The promise of the internet was to connect billions of people through information and data. And it’s been successful at that: We can access a website around the world in seconds, share content, and interact with each other through emails, messages, photos, blogs, videos, and more.
But while the internet of information has succeeded, we’re still missing the internet of value. Shouldn’t we be able to transfer value just like we transfer a photo or the contents of an email around the world — seamlessly and in seconds? Right now, when you send “money” via a financial application like Venmo or PayPal, you’re not really sending money but rather a digital IOU.
That’s where crypto comes in. For the first time it gives an internet or mobile phone user the ability to transfer a unique piece of digital property to another internet or mobile user. The users can verify that the transfer has taken place, and that transfer can happen independently of any central party. The fundamental shift with crypto is that after clicking “send” the recipient — whether on the other side of town or the other side of the world — possesses the actual value. It is like cash in this way, but is also digitally native like an image or email.
One of the most frequent questions we get is “Why is this all needed?” Aren’t current payment systems — whether credit cards or apps like Apple Pay, PayPal, or Venmo — working just fine? The answer depends on where you’re sitting: if you live somewhere with a developed financial ecosystem and reliable socio-economic institutions, they’re working well enough. But these applications only work when both the sender and receiver have basic financial infrastructure already in place, like a bank account to which their app is linked.
But nearly two billion people in the world, despite having access to a smartphone, lack bank accounts or even identity documents. In fact, over half of Argentina is unbanked despite a high penetration of mobile phones. The situation is worse in Africa where an even higher percentage of the population lacks a bank account. Without basic financial services, people don’t have a straightforward way to receive or store value or easily pay for things, let alone establish assets, build credit history, or get a loan. As a result, this massive segment of the population is excluded from the global economy.
And even for those of us who do have financial apps and payment systems that function “well enough” there’s still plenty of room for improvement. Making an international payment or wire isn’t instant. Even the simplest credit card transaction involves half a dozen intermediaries: payment gateways, processors, credit card associations, issuing and merchant banks. Behind the scenes, all these middlemen must still provide settlement services, which not only takes time but also results in fees of roughly two to three percent in the developed world. Elsewhere, rates are much higher.
People have talked about crypto addressing inefficient payment mechanisms and the unbanked for some time. But volatility has plagued the space. And what actually exists today are technical, often disjointed solutions that not everyone is able (or willing) to put together to make a simple transaction. This is one reason mainstream adoption hasn’t yet happened. And until a working and smooth user experience takes hold and volatility is solved for, it may not.
Just as user experience and a user-friendly interface made the internet go mainstream, we believe a similar focus on usability in crypto could unlock the promise of internet money.
That’s why we are excited to announce our investment in Celo. Celo is building a global payment platform that can be used by anyone around the world with a mobile phone — no banks or intermediaries required. Under the hood, it is a decentralized smart contract platform whose architecture enables mobile phones to easily validate transactions, and it uses stable-value tokens pegged to fiat currency to minimize volatility. But because Celo is building both the underlying infrastructure and a consumer mobile wallet, it is taking a “full stack” approach. This means they’re building a complete product or service that can bypass legacy infrastructure and limitations, and more importantly, provide a better end-to-end experience — enabling Celo to take the best features of crypto and pair them with a more seamless user experience.
Celo is building a global team and has offices in San Francisco and Berlin. The team has attracted experienced engineers, designers, legal and policy experts, and researchers. They’ve hired from companies like Apple, Facebook, Google, Pinterest, Square, Visa, and WhatsApp to help further build Celo’s decentralized community of creators — from developers to designers to partners — around the globe.
Our focus at a16z is always on the team. Not only does Celo represent a strong global team that knows how to bring complicated technology to a mainstream audience by making it easy to use, it’s a great example of experienced entrepreneurs entering crypto. Co-founder Sep Kamvar developed the first efficient algorithm for adding personal context to the internet search process, and after Google acquired his company, he led personalization at the search giant. Until recently Sep was an MIT professor and is also the inventor of EigenTrust, one of the most well-known protocols for trust computation in decentralized systems.
His co-founders Rene Reinsberg and Marek Olszewski founded a machine learning startup that spun out of MIT and was later acquired by GoDaddy. Marek made influential contributions to the field of efficient deterministic multithreading while at MIT, and also worked at Google, Microsoft Research, and Sun Labs, where he focused on program correctness and scalable lock-free algorithm research. And Rene began his career in finance, working in global capital markets at Morgan Stanley, with stints in McKinsey’s financial services group and at the World Bank’s Venezuela office.
Together, the founding team brings deep perspectives in tech, mobile, and finance, all united under one roof to help crypto do for the next wave of the internet what user-friendly versions of email, photo, and text did for the last wave of the internet. We are thrilled to partner with Celo on their journey to “make money connected” and create open financial tools for the benefit of all.
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