The acceleration of advanced technologies is undeniable, yet the applications and implementations of these technologies often seek to provide for a narrow market that is not inclusive of many who live in an altogether different reality, one in which basic access to financial services is rife with high risk or entirely absent. This lack of access can result in crime, poverty, even death. However, one of the great opportunities afforded by these technologies is the opportunity to “leapfrog” underserved populations into the future, bypassing the years of infrastructure and architecture that make progress so slow in the more developed societies of the world. Blockchain is currently poised to provide the less fortunate of the world the means to meaningfully interact and transact in networks of value. This is a future worth building for.
In this article, I want to compare two blockchain-based projects seeking to provide financial services to anyone with access to a common smart phone: Humaniq and LakeBanker. While these endeavors share some important elements and intentions, the differences of their design and implementation are worth noting. The intent for the following is to provide an unbiased observation of two projects that seek to bring about significant change by providing financial security to those without secure access to these services. Only time will tell which of these endeavors will make the most impact.
Humaniq’s goal has a singular focus: “banking the unbanked.” The target users for the Humaniq application are the populations of the world that lack complete access to stable financial services, where the only medium of exchange is cash in hand with no secure, reliable way to manage said cash. These unbanked are 2.5 billion. They also address the 1 billion underbanked.
LakeBanker in general wants to provide “free banking for the world.” While the project acknowledges the underserved populations of the world, they appear to be casting a wider net with a platform that is providing an alternative solution to cumbersome financial systems that have become standard in society. There is not as much emphasis on the 2.5 billion mentioned above, yet it is implied that they too can make use of the platform if they have access to a smart phone and a community of active users.
The Humaniq application is a simple mobile wallet. Through this mobile crypto wallet, users can transact with one another, specifically with HMQ, the native token and transactional unit of value of the platform. However, before one can access and set up their wallet, they must first go through a three-step “bio-identification” procedure which consists of taking a photo of themselves, recording a video of them smiling or grinning, and reciting the randomized text on the screen. There is great emphasis on biometrics in this project to the extent that they are about to establish the Humaniq Center for Biometric Research, which will support startups, agencies, and companies exploring and developing biometric technologies.
To access the wallet thereafter, the user must complete one of the three steps used to create their initial biometric ID. After the selfie or voice analysis, a passcode is required for two-factor authentication.
Humaniq allows two methods for user-to-user transactions. One is through the mobile wallet which will involve passing the transaction through Humaniq’s servers before being relayed to the Ethereum blockchain. Users more familiar with cryptocurrency transactions can forego the mobile wallet and Humaniq server and instead use another Ethereum compatible wallet for a direct transaction.
The app will also feature end-to-end encrypted messages and calls, allowing users to coordinate meetups for local transactions. In its current LITE test-net edition, peer-to-peer transactions seem to be the focus, but the PRO version Android and iOS app release will feature improved biometrics, encrypted chats and calls, a referral system for reward bonuses, and a “smart payments” system for easy payments.
The HMQ token was distributed in a crowdsale back in April. The project utilizes an “egalitarian emission mechanism” for the token supply. As written in the whitepaper: “The amount of coins that one person can mint is limited, and that is what makes Humaniq so special.”
LakeBanker, a spinoff of the LakeBTC cryptocurrency exchange, is taking an altogether different approach to providing banking services to users. LakeBankers are the nodes of the network—the users—who provide various financial services for one another. This model is referred to as “crowd-banking,” a peer-to-peer, matching-market alternative to the traditional financial institutions that are incapable of providing secure and efficient banking to the masses in many parts of the world. A key element to the LakeBanker system is an artificial intelligence agent, Sage, which finds optimal pairings of users as well as conducts continuous risk management.
There is an incredibly low-cost overhead since a network of this sort can provide these services without building or renting a brick-and-mortar office building, setting up a high-street branch, hiring many employees, or installing and monitoring ATMs. The crowd-banking model allows for truly ad-hoc financial services. “Be Your Own Bank” becomes “We Are the Bank.”
Where this really starts to differentiate from Humaniq is the depth of the financial services LakeBankers can conduct with each other. At least with the options that are currently available. Humaniq will eventually provide what they call “smart payments,” which is just a simple payment system. Micro-loans and “smart insurance” are also in the pipeline, but as of now those are just milestones of a roadmap. LakeBanker seeks to create KYC/AML due diligence facilitated by the network’s participants. Obviously, many records and documents will have to be accessed, observed or verified in some manner during these processes. The exact methodology or the user experience involved is unclear. It is also unclear how such documents will be managed in the Humaniq system as well, although they seem intent on decentralizing all aspects of their model, including file and data storage.
So that was a basic rundown of each project. Next, I will cover specific areas of interest and explore the differences.
Both Humaniq and LakeBanker are betting on exponential growth of the network due to market effects—simply, the more active participants there are the more robust and effective the network will be for the individuals who comprise it. Each project relies heavily on local communities of users to drive use and adoption. If you want to transact with someone on either network, locality is key for many instances. The natural progression for each project is to target a certain segment of the population and let the community carry it forward.
