A new blockchain protocol funded by the Web 3.0 Foundation promises to reduce collateral requirements in DeFi and cross-string applications.
Interlay received a foundation grant to build a bridge between Polkadot and Bitcoin (BTC). The latest document resulting from this project, „Promise: Harnessing Future Gains for Collateral Reduction,“ proposes a new protocol.
Alice and Bob have an ongoing relationship
The easiest way to explain how Promise works is through an example. Let’s say that Alice hires Bob as a service provider for a number of tasks, and that this relationship is an ongoing one, where Bob periodically provides a service to Alice and, each time, she pays him 1 Ether.
How Promise works. The source: Promise whitepaper.
Normally, Bob would have to lock up a guarantee of 1.5 Ether, in case he accepted payment and did not perform the task. With Promise, Alice, instead of sending the Ether directly to Bob, would lock it up with Promise. Bob would receive periodic payments through Promise upon delivery of proof of service. Because future The News Spy, Bitcoin Evolution, Bitcoin Code, Bitcoin Trader, Bitcoin Circuit, Bitcoin Era, Bitcoin Billionaire, Immediate Edge, Bitcoin Profit, Bitcoin Revolution act as an added bonus, Bob might be able to deposit a smaller amount of security. The key here is that the relationship should be ongoing, not unique.
Music to our ears
Cointelegraph interviewed one of the creators of Promise, Dr. Dominik Harz, who is currently in Japan due to the outbreak of COVID-19. In his opinion, Promise does for transactions involving collateral what Spotify did for the music industry:
„And it transforms this short interaction into this sequential game or simply as a classic subscription model. Imagine if you used Spotify. And instead of paying a monthly subscription, you’d pay for each track individually. Well, each individual song could be super cheap. There’s a mental overload. This mental transaction costs where you think, ‚oh, I really want to hear the next song? And it’s barely worth a nickel. Whereas if you just have a subscription, it’s all right.“