Breaking the Chains: Due Network’s Ambitious Mission to Overcome Global Payment Inefficiencies

Hot on the heels of leading a follow-on investment round in Superfluid, a programmable streaming payments protocol, Fabric are doubling down in our on-chain native payments thesis and proud to announce we are co-leading the $3.3m seed round into Due Network, a smart contract programmable token-based payments protocol designed to to harness the power of blockchain and redefine international payments, making them faster, more affordable, and universally accessible.

We are excited to join forces with a strong founding CEO Robert Sargsian from Revolut, who should know all about international payments, as well as investors such as Semantic, BlockTower, Speedinvest, Polymorphic Capital, Discovery Ventures, as well as angels from Argent, Bolt and Revolut.

The crypto bear market has brought positive developments, with blockchain entrepreneurs focusing a-new on real world inefficiencies and engaging the mass market outside just crypto natives. There are few opportunities which can come close to challenging the size of TAM as represented by those tackling payments whether that’s emerging markets, international, ecommerce or business payments.

Given the strong heritage of several Fabric partners and their impressive investment track record in the industry, Fabric has closely observed numerous blockchain payment projects in recent times. Typically, these projects focus on enhancing the user experience associated with on and off-ramps between fiat and blockchain, and/or act as a regulatory umbrella for payments as intermediaries. The potential for building exciting and large businesses in this realm mirrors the evolution of web2 payments. This is precisely why Fabric continues to invest in various cases, whether it be in crypto merchant acceptance and gateways like Sylq, Bitpay, and Coingate, on/off ramps such as Ramp.Network, emerging market stablecoin liquidity providers like Yellow Card, digital currency-based providers for business bulk and bill payments, especially international transactions, such as Nilos Finance, on-chain DeFi “banking” as seen in Unstoppable Finance, EMI-regulated stablecoins with integrated IBANs like Monerium, card offerings linked to wallets such as Gnosis Pay or Kulipa, and full-service fiat BaaS providers like Fiat Republic or wallets such as Ledger, Metamask, or Argent — serving as substitutes for stored value accounts (= Companies closely connected to Fabric or in our portfolio). The majority of these ventures follow an evolutionary path, leveraging the successful framework of web2 banking and payments and adapting it to the blockchain for enhanced efficiency, transparency, and speed improvements.

On top of this, it’s equally exciting to see the emergence of completely revolutionary projects, such as Superfluid and Due Network, which recognise that blockchain can contribute a new dimension to payments. In the case of Superfluid, they are redefining the notion of what a payment is: moving away from the well known concept of a discrete movement of funds to a stream matching ongoing utility of a service with constant settlement, creating entirely new use cases within salary streaming, asset rental, rewarding loyalty, vesting, seamless DeFi liquidity, royalties and business accounts receivables.

In the case of Due Network, the focus of this piece, it has the lofty ambition to create a programmable token-based cross border payment system moving us away from the existing account-based system we use today but bringing the richness of that same system on-chain and at the same time rectifying its severe shortcomings. How, what?

Today, in fiat systems, money is mainly transacted via account-based systems, such as in the form of bank transfers, credit cards, or mobile payments, which are linked to an underlying bank account. Looking via this lens, Visa, for example, is a payment method (scheme) network connecting acquiring banks (for the receiving merchants) and issuing banks (and their card holding customers). It exists to standardise the interchange between buyers and sellers, to manage fraud, “move the money” from buyer to seller (aka processing), ensure accounting/ledgers are correct and provide transactional data insights for merchants about their customers. The standardisation and trusted middleman status of Visa enabled the facilitation of transactions between different banks (and their customers) especially internationally. In a nutshell, platforms such as SWIFT or Visa solve quite complex movements of money, and make it look seamless to the end participant.

The popularity of such account-based payments is mainly due to the convenient handling of transactions and the comfortable storage of money. Account-based payments solutions however are far from perfect today. Regardless of their richness in customer choice, these systems suffer from severe constraints, mainly:

• No global accessibility: Onboarding of merchants is complex, can require hardware and can take weeks. This limits accessibility of the networks, esp. in developing countries.
• No inclusiveness: 1.7 billion adults remain unbanked — without an account at a financial institution or through a mobile money provider. Capital controls in high inflation countries limit companies and individuals, even if they have accounts, from accessing stable assets or other inflation hedges.
• Slow settlements: Settlement of Visa and international bank transactions are not instant and can take 2–5 days on legacy banking rails.
• Expensive cross border/cross system settlements: The average cost of international payments is estimated to be 5–6%.

These are constraints imposed, or consequences of decisions, by centralised account-based intermediaries usually acting under the guise of financial system stability regulations (or their own commercial needs).

