Interview with Shahaf Bar-Geffen, CEO of COTI, conducted by Jason ManolopoulosCOTI offers an innovative new network for decentralized and scalable payments that aim to make global commerce on a B2C and C2C level more efficient and economic.
We had the privilege of sitting down with the CEO of COTI,
Mr. Shahaf Bar-Geffen at the
Crypto Investor Show in London for a comprehensive interview on how COTI came to be, what it is and what the future holds for them.
About Shahaf Bar-Geffen
Can you tell us a bit about yourself, your background and what you were doing before COTI?In the past 15 years, I have been an entrepreneur and have co-founded five companies—one of which was WEB3, a leading digital marketing company. Since my tenure there as of 2006, it grew from a two-person start-up to a multinational business that operates in 15 countries around the world. In my previous career, I was also an officer ranked Air Force Major, something that lent me an unparalleled managerial skill set. I decided to make the jump to COTI when I was approached to take the helm as CEO after I had been serving as an advisory board member for some time.
What was the inspiration behind launching COTI?COTI’s vision is to build a decentralized and scalable payments network to facilitate efficient global commerce in B2C and C2C settings. This will set the standard for a next-generation payment solution that is trust-driven, easy to use, instant and cost-effective. Although this will be the first use case forour Trustchain
TM base protocol, we’d like to branch out to other industries that are facing trust issues, transactions and need for mediation processes.
When and how did it come about? COTI was founded in early 2017 by a group of professionals with extensive experience in the payments, cryptography and financial services domains. The problem that merchants face these days is that they pay fees to many intermediaries and lose revenue opportunities to low approval rates, this was known to our founders and needed a decentralized solution that will bridge the better of traditional systems with, the better of blockchain.
COTI – Basic OverviewWhat is COTI all about?At COTI, we’ve developed a base protocol called Trustchain
TM that aims to solve the numerous shortcomings faced by cryptocurrencies and traditional payment methods. Our distributed ledger, the Cluster – based on a directed acyclic graph (DAG) data structure – works alongside a robust trust scoring algorithm and decentralized mediation system to provide the fastest and most scalable digital payments network around. Together these components provide a simple, secure and frictionless payment experience with low-to-zero fees.
What issue does it solve?The payments industry has been monopolized by Mastercard and Visa for the past 40 years. Such traditional payment systems, however, face many shortcomings. Each transaction goes through a number of mediators who collect their respective fees. They are the primary cause for declined transactions, which drives down revenue and profits for merchants while turning away well-meaning customers. There is also little accountability for the underbanked population, which amounts to two billion people around the world without access to financial services and banks.
On the other end of the spectrum, digital currencies like Bitcoin and others have faced severe network congestion, giving rise to scalability issues, higher fees and slower settlement times. These issues are compounded by complicated user experience, lack of buyer-seller protections and volatile prices, which deem cryptocurrencies unfit for everyday payment use cases.
How does it work?The COTI network’s Trustchain
TM base protocol requires each new transaction to be verified by up to two other transactions to be added to the ledger, or the Cluster as we’ve coined it. To accomplish this, users are encouraged to run their own nodes that work to validate transactions in the Cluster. In DAG-based systems like COTI, greater network usage leads to improved scalability. As such, there is a definite correlation between the number of network users and the rate at which transactions are confirmed.
COTI’s base protocol also makes use of Trust Scores, which collectively form Trustchain
TM, to efficiently reach transaction consensus and validation. Trust Scores incentivize users to contribute to the quality of the ecosystem and serve as a proxy for how reliable a participant will be in fulfilling transactions according to the agreed upon terms. They also serve as a key driver of transaction fees: high scores are associated with low-to-zero fees, while low scores are associated with comparatively high fees.
The Mediation System adds an extra layer of support by providing buyer-seller protections in the event of transaction disputes. These can be related to billing errors, inadvertent transfers, unauthorized charges and undelivered goods or non-conforming goods and services. COTI’s approach to mediation involves harnessing an independent network of crowdsourced mediators to resolve disputes fairly and efficiently, without causing an increase in transaction costs. These mediators are rewarded for their efforts in COTI when successfully contributing to consensus.
