e-Money, founded by Martin Dyring-Andersen and Henrik Aasted Sørensen in 2017, is a Danish Fintech developed by Block Finance A/S. It is a system of decentralized finance as well as electronic payments. The aim for e-Money is to deliver a financial service that is global, transparent, available to all and where transaction fees are very low (around 0.01 EUR).
e-Money is providing transparency to their users through quarterly audits conducted by Ernst & Young. Additionally, they are operating according to the Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) legislation. The system is implemented on the Cosmos Network.
Cosmos is a decentralized, scalable network of blockchains that are independent but can operate with each other and process incredibly fast transactions. Cosmos uses an open source tool and the Tendermint engine, which is a package that allows the developers to solely focus on the application level of the blockchain. This makes the creation of new blockchains easier and faster.
Cosmos and Tendermint implement Proof of Stake (PoS), which is a blockchain transaction validation mechanism. It differs from Proof of Work (PoW), utilized most notably by bitcoin, where miners need to compete with each other by solving a complex puzzle in order to add the block of transactions to the blockchain. The puzzle is ultimately what secures the network. In Proof of Stake, the users are keeping their coins in a wallet (staking them) and the mechanism randomly chooses the user that will get the right to validate the block.
It is important to note, that the more coins the user is staking, the higher chances they have of being chosen. In this way, PoS does not require an expensive and specialised hardware for mining. Here, the initial investment is the currency itself. At the same time, the coins that the users are holding (the stake) is the measure of security. If the validator fails at keeping the network secure, their stake is at risk.
Two types of tokens
The e-Money system offers two types of tokens – currency-backed stablecoins and a staking token. The first differs from the usual stablecoins, as they are interest bearing and do not promise a 1:1 exchange rate between the coins and their backing currency. Instead, the value of e-Money stablecoins is based on the interest accumulated on their reserve. The supply of the stablecoins is also inflated 1% each year, meaning it will increase with time. The second type of token is a staking token, which is used for securing the network and rewarding the validators of the blockchain. The token is called the Next Generation of Money (NGM) and it will be inflated 10% every year.
The reward for the validation of a block is calculated on the proportion of the user’s stake in the total stake of NGM tokens. For example, a person which holds 5% of the total staked NGMs, will receive 5% of the created NGMs. The number of NGM tokens is controlled by burning, which means the removal of tokens from circulation. The inflated supply of e-Money stablecoins will be utilized to buy NGMs, which then will be burned.
In March 2020, the e-Money mainnet launched, with its first block creation. Since then, the mainnet has been integrated on Lunie.io, a platform for staking and governance of tokens. As of now, the system supports a number of European currencies in the form of stablecoins. These are EUR, CHF, SEK, NOK and DKK. The company’s plan is to integrate multiple global currencies, with the next step being USD and JPY. Additionally, a-Money has developed their own decentralised exchange, now operable with command-line tools. The graphical user interface development is in progress.
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