As a cryptocurrency entrepreneur who helped launch Stellar and Dogecoin, Marshall Hayner has long been interested in finding a way to use blockchain — the digital ledger technology originally developed for Bitcoin — to solve some of the data privacy issues relating to payments.
While digital transactions are on the rise, so too is fraud, and consumers are increasingly being asked to share more of their personal data with providers to make payments more secure. Last year, new European regulations enforced Strong Customer Authentication, which implements an extra layer of verification around transactions. The only problem is that this authentication is typically conducted via insecure channels such as email or text message.
Hayner is part of a group of entrepreneurs that is attempting to tackle this issue through a new blockchain protocol specifically designed to bridge the gaps between the cryptocurrency world and traditional finance. Called Proton Chain, it aims to enable P2P payments — using traditional funds or cryptocurrency — between any two providers, as well as improving speed and security in the process.
The central concept of Proton Chain is to use @name handles as identifiers, in the same manner as Twitter and Instagram, albeit in this context they are used to verify transactions. The idea is that personally identifiable information (PII) such as account and routing numbers can be encrypted within each handle onto the blockchain. This means that payments can be requested and processed without sharing PII with vendors in a manner which is vulnerable to hackers.
“Right now receiving money requires sharing your bank and card payment information,” said Hayner. “But if a third party gets hold of the 16 digit [number] on your card, your expiration and your CVC, they can just charge that. And we couldn’t help thinking this system is very silly, because if I were to give you my email address, you wouldn’t just be able to log in and check my messages. So we began looking at traditional bank and card payment messaging commands like IBAN, ACH, CIPA; and we had the idea of replicating them on a blockchain in an immutable way in [that] the consumer’s personal information is secured. We think it has the potential to decimate fraud by preventing card data and identity breaches.”
The Proton Chain vision is to create a world where all the major payments providers are integrated into a single blockchain — ranging from major banks to new fintechs such Revolut and TransferWise, and digital wallets — enabling payments to be rapidly processed between any two platforms without ever needing to share account details. Hayner described this future as akin to ‘an email for money.’
While the Proton project is little over two years old, it has already received some serious backing. One of its partners is U.S. fintech Plaid which Visa agreed to buy for $5.3 billion earlier this year. However, onboarding providers on the scale which Hayner is envisioning will require persuading traditional financial entities to interact with blockchain in a way which has never been done before.
“There are still many challenges and obstacles that need overcoming before blockchain and finance can interact efficiently technically, entrepreneurially as well as politically,” said On Yavin, CEO of Cointelligence, a company which provides data analysis on the crypto economy, and a board member for cryptocurrency Electroneum.
“Monetary control is a big political issue, as governments and big banks see crypto as a challenge to their historical control over monetary policies and currency itself,” Yavin explained. “That said, banks and governments and even international financial institutions, including the IMF, know that blockchain is beneficial. They acknowledge this technology has potential to take over the financial industry as the de-facto standard of ledger-keeping across time.”
Initially, Proton Chain will become available for processing payments through the latest iteration of Metal Pay — a digital banking platform founded by Hayner — this year. To facilitate onboarding of more platforms, global compliance regulations are embedded within the Proton network, meaning that to claim a handle on Proton Chain, users have to undergo a rigorous identity checking process to prevent money laundering, traditionally a concern with such technologies.
For Yavin, one of the aspects of Proton Chain which could encourage consumer uptake is the mission to integrate cryptocurrency providers with traditional payments platforms, making it conceivable to make cross-platform payments in cryptocurrency as well as government-issued cash.
“Based on this, the project does have potential, as there is a great need for a solution like this one that makes crypto and banking so much easier, eliminating the need for cumbersome wallet addresses and private keys and so on,” he said. “But I can’t predict whether they will actually succeed in their mission. The market is relatively young and they have not yet proven there is true demand for such a service.”
However Hayner is bullish, declaring he has already seen substantial appetite within the industry for Proton Chain.
“The interest is huge,” he said. “Particularly from smaller banks. And a lot of that is due to the coronavirus pandemic, which has really created a crunch on cash with all payments going digital.”