What will COTI’s initial use cases be?COTI’s initial use will be for the payments industry. Over time we envision that the COTI network will encompass other domains, such as insurance, money transmission, and high-frequency trading.
What are the business model and monetization plan?Nodes in our network collect coins as transaction fees and for dispute resolution. COTI, alongside its network partners, operates such nodes. We’ll also be operating our own exchange, collecting fees for the trading of crypto assets.
Why does this need to be decentralized?Keeping COTI’s services decentralized works to maintain low costs and high transaction confirmation speeds for the entire network. Because there are no third-party financial intermediaries, there will be higher acceptance rates and low cart abandonment rates in B2C settings. It will also help to account for the underbanked population, which amounts to two billion people around the world without access to financial services and banks.
DAGs (Directed Acyclic Graphs)IOTA/NANO(Railblocks)/DigitByte are also trying to achieve frictionless payments.There are a number of other DAG-based networks that have come to the fore, but what sets us apart is our Trustchain
TM base protocol, Trust Scoring Engine, Mediation System, currency exchange and decentralized governance. While the payment space is our first use case, the Trustchain
TM can be used for countless other applications that face processing shortcomings.
How does your tech differ specifically? Our Trustchain
TM base protocol is based on a DAG data structure, but we take our consensus method a few steps further with the use of a Trust Scoring Engine, Mediation System, currency exchange, and decentralized governance.
How does your business strategy differ?We’ve secured some strategic partnerships with companies from the financial industry, such as
Processing.com, which will streamline our go-to-market strategy. Beyond this, our Trustchain
TM base protocol can be used across a range of business domains, such as insurance and remittance.
Who do you consider to be competitors from the crypto space? While other DAG-based digital currencies like IOTA, Byteball, and Nano can be considered competitors, we don’t explicitly see them as such. COTI has departed from both traditional payment systems and digital currencies to provide a one of a kind technological infrastructure and product offering.
COTI – Network/Token Economics
How do the token economics work?The total supply of COTI tokens during the formative stages of the network will be limited to 2,000,000,000 COTI. These tokens will be allocated according to the chart below.
Proceeds from the sale of COTI tokens will be used to fund the development and expansion of the COTI network.
The maximum token price will be USD 0.1 per COTI. Discounts will be provided in line with each stage of the token sale.
- Private sale: $0.079 per COTI
- Public pre-sale: $0.083 per COTI
- Public sale: $0.08 -0.100 per COTI divided across four tranches
How do you balance the diverging needs of the initial funders of the network versus future users? COTI is based on decentralized governance, which will provide voting rights for executing changes in COTI’s base protocol and deciding future use cases of the COTI coin. Futarchy governance is one such methodology that utilizes a team of experts who work to define metrics for implementing new developments. COTI coin holders can then collectively vote for the best possible outcome to reach a decision based on the wisdom of the crowd.
What happens if the token price rises too high, thus dissuading usage?We have built merchant hedging services and hedging marketplace to balance that.
What will remain in the initial equity of COTI?10% of all COTI tokens will be allocated to the founders, team, early backers and advisors.
Trust ChainHow does it work?The Trust Score Servers analyze user data, user behavior, and network payment statistics to calculate a Trust Score for each COTI network participant. The Trust Score as a metric helps to rate participants according to their trustworthiness and contribution to the COTI network.
Each new transaction attaches to two previous transactions in our directed acyclic graph (DAG) ledger, which we’ve coined the Cluster. However, they are not attached randomly but are added in accordance with their respective Trust Scores. This means that a transaction with Trust Score 60 will most likely attach to a transaction with a Trust Score within a similar range. This is how we create a chain of transactions with similar Trust Scores or a Trust Chain. A transaction can be confirmed once the accumulated Trust Score of each transaction reaches the predetermined threshold.
How are Trust Scores calculated for new users when there are no public databases for reference?A participant’s Trust Score is initially determined by a general questionnaire and document verification. Trust Scores update automatically according to a user’s payment history and Big Data collected by the network.
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to be continued on part II--
