AMA Highlights — e-Money
On Monday 14 February we welcomed Martin Dyring-Andersen and Henrik Aasted Sørensen from e-Money into the Hillrise Capital Telegram Chat for an AMA. Martin and Henrik are both cofounders.
e-Money describe themselves as the “the next generation of money” — a vision they aim to realize through becoming the next-gen of stablecoins.
Their stablecoins are fully collateralized, interest-bearing, transparent, and compliant. Allowing for frictionless payments for the global citizen, business, or corporate.
Stablecoins are a hot topic at the moment as the crypto-markets heat up again… now, more than ever are reliable stablecoins an important topic of conversation.
In this post, we have compiled key questions and answers from the event.
Daniel Dal Bello
Hi guys and welcome to you both. As always it would be great to start with some introductions to yourselves and how you came together to found e-Money.
My background is primarily as a consultant in software engineering. Mostly for companies in the financial sector. I was, among many other things, part of creating the national e-identity solution that is being used here in Denmark. In my younger days, I stumbled into brief fame by founding the Adblock project.
In 2017 I founded e-Money with Martin, and have been working on it ever since.
As Henrik, I have a background in software engineering and have cofounded and worked as CTO on a couple of startups with a European focus.
Before co-founding e-Money I was working on algorithmic trading of currencies and precious metals and stumbled on the blockchain space in 2017… A bit late, but I’d argue just around the time that things were getting interesting with Interchain communication and scalable chains.
We love that you have spent years building this project before seeking any significant funding. We’d love to hear more about your journey through the years, the ups and downs, the good and bad.
From 2017 to around April 2018 it was a “weekend and extra days” project where we examined the feasibility of it all. From April 2018 we went all in and did it full-time.
We’ve spent the time on several fronts, doing regulatory explorations, building the tech and establishing partnerships with banks and auditors.
Our mainnet launched in March last year with a solid validator set.
Lots of ups and downs, we have an overview of roadmap & timeline on our website.
We are self-funded since 2017 to ensure we had a viable product before doing any fundraising and have done seed & private sales in 2020.
Daniel Dal Bello
You’ve written about algorithmic stablecoins in your whitepaper back in September 2020. Since then, there have been quite a few projects going through somewhat boom-and-bust phases.
How have your views changed in this area of the industry? Have you seen any new innovations from these algo-coins that you see as a step up from last year?
1. If they are stable “against” a fiat currency, there should be a highly efficient (cheap & highly liquid) way to move from fiat/stablecoin.
2. It should be possible to reason about the inherent value of the stablecoin. You need to know there is a strong buy-side for the stablecoins so that you can always exit back into fiat. Otherwise, what are you holding?
3. Ideally the interest rates of the underlying currency should be reflected in the value of the stablecoins.
Algorithmic stablecoins struggle with most of these. e-Money was designed to improve on the existing currency-backed stablecoin design such as USDT. More transparent. Supporting all major currencies. With negligible fees. Supporting instant payments while being movable across chains.
Some of this is obviously “just” technology, esp. fees and instant payments. But back in 2017, we saw that Cosmos would provide this and we chose that as our blockchain tech.
Daniel Dal Bello
Could you explain to us how the dual token system works? We have your NGM and the e-Money Token Class.
Also, is it correct that the e-Money Token Class is inflated at 1% rate per year and that this increase in supply is used to buy-back-and-burn NGM?
The NGM token is our staking token, which is used to secure the network.
The supply of stablecoin tokens (eEUR, eCHF, eNOK, eDKK and eSEK) are each continuously inflated with 1% per year. The inflation is used to buy back and burn NGM tokens on the DEX that is on the blockchain.
The advantages of this model are that there is no need to have large fees on transactions involving the tokens to have things work. The tokens can even be used on other chains without involving our chain.
The reason for the 1% inflation of stablecoins is that this is how the stablecoin issuance is monetized (by both e-Money and other NGM holders). This is necessary as the interest on the fiat reserve is passed on to the stablecoin holders.
Daniel Dal Bello
Based on the whitepaper, it appears that both groups of tokens bear no governance rights — most importantly, NGM staked do not provide governance rights. Could you shed some light on why users might be incentivized to hold the NGM token issued as stakers/buyers of NGM?
The price-making of the NGM tokens tie directly into the size of the stablecoin issuance due to the buyback mechanism. Governance was left out due to the need for a legal entity to operate in this kind of “hybrid model”.
Would make no sense to have a governance vote that forced the legal entity into doing something that would not be possible, illegal or jeopardized the partnerships created.
That being said, we’re paying close attention to what the NGM community is suggesting/wants.
In addition to the NGM buyback, staking rewards can be earned (approx 17% per year) by delegating tokens to e-Money mainnet validators.
What is your favourite part about building on top of Cosmos? Can you tell us more about your cross-chain strategy moving forward?
The tech is rock-solid. It provides us with instant finalization, which is essential for payments, in our opinion. Also likes that it does away with proof-of-work.
As an example, it has allowed us to introduce dynamic block times. This means that a “heartbeat” block is created about every 30 seconds on the chain, but when transactions enter the memory pool a block is created ASAP. This provides a transaction time that is usually less than 0.5 seconds.
In the long run, this is competitive with physical credit card payments and can be used in the real-world.
Our “cross-chain strategy” is essentially to bridge to established and promising-looking networks and make our tokens available there.
In practical terms, instant finalization means that from the moment a user hits “send” on a payment on the e-Money mainnet, the transaction is confirmed in < 500 milliseconds. So the blink of an eye (if you are a slow blinker 👀). That transactions can’t be reverted is crucial for payments.
The open-source nature of the industry rewards projects that are able to build strong contributing communities. How has the e-Money community grown through the years?
To what extent does your (and partners like RAMP’s) community contribute to the success of e-Money?
That’s true. It’s largely an ecosystem where projects compete with and support each other.
We’ve gained quite a lot by being able to build on the tech provided by tendermint and the Cosmos SDK. For our part, the NGM token provides an excellent way to incentivize partnerships, collaborations and an ecosystem as it ties directly into how successful the project is at gaining adoption for the stablecoins.
As Henrik mentioned above, an interesting property of our token model is that we can incentivise partnerships through our NGM token and have allocated a significant portion for that. As stablecoin issuance increases, so will the value of NGM and the value of our partnerships.
This is AFAIK a first for any currency-backed stablecoin.
To build on this, have any grants been given out to projects building within the e-Money ecosystem, or is this something that you’re looking into?
Yeah, grants have been given for validators in testnet participation, blockchain explorer integrations etc. We expect to provide funding for work such as integrating our chain (and DEX) into trading tools such as Hummingbot, wallets etc.
We haven’t used it for “cross-pollinating” with other projects through tokens (yet) — this is easier now that we have a live market.
Hillrise Capital is an independent research, and advisory firm exclusively focused on blockchain startups and crypto-assets.
e-Money is improving the legacy banking system with a single efficient blockchain layer.