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Are We All Going To Start Using Digital Currencies Sooner Than We Think?

In today’s digital currency landscape, we see a few clear use cases emerging. For example, Bitcoin is a store-of-value (i.e. ‘digital gold’), Ethereum is a smart contracting platform and Ripple is a digital asset for settlements. However, no existing digital currencies are widely used as a means of payment. We sat down with COTI’s CEO Shahaf Bar-Geffen to understand how they are building a genuine framework for mass digital currency payments. Disintermediation is an oft-repeated phrase amongst blockchain enthusiasts.  Where does COTI fit in the puzzle of reducing the presence of middlemen and other intermediaries from the payments equation?

Shahaf Bar-Geffen: The COTI network has departed from a chain-based model in favor of a more robust and scalable consensus model that is based on a directed acyclic graph (DAG) structure. There have been growing fears that proof of work (PoW) systems could eventually become a monopoly with the rising rate of mining farms. With COTI’s DAG-based consensus model, however, there is no need for mining.

Each new transaction is required to verify up to two other transactions in order to be added to the ledger, or the ‘Cluster’ as we’ve coined it. To accomplish this, users are encouraged to run their own nodes that work to validate transactions in the Cluster. This effectively puts the responsibility in the hands of users who are incentivized with low-to-zero fees, fast confirmation times and high Trust Scores as a reward for their honest, trustworthy conduct.

We’ve also created an extra safety net to address trust issues between parties that do not know each other and may never transact again. Our Mediation System addresses any disputes that may arise during the transaction process, including billing errors, inadvertent transfers, unauthorized charges and undelivered goods or non-conforming goods and services. COTI’s approach to mediation involves harnessing an independent network of crowdsourced mediators to resolve disputes fairly and efficiently, without causing an increase in transaction costs. These mediators are remunerated for their efforts in COTI when successfully contributing to consensus. To this effect, we believe we’ve found a compelling approach to rerouting costly third party mediation services common in traditional payment systems, P2P commerce and online marketplaces. Bitcoin and early cryptocurrency entrants promised to revolutionize payments and banking, but have missed the mark until now. How does COTI plan to overcome many of the hurdles, especially relating to scalability and processing power that have faced more legacy systems like bitcoin?

SB-G: In DAG-based systems like COTI, greater network usage leads to improved scalability. As such, there is a positive correlation between the number of network users and the rate at which transactions are confirmed. However, in chain-based networks, greater scale leads to adverse effects on network usability.

As the Bitcoin network has grown, it has faced severe network congestion, giving rise to higher fees and slower settlement times. The network can currently handle approximately 20 transactions per second (TPS) on average, compared to COTI’s throughput of 10,000 TPS.

Moreover, because we’re developing a DAG-based consensus approach, we have done away with the energy intensive shortcomings of PoW blockchain systems and mining operations that have become incredibly costly to operate.

COTI’s Trust Scores and Mediation System add to our commitment to buyer-seller protections and reliability. It’s something users have grown accustomed to with legacy payment systems, but has clearly been missing for major cryptocurrencies to date.  

While technology is crucial to facilitate payments, regulation is just as important. COTI's network participants are required to go through a Know Your Client (KYC) process to meet global compliance standards. COTI has also applied for a licence in Gibraltar as part of a global licencing procedure.

Click the video above to learn more about COTI’s ‘TrustChain Consensus’ Why is COTI a better solution relative to existing cryptocurrencies and how does the idea displace other cryptocurrency endeavors that make similar promises?

SB-G:COTI sets itself apart from other cryptocurrencies in a number of ways:

— COTI’s ledger, the Cluster, is inherently scalable due to its DAG-based consensus algorithm. Transactions can be confirmed much quicker as network participants grow, which will support everyday payment use cases.

— Instantaneous remittance as compared to slow Bitcoin transactions that can take anywhere from 30 minutes to 16 hours on average.

— Users of the COTI network pay variable fees depending on their risk profiles, with highly-trusted users paying low-to-zero fees and users with higher risk profiles paying higher fees..

— A global Trust Scoring Engine, which automatically assesses the interactions between buyers and sellers over time, assigning each network participant a unique Trust Score. Trust Scores collectively form Trust Chains, which are used as part of COTI’s consensus algorithm.

— A Mediation System that resolves disputes between transacting parties and maintains the integrity of the network.

— COTI is developing a currency exchange that provides network participants with continuous access to liquid markets in a range of digital and fiat currency pairs.

— The COTI payments network will be easy to use for consumers and merchants alike through user-friendly applications. This takes away the complicated learning curve of many digital currencies.

— COTI is working in accordance to regulatory frameworks and global licencing standards.

— We will be providing merchants with hedging services that will help them to reduce or eliminate their exposure to near-term currency fluctuations. From an architecture standpoint, what gives COTI a demonstrable edge in the payments space?

SB-G: COTI’s DAG-based consensus model, Trust Scoring Engine, Mediation System, currency exchange and decentralised governance are all hallmarks to the functioning of the COTI network. We’re charting new territories in the payment space, and it’s a place that no other digital currency or payment system has gone before. blockchain preaches trustless transactability.  What will the role of trust be in relation to transacting in the COTI ecosystem?