With digital tokenisation on-chain, all kinds of physical assets, goods, forms of money and rights can be represented by digital tradable tokens. Token-based payments on-chain can be transacted peer-to-peer (p2p) as the identification of the token holder through an intermediary is not required and with no double spend. Importantly, it needs not to be ensured that tokens cannot be counterfeited or duplicated. P2p transactions with token-based money increases payment efficiency as transaction processing is no longer dependent on intermediaries and can be directly conducted between the two counterparties of a transaction. Moreover, this p2p characteristic increases payment resilience since payments can also be conducted when an intermediary is not available or acts in a malicious way. In addition, decentralised protocols have less manipulation risk. Mathematically guaranteed settlement and exchange improves the speed of execution and reduces transaction costs because counter party risk is reduced substantially.

Lets double click on what is actually happening on-chain in payments today, in comparison to account-based payments (and for the record I am explicitly ignoring the standard technical and regulatory push backs of blockchain payments related to scalability, gas fees, crypto volatility, privacy and regulations because I believe these are all being solved by current technology infrastructure and stablecoin tailwinds). Each of the web3 players I covered above, in the second paragraph, all play a critical role in on-chain payments but are usually local players with significant costs to internationalise (incl. licensing), nor do they easily solve for things we take for granted in web2 payments — fraud detection, micropayments, refunds, chargebacks (merchants might like the lack of chargeback options but consumers will not adopt mainstream on-chain payment methods without adequate customer protection), invoice payments, direct debits, and confirmations. At the end of the day the 1st and 2nd generation of on-chain payment players are simply not leveraging smart-contracts enough, they usually have most of the logic off-chain and just use the very basic transfer primitives of the blockchain protocols. This makes these systems effectively centralised and also limited in interoperability. In perfectly interoperable systems, money should not need to pass a “gateway” between different payment networks, and an exchange from one type of stablecoin to another type (e.g., issued by another counterparty) should not be required. Business models are sometimes also questionable: Receivers of funds prefer real time settlement, it can be the lifeblood of a business but gateways are well known to use the float they receive from a crypto payment (before passing on the fiat) for working capital as a key part of their business model. In essence, a myriad of issues remain to create a well functioning and rich payment method on-chain as the mass market of businesses and consumers are used to in web2. And as mentioned above, these issues are independent of solving the technical and regulatory push backs for blockchain.

Within this quest to move from account-based payments to token-based systems, next generation smart contract based solutions such as Due Network are positioned to bring all the flexibility customers require from account-based payments and more. The Due Network on-chain payment method, is a smart contract-based payment abstraction layer on top of Ethereum L2s and other chains with its own relayer infrastructure. One that can manage interoperability of chains and integrations with various DEXs, bridges and liquidity networks (most payment participants will not want to manage this complexity and is analogous to the complexity Visa stepped in to solve in web2: many currencies, settlement systems, bank issuers, and merchant fragmentation). One that orchestrates settlement, payments metadata and identities between participants such as gateways, PSPs and wallets as partner customers. And with the integration of DIDs interoperability will improve even more, where customers will be able to sign into their digital wallets embedded into pretty much any application.

Being smart contract based, Due Network can build in alternative programmable payment method logic such as direct debits, invoice payments and can automate the payment flow and any refunds and provide configurable settlement for say PSPs (e.g. batch). Programmable payments of course already exist today in account-based payments systems, for example, in the form of standing orders and direct debits. However, it is burdensome to implement complex logic into the dated account-based payment systems that execute them, and hence their flexibility is limited. Smart contract payments are not like basic automation that exists in your banking account where money transfers are automatically debited from your account based on a schedule. Instead, smart contracts can do so much more. They can look for the money first and then agree to move forward with the contract after that, and each time the contract should be fulfilled. This can automate the payment process but circumstances can also change and it instead can alert you to the situation before an issue emerges. Smart contracts offer flexibility and facilitate the integration of complex business processes with payments which will be an important building block for “Industry 4.0”, including the Internet of Things and tokenized assets.

We should look forward to a brave new world where we can get to near-zero FX spreads on major currencies accessible to everyone in the world, thanks to the ability to integrate DEXs into the payment processing directly. To a world where the programmability of stablecoins allow for very cheap bridging across networks (e.g. CCTP by Circle) as well as 0% fees for on/off ramps to fiat. To a world where the permissionless nature of blockchain allows much more participation of various liquidity providers, essentially where anyone can become a liquidity provider for a myriad of stablecoin issuers for sovereign currencies. To a world where seamless movements between “current’’ and “saving accounts’’ happen for yield payments from RWAs or where customers can create seamless credit or BNPL facilities based on collateralised assets in “investment accounts” or where loyalty rewards issued directly by merchants can become embedded into platforms natively and become liquid traded on exchanges.

We look forward to a brave new world of payments on-chain with Due Network: Feature-rich, Flexible, Fast, Fair and For-all.