assets from centralized exchanges to self-custody wallets like MetaMask and Ledger.
But for a long time, there is no convenient way to spend self-custody assets in the real world. The crypto industry, Ernst admitted, is currently dominated by “all these tokens that don't work anywhere else.”
“We've always had this strong boundary between cryptocurrencies and the real world. “We’re trying to phase it out little by little so people can use their real-world money in crypto and use their crypto to pay for things in the real world,” he said.
The Gnosis Card will initially be released in the United Kingdom and the EU, with plans to expand to Brazil, Mexico, Singapore and Hong Kong. Gnosis Pay aims to launch in the US at the end of the third quarter and will work with MakerDAO to offer the USD stablecoin called Dai as a credit card option.
The Gnosis Card will be sold for 30 euros, while the cost of production and distribution of the physical card is 10 euros, with the surplus going to engineering and compliance infrastructure. Transaction fees will generate revenue, and card adoption will drive demand for Gnosis's GMO token, eventually boosting its blockchain ecosystem.
Transact with cryptocurrencies
When asked why the financial system needs cryptocurrencies, Ernst advocated for a more favorable future in which cryptocurrencies can enable truly peer-to-peer transfers, but the technology needs time to mature.
“You need to give people like us some time because we actually try to build these things. In principle, the user experience that true peer-to-peer trust will provide is superior in every way to what we currently have, and I think we need to get to a point where the user really perceives and values that.”
As expected, a project like Gnosis Card requires significant work on technology development, integration with the existing financial system, and compliance.
“On the user side, if you make a payment, it seems very simple, but in reality it passes through many hands. You need contracts with all parties to make the transaction a reality. You must become a member of Visa, which we are; we are also becoming members of MasterCard,” Ernst said.
One of the key partners powering the Gnosis card is moneri, the company that offers the EURe according to its European nomination, the only regulated stablecoin in the European Union. Monerium allows users to connect their wallets to an international bank account number or IBAN, a standardized cross-border bank account identification system that is widely used in Europe.
When users send money from a bank account to an IBAN linked to a wallet, payments are minted as EUR on blockchains, such as Ethereum and Gnosis, and appear in their wallets. On the contrary, when users sign the payments of your wallets, the EURes are burned and sent as euros to your bank accounts.
Scaling fintech with crypto
Gnosis is also launching Gnosis Pay, a set of developer tools that allow crypto wallets to create a version of their Gnosis Card without having to jump through all the hoops of building an online payments system. MetaMask, for example, could issue a card of its own simply using Gnosis Pay tools and APIs.
The offering offers another source of income for Gnosis. When you allow other wallets to issue their own internal cards, you also get a share of the revenue.
Starting a fintech business has become very expensive, argued Julian Leitloff, co-founder and CEO of the emerging company decentralized identity platform Fractal, one of the technical partners of Gnosis Pay. But a solution like Gnosis Pay will eventually help lower the bar for entering the sector, she said.
“A Fintech is supposed to be international, but all those companies, what they do is: we launch in Germany, and then we launch in France, then we launch in Portugal, so it's kind of like little by little until they are little by little international . »He commented. “And you must use what the banking license allows, which are mostly indigenous products.”
“But by using Monerium accounts, Gnosis credit cards, Fractal KYC and Aave savings accounts, you get a complete fintech product at a small fraction of the cost and allow others to connect to it, because it is code open source and permissionless,” he continued. “Imagine how much less costs we will have and how many more fintech companies will appear.”
Make DeFi compatible
Fractal is helping Gnosis Pay with its know-your-customer (KYC) process. When a user sets up a Monerium bank account and wants to apply for a Gnosis card, Fractal has a system that allows users to have a chain message signature and share their verified identity with Gnosis.
The challenge, according to Leitloff, lies in complying with data privacy regulations, which is why they have been working on a solution that distributes data among a private but permissionless federation of nodes, meaning that no entity controls the chain of data. blocks. Unlike IPFS, a popular distributed file storage protocol, this allows Fractal to “ensure data overrides and therefore comply with the right to be forgotten.”
In other words, the solution allows users to control their own data while granting time-limited access to the obligated entity as required by law. An obligated entity is under the regulator scrutiny financial, which may request information such as the party behind an IBAN number.
Together with its partners, Gnosis Pay can also detect fraudulent activities. The payments solution is based on Safe, a popular smart contract wallet infrastructure that raised $100 million from investors including Tiger Global after leaving Gnosis last year. Each user has a secure account on the layer 1 Gnosis chain and another on zkEVM, the Layer Ethereum Scaling 2 created by Polygon, similar to having a savings account and a spending account, Ernst explained.
When funds go to the L2 account, they are screened for anti-money laundering (AML) and combating the financing of terrorism (CFT) through compliance partners. This means that everything that reaches L2 is approved and can be spent instantly through the Visa network. Users have full control of both safes and can transfer back from L2 to L1 at any time. That is, L2 works both to ensure compliance and to allow the network to process a large volume of payments, which is essentially the purpose of L2 solutions.
But of course, all of these technical complexities are “abstracted from the user,” Ernst said, as the goal is to provide a seamless experience that feels like using a traditional credit card.
