BeinCrypto spoke to Warren Venter, Director of 6dot50, a platform that aims to make spending crypto as simple as scanning a QR code.
Cryptocurrencies have grown in scope and usage. However, they are still lagging in the one area they were created for— use as currency.
There is a myriad of reasons for this, from regulations to complicated transaction mechanisms. These barriers are slowly being overcome, with the likelihood of more accessible, faster transactions of cryptocurrencies happening in the near future.
Increasingly, there are some solutions like the Lightning Network, Strike, and others. However, these are often not available in developing countries or have barriers to entry outside of major hubs.
This is where Venter and his team at 6dot50 have found a way around this issue in South Africa. Using conversion to vouchers they call “Digital Rands,” they make it possible to spend crypto across the country.
South Africa and the mobile money world
While many may not expect it, South Africa and other African countries have been the playground for mobile money solutions for years.
Payment apps like SnapScan and Zapper allow users to quickly pay at tills using QR codes with linked bank cards. For those without bank accounts, USSD money solutions have also provided transaction abilities without cash.
It’s from this background that Venter founded 6dot50.
“I went into Malawi and Zimbabwe for about two to three years. I went backwards and forwards, trying to understand how we could build a mobile banking environment. Again I ran into regulated framework where it was actually impossible to get a mobile license to serve the needs of people,” explains Venter.
“So actually trying to make it easier for people to access banking was not the answer. Rather finding a new way for people to store value and transact without a bank account was really the solution.”
“So the only way to provide a transactional service was to sell a product that could then be exchanged for another product. So if you think about the concept of gift vouchers or coupons, you’re purchasing these vouchers, and then you can exchange them for something else. That’s not really a deposit,” he explains.
These vouchers can be accessed by those through a smartphone. Therefore, those who don’t meet the criteria for holding a bank account can still receive and spend money using an app on their phone.
Responding to opportunity and demand with crypto
Cryptocurrencies were not initially envisioned for this platform. However, it quickly became apparent that digital vouchers provided an opportunity for crypto spending.
“When we started, we wanted to create an on-ramp for cash to digital. We thought that this bridge created this link between these two different worlds. It became obvious that there was this other world of value in the crypto space. Cryptocurrency was meant to be used as a medium of exchange, but it’s actually failed to meet that primary function of money. It has instead become an asset class,” he says.
“So if we could take that concept of cash and say, well, let’s take crypto and instead of an on-ramp for digital [6dot50] can be an off-ramp to fiat. We’ve created the opportunity for someone to convert very quickly to a stable form of value that could be adopted easily.”
Building stability into bitcoin
However, cryptocurrencies do come with their own unique set of issues—specifically, the extremely volatile price.
To overcome this hurdle, Venter and his team worked with an offshore exchange to provide a 15-minute guarantee on the crypto price to Digital Rands.
“The 15 minutes was important for two reasons. One is that we sell a product that has a defined value in the digital realm. So if you want to buy 1,000 Digital Rands, we’re going to give you a quote at the time that you request to make that purchase,” he explains.
This is possible because the exchange the platform works with runs an algorithm that identifies the payment and runs a probability check on when it will potentially be recorded on the blockchain. Based on this probability, a 15-minute price guarantee is set.
While this is beneficial for users, it’s the merchants on the other end who are most interested in this guarantee.
A merchant is not interested in accepting the risk of a fluctuating price. It may be fine for a user to risk paying a bit extra. However, the possible loss is harder on the other end.
“So we’ve got an example of a merchant that has no way to accept crypto. They don’t really understand the crypto environment, but they sell some high-priced artworks. They want to be able to accept bitcoin. So in the context of that merchant, they can say this artwork is R1 million. They can generate a million Digital Rand request from our platform. They can send the address and the amount to the buyer. As long as the buyer pays it in 15 minutes, the merchant gets the exact amount,” he explains.
A future with crypto, CBDCs and fiat
However, the term Digital Rands is an interesting choice. This is because it has already been linked to the South African government’s possible Central Bank Digital Currency (CBDC).
On the surface, this may pose an issue for 6dot50. However, Venter isn’t worried and rather welcomes this eventual outcome.
“We most certainly believe that the digital currency space is going to continue growing and find favor, but it’s not going to be without the fact that this [fiat] environment is going to continue as well.”
“So we see these two worlds coexisting. While they coexist, there’s no doubt that any digital currency backed by the government will come with the regulatory framework. This is the same as what we’ve experienced in the banking environment,” he says.
As a result, he sees 6dot50’s lack of barriers to entry continuing to be a valuable service.
“So the solution we have as a bridge between these different worlds I think will continue. If nothing else, if the government introduced a digital currency to a regulated environment, that bridge becomes more important,” he says.
“This is because you now have to engage between digital currencies and merchants that are sitting with traditional fiat acceptance models. So this off-ramp environment from digital to fiat, whether it’s crypto in the open market space or whether it’s a digital currency from the government, will still require these worlds to coexist.”