SB-G: COTI takes a novel approach to building trust between transacting parties through its Trust Score mechanism. The Trust Score servers analyse user data, user behaviour and network payment statistics to calculate a Trust Score for each COTI network participant. The Trust Score as a metric helps to rate participants according to their trustworthiness and contribution to the COTI network.

COTI’s DAG-based consensus algorithm also makes use of Trust Scores, which collectively form Trust Chains, in order to efficiently reach transaction consensus and validation. Trust Scores incentivise users to contribute to the quality of the ecosystem and serve as a proxy for how reliable a participant will be in fulfilling transactions according to the agreed upon terms. They also serve as a key driver of transaction fees: high scores are associated with low-to-zero fees, while low scores are associated with comparatively high fees. One of the keys towards unlocking a sustainable self-contained blockchain ecosystem is the velocity of coins. How do you intend to ensure that coins are spent on the platform’s utility instead of being used as a tool for speculation?

SB-G: At COTI we’ve not only built a digital currency, but an entire digital payment ecosystem. Our payments network was designed to take over where traditional payment systems left off, namely with instantaneous transfers, low-to-zero fees and cost effective mediation services. This is a major advantage for consumers and merchants alike as compared to traditional banking, credit cards and P2P platforms.

What’s more, merchants will be able to deter the occurrence of chargebacks, fraudulent purchases and cart abandonment, while consumers will be able to transact freely in cross-border commerce with high approval rates. The idea is for COTI to lead the mass adoption of digital currency payments in the mobile era, and we believe we’re on the right path to achieving this milestone. Public blockchains are about empowering communities, something COTI has already focused on.  What steps are you taking to cultivate a strong community and incorporate their sentiments into the network and decision-making process?

SB-G: COTI is developing a decentralised governance model that will provide voting rights for executing changes in COTI’s base protocol and deciding future use cases of the COTI coin. Futarchy governance is one such methodology that utilises a team of experts who work to define metrics for implementing new developments. COTI coin holders can then collectively vote for the best possible outcome to reach a decision based on the wisdom of the crowd. What do you think is needed for more consumers and businesses to embrace and adopt this newer payment solution?

SB-G: Ideally, there should be a bridge between traditional payment solutions and digital currencies. This is why COTI developed a scalable payment solution, in addition to a unique Trust Scoring Engine, Mediation System and currency exchange. We’re also  pursuing licensing authorisations to cover merchant processing solutions in fiat currency, as well as exchange and wallet functionality. Know Your Customer (KYC), anti-money laundering and Treating Customers Fairly (TCF) standards will also make up the regulatory environment at COTI.

Because the relative complexity of digital currencies has inhibited their widespread adoption in payment use cases thus far, a primary focus of COTI’s application design efforts has been on making digital currencies as easy to acquire and use as their fiat equivalents.

Moreover, it will be crucial to maintain instantaneous transactions, low-to-zero fees and buyer-seller protections, in addition to multi-currency support and network security. Over time, all these factors will incentivise more buyers and sellers to utilise COTI’s processing tools to further enrich their cross-border e-commerce experience. What’s the benefit of using digital currencies compared to credit cards?

SB-G: Digital currencies take out the need for third party financial intermediaries, which drives down transaction costs by eliminating fees. Because digital currencies are guaranteed by cryptographic proof, this curtails common issues experienced in cross-border ecommerce, such as chargebacks, false positives and low approval rates by credit card companies. What’s more, the use of a single, unifying digital currency serves to open up international exchange, particularly when local payment methods are not available. What’s the selling point of digital currencies to individuals who still prefer cash and cheque payments?

SB-G: With digital currencies like COTI, you pay low-to-zero fees for transactions. Transfers are instantaneous, which means you don’t have to wait for cheques to clear. Digital currencies will also make online shopping and international trade much simpler with higher approval rates, bypassing the need for locally available payment methods. Where are you now with COTI? What's your roadmap?

SB-G: We are due to release our exchange in the next quarter and will be following up with the COTI wallet shortly after. These are important milestones for us as they are key elements in our ecosystem. 

We have also signed a partnership with, which will grant us access to thousands of merchants around the world. We’re also expecting to have a test-net ready for them by the end of the year. Last but not least, our ICO is well on its way, and we have already raised substantial funds from high net worth individuals and funds. Our public sale is due to start soon. The demand has been high, so we’re predicting that it will be a relatively quick sale. Many blockchain startups are managed by first-time entrepreneurs. How do you differentiate COTI's team from others?

SB-G: COTI's team includes the best of the best in terms of management and R&D talent, veterans of the financial industry and blockchain experts. Our team of advisors and backers includes Greg Kidd (early investor in Twitter, Square, Coinbase and Ripple), Steven Heilbron (former CEO of Investec Bank UK), Dr. Matthew McBrady (former CIO of Blackrock), the founders of and many other reputable individuals. As your base protocol has many use cases beyond payments, why did you choose to start with the payments industry?

SB-G: Our first use case for the Cluster, our base layer protocol, is to disrupt the payments industry. It’s a massive two trillion dollar market, but it’s currently monopolised by Visa and MasterCard. The payments sphere is definitely ripe for disruption as it hasn’t been innovated upon for the past 40 years. Nevertheless, we don’t plan to stop there. We can use the same protocol to revolutionise the insurance industry and high frequency trading amongst other key markets in the future.

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