Bitcoin

An in-depth look at Plutus

Recently I posted an article listing 10 up-and-coming projects that exist on the Ethereum blockchain.  One of these projects is called Plutus, a “tap-and-pay” dApp that would allow users to deposit small amounts of Bitcoin and receive, instantly, the same amount of money in fiat.  Users can then turn around and quickly use their funds to pay at any NFC terminal world-wide.  Underlying the system is their own version of a decentralized crypto exchange, called PlutusDEX.

I recently read the company’s whitepaper and came up with a few questions which I submitted to Danial Daychopan, a co-founder of Plutus.  The questions and their answers will be found below, but before we get to them let’s take a moment to parse out what exactly Plutus aims to do.

It’s important to understand that a crucial component of the entire Plutus framework is their version of a decentralized crypto exchange, in this case trading explicitly between Bitcoin, fiat currencies, and Plutus’ proprietary token, called Plutons.  This exchange, the PlutusDEX, will be accessible via the Plutus dApp itself and the web.  Basically, traders on the exchange will set up an account and verify their identities, and will also deposit fiat to an escrow account.  This fiat deposit assures that users who deposit BTC (in order to eventually make payments at NFC terminals) will have their Buy orders filled instantly.  Furthermore, the BTC deposits are sent to whatever BTC address you specify, guaranteeing the instant transmission of those funds as well.  In keeping with the spirit of autonomy and trustlessness, no funds will be stored on PlutusDEX.

It may sound a bit complicated at first, but really the process boils down to: 1.) Deposit BTC to a wallet address found on the Plutus app.  2.) This deposit, acting as a Buy order for fiat, is filled immediately by traders whose funds are in escrow.  3.) These escrow funds are released to the user’s virtual debit card (VDC) almost immediately, and the traders in turn receive the BTC they have “bought” from the users who initiated the process.  For a step-by-step guide on how Plutus will work, check out this page.

One last thing to note before diving into the nitty-gritty: Plutons. Plutons are the token associated with Plutus, and they are awarded to users as a rebate for every transaction they make on the Plutus app.  Furthermore, they will be available to early adapters who buy into the crowdsale (which has yet to be announced).  Unlike BTC transactions, Plutons are confirmed instantly on the blockchain.

Here are the questions I posed to co-founder Danial Daychopan.  They can also be found in this reddit thread.

Aside from the rebate, will there be any way to access Plutons outside of depositing BTC into the Mobile App?

Yes, anyone can obtain them directly from other users who earn them as a rebate on the app or from users who got them early from the crowdsale. Rebate and crowdsale tokens will be restricted to in app use only but can be obtained by anyone via the PlutusDEX.

Will Plutons only be tradeable on the Plutus DEX? That is, can traders trade them on Poloniex and other exchanges?

Users will be able to trade them externally, but only after they are obtained via the DEX platform. Users who buy-in early will only be able to redeem them via the PlutusDEX towards contactless balance or send them to a friend’s account within the app.

Can users only deposit BTC into the mobile app? Why not fiat currency directly? Or am I missing something?

Yes, the app is primarily built for users within the blockchain ecosystem. With only BTC and Pluton as deposit options. However, the design itself is not limited to digital currencies. In the future, direct fiat deposits may also be an option.

Are users at risk of having their BTC deposit tied-up if no sell orders are found for them? Or will the DEX take care of that?

The DEX takes care of that. Buy orders are already set up by users on the PlutusDEX, so a user will simply select an amount to deposit and will be shown the best rate on offer. If the user accepts the offer and sends the BTC to the address shown, then it will instantly begin the conversion process and confirm once the blockchain verifies the transaction.

Doesn’t the buy-in system benefit early adopters over later ones? That is, won’t the value of Plutons fluctuate as BTC/USD/ETH fluctuate?

The notable benefit the early buy-in has is that users will have access to Plutons and will be able to take advantage of instant conversions and a zero fee shopping experience. As opposed to users who’ll have to use Bitcoin deposits to earn Plutons as a rebate. And because the Plutus app is designed for smaller, everyday payments (contactless payment have a limit of £30 in the UK, $25 in the US and €25 across the Eurozone on per transaction), a user with 50 btc in Plutons will not be able to redeem them all at once because of the daily spend and transaction limits, as well as the rebate emission rules. The concept was developed with stability and convenience in mind for early adopters. How the market reacts, is something we obviously can not predict.

In this same vein, are users at risk of their wallet (or the funds in their mobile app) depreciating? Could they lose money if they don’t spend their funds quickly after depositing them? Will Plutons be subject to high volatility, like ETH and BTC?

The initial value of Plutons will be decided by the users during the crowdsale, and then later by the marketplace. BTC/ Pluton fluctuation will exist like with any other digital asset. However, the emission system is designed to create stability – and the spending limitations on contactless payments (mentioned above) mean that Plutons bought by early users will have natural protection for the ecosystem. And because Plutons are an Ethereum asset, they can also be accessible directly from the app to convert, whereas the Bitcoin will be held separately by users themselves. Once you transfer Bitcoin or Pluton, they are converted into a contactless payment balance, which is not affected by the volatility in crypto.

Do you have plans for expanding the capabilities of Plutus in the future? You mention limits in the whitepaper to the amount of BTC able to be deposited, saying that users should only deposit what they intend to spend. So Plutus won’t act like a wallet? Or do you plan on making the deposit limit larger in the future? If not, then why not just link someone’s ETH/BTC wallet to Plutus so they don’t have to keep depositing small amounts into the mobile app?

Plutus is primarily a contactless payments app, rather than a crypto wallet. All deposits are converted to a virtual debit card upon confirmation. However, the app itself is not limited to crypto deposits only. In the future we may expand our deposit options to direct bank transfers, and other common methods. And because the DEX is built on the Ethereum blockchain, linking a BTC wallet directly to the app is not possible, and currently a proxy method is needed. However, Plutons are a built-in Ether asset which can be accessed directly from the app, meaning a user can hold their funds in Pluton and convert them instantly when needed, whereas with Bitcoin must be directly sent for conversion.

Lastly, could you please expand on the rebate system? I had a difficult time keeping up with it. Will new Plutons be created? What exactly if going on with the rebates?

There will only ever be 20 million Plutons created, with almost all of them secured in a rebate pool. These are then emitted via the token contract on every Bitcoin conversion made towards a purchase. “To circumvent the cost of fees to the customer, we use the Ethereum blockchain to issue a rebate token (ether asset) which can then be converted to a payment balance – the same way as Bitcoin, but with the added benefit of zero fees and instant conversion. For example, let’s say you deposit $10 worth of Bitcoin and the fee is 2.5%. You will end up with a contactless balance of $9.75 and + $0.30 in Plutons (3%). Over time (as the network of grows), the Pluton rebate will decrease to a minimum of 1%, and you will receive $0.10 in Plutons. You can then send / donate / charge your payment balance with Plutons instantly for free.”

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1 Comment

1 Comment

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