Nimiq, a disruptive project in Blockchain, has created the blueprint for making fiat currency (USD, EUR, etc) blockchain-compatible. It enables seamless value exchange between crypto and the traditional banking system.
Nimiq’s novel approach makes fiat behave as if it were a token on a blockchain, meaning a crypto holder can sell their coins directly to a fiat bank account holder and vice versa. The transfer is done without a single, centralized intermediary (like an exchange or payment processor) controlling the two assets being exchanged, and without the private keys of the crypto asset ever being entrusted to a third party.
This has the potential to eliminate unnecessary middlemen for merchants and crypto holders alike e.g. payment processors (like Simplex) who typically charge up to 5% on transactions. By connecting the crypto positions more closely to fiat, it removes a significant number of use-cases for stable coins such as Tether.
Nimiq is trying to change how people get their money in and out of crypto markets by removing the complications that currently act as a significant barrier to mass crypto adoption.
Industries Set For Disruption
Stable coins, with a cumulative value of $2.8bn, could be disrupted since one of their main use-cases is to provide an easy way for cryptocurrency owners to hedge against the volatility of crypto markets by buying stable coins (which attempt to replicate the value of the dollar). Instead of having to trust unaudited stable coins, crypto holders could easily move funds between crypto and real fiat.
According to TABB Group research, the over-the-counter (OTC) crypto market is three times larger than the exchange market and operates by matching large crypto holders with fiat buyers. OTC markets could sooner or later be significantly challenged by this efficient and convenient solution.
Crypto payment processing for online merchants is another area that could be revolutionized. By tying directly into decentralized exchanges 3rd party custodial processors can be eliminated. Industry players such as BitPay that recently raised $72.5M could face significant disruption.
Additional details including the scheduled go-live estimate are published on Medium.
Team Nimiq are implementing their blueprint in collaboration with WEG Bank AG (in which Litecoin and TokenPay each hold a stake) and the non-custodial cryptocurrency exchange Agora.Trade, headed by Forbes ‘30 Under 30’ list maker Reto Trinkler. This is particularly groundbreaking as it is one of the first occasions where a traditional banking institution has demonstrated that it aims to revolutionize the way banks deal with cryptocurrency.
The blueprint works without issuing or using a stable coin and allows the Euro (USD, etc) itself to behave as if it were a token on a blockchain. It is powered by Nimiq OASIS (Open Asset Swap Interaction Scheme), which is the middle layer solution that connects Agora Trade to WEG Bank and enables crypto to fiat trades.
The potential of Nimiq OASIS is far-reaching and the vision is to allow other banks, exchanges, fiat- and cryptocurrencies to integrate in the future. This will enable even more cryptocurrency users and financial institutions to reduce the use of crypto payment processors and easily transfer value between the two ecosystems.
Team Nimiq’s partners made the following comments on the collaboration:
Matthias von Hauff, CEO of WEG Bank AG:
“For the past 12 months, we have been looking at various ways to expand our core banking activities into the blockchain community. With Nimiq, we have been able to develop not only a landmark payment interface which has the potential to revolutionize the way we deal with cryptocurrencies, but also an innovative and powerful partnership.”
Reto Trinkler, Co-Founder of Agora Trade:
“Overregulation and lack of innovation lead to the development of custodial exchanges and financial intermediaries such as stablecoins. By combining an easy-to-use payment token, a noncustodial exchange and an innovative fiat bank we go back to the heart of what blockchain is all about; Self-sovereignty and removing unnecessary middlemen.”
Disclaimer: The author holds some NIM in their portfolio and is compensated in a long-term independent consulting capacity by Nimiq. This article must not be construed as investment advice. Always do your own research.