Decentralized Capital (DC) is a new service that allows users to bring dollars, euros, and other government-backed currencies onto and off of the Ethereum network. DC will be demoing their product during International Blockchain Week's Demo Day (9/22) in Shanghai later this month.
Users can transact with DC assets for products and services on the Ethereum network, benefiting from the network's speed and security, but in a way that feels more familiar and is free from the price speculation inherent to cryptocurrency.
The new service interfaces with the traditional banking system via Crypto Capital, a private fiat banking platform built to support any crypto Blockchain. Crypto Capital provides both KYC/AML services as well as the acceptance and custodian of funds from users' accounts within the traditional banking system.
Alex Wearn, CEO of Decentralized Capital, told IBTimes UK: "For decentralised technologies to reach their full potential, they will need a trusted third-party connection to the traditional world of finance. Our mission is to create this connection."
"Customers looking to purchase DC assets can currently do so via two methods: Through an account with our banking service provider, Crypto Capital, or through a Bitcoin deposit directly through our website.
"Once a deposit is received, we issue DC assets back to the individual. They can then use those assets anywhere on the Ethereum blockchain without performing additional AML/KYC process. Each deposit maintained by Crypto Capital and held at various banks around the world, which differ based on the currency type and country in which the reserves are held."
DC's smart contracts adhere to the token standard put forward by the Ethereum Foundation with the goal of interoperability. Assets that follow this standard can be easily accepted and recognised by other smart contract services on Ethereum.
DC also uses a two of three multi-signature approach for asset creation, or minting, in case some rogue employee or individual attempted to mint assets without authorization. Additionally the system is structured so that these private keys are never stored on a server that's exposed to the Ethereum blockchain or to where a hacker could gain access.
"We are signing transactions and then bringing them over to the live Ethereum blockchain and broadcasting them for asset creation. It's another layer of security to ensure that no one is able to get access to our keys."
Wearn provided the example of a wager on the Trump/Clinton result locked in a smart contract to show how the volatility of Ether would present a volatility risk.
"If they denominate that transaction in Ether the value will be different than it is right now come November, presenting risk for every party involved.
"This price volatility affects all sorts of transactions, including any sort of escrow or deposit service. If you are locking up funds and denominating them in a cryptocurrency then it somewhat undermines the purpose of that deposit. There comes an additional form of speculation in terms of the exchange rate of that asset."
He also pointed out that people want to have things denominated in the currency where they reside.
"If you are in Europe you want euros. That's what you use to cover costs, your labour, materials etc. It's what you are paying taxes in. You want to match your revenues - even if they are from a blockchain based service - to the costs that you are incurring in the real world."