Humaniq is targeting developing countries where the unbanked and underbanked are the norm not the exception. The project started a group called the Humaniq Ambassadors, experienced crypto evangelists in these regions who can educate locals on not only Humaniq, but the benefits of cryptocurrency in general. There are also plans for a built-in rewards system in which user earn HMQ for accomplishing certain tasks. Since the goal is to lift people out of poverty, providing incentives to participate can produce great results.
The LakeBanker network involves merchants and non-merchants who can provide financial services to one another. With the number of these services, a vibrant network is paramount. In a similar vein to Humaniq’s Ambassador program, LakeBanker will rely on local drivers of adoption. Since the network will start off like a small town where everyone is familiar with one another, this will allow a community to develop organically around the platform, town to town, region to region. Both projects wish to remove centrality of local services entirely and replace it with peer-to-peer participation.
With so much emphasis on financial inclusion, it’s important to parse out how users will transact with one another on these platforms. Is it reliant on one cryptocurrency? Is there a bridge to fiat? These are essential questions to determine if these platforms are sustainable.
Humaniq is largely critical of past options of cryptocurrency, notable Bitcoin. The reason is that it has been marketed as a medium of exchange that transcends the boundaries and limitations of fiat currency. The network congestion and high latency of the Bitcoin network combined with the language barriers and limited technical knowledge necessary to discuss and educate the unbanked severely limit the viability of Bitcoin in certain regions of the world. Therefore Humaniq decided to create its own currency for these populations, HMQ.
The payment options for Humaniq seem very simple and straightforward, which is ideal for adoption. However, if the unbanked want more involved financial services like loans and various KYC/AML protocols, then they might have to wait for the system to mature to allow such services to be possible. There doesn’t seem to be any clear method for users to cash out to their local fiat currency or other cryptocurrencies. The materials available don’t mention access to exchanges in the short term but that they are in talks with local businesses and that they will eventually develop the necessary infrastructure within their mobile wallet.
LakeBanker’s goal is to provide free banking for the world by building a peer-to-peer network that can provide financial services competitive with traditional branches. The crowd-banking model will allow for payment processing, loan services, KYC/AML, risk management, and many other services. Rather than use a singular cryptocurrency like Humaniq, LakeBanker will accommodate all manner of crypto, an advantage of being able to interface with the LakeBTC exchange. However, the network does utilize a token, banc (BAC), to provide numerous incentives for participation and completing tasks (like Humaniq) and wells as denominate all fees and interest.
Fees and interest? Isn’t this supposed to be free banking? Yes, but not necessarily by default. In the crowd-banking model, the fees are not imposed on the users by the LakeBanker Foundation or the system itself, but by the participants of the network. For example, if you want to process a payment, you could go to a local merchant, another LakeBanker node, that provides that service. He or she may charge you for processing the transaction. Conversely, a merchant LakeBanker could advertise free payment processing to attract more local customers to their business. This is where Sage comes in. Using a similar matching market model employed by LakeBTC and other exchanges, the optimal pairing at that moment in time is chosen for each instance.
Humaniq’s test net is currently running on the Ethereum blockchain but they intend to move everything to an Ethereum sidechain to bypass the congestion and fees of the public network. The transaction processing appears to follow the mold of other projects, using smart contracts to facilitate the transactions, particularly the exchange of HMQ, an ERC20 standard token. However, to make it as easy as possible for users to transact HMQ, they have a heavily simplified payment system through the mobile wallet which relays the transaction through Humaniq’s servers. Now, this is a point of contention for many in the blockchain space since decentralization is often the name of the game. Any discernable points of centrality are met with skepticism. It should be noted that Humaniq is aware of this and intends on decentralizing their entire structure in due time.
Their reliance on biometric access presents some challenges. Bio-identification is known for not being a perfected form of security and access. In the LITE version of the app, many reviews claimed constant errors in this process. Humaniq creating a research center for that very field is comforting, but to be truly effective this critical element of the app needs to be impeccable.
LakeBanker makes no qualms about the centralization of their operations. As they explain in their whitepaper, “Our users will be trusting us with their money and their personal data.” The address any concern by pointing out that LakeBanker is a spinoff of the LakeBTC exchange which has yet to suffer from theft, security scandals, or crashes, issues that plague other exchanges. They also provide a rundown of their security protocol not only for their physical operations, but the digital as well, with SSl/TLS encryption, multi-sig wallets, 2-factor authentication with 48-hr lock period, SMS confirmations, encrypted backups, and an internal network inaccessible from the Internet. All cryptocurrencies they hold are kept exclusively in cold storage.
With the ERC20 BAC token, the Ethereum network must play a key role in LakeBanker’s architecture. Since the LakeBTC exchange is going to directly interface with the LakeBanker ecosystem, this must mean that the project will utilize both on-chain and off-chain operations.
Humaniq wants communities who use the mobile wallet to grow and expand. To accomplish this, the project is continuously attempting to partner with local and other businesses to accept HMQ as a currency. They also seem keen on building micro-services which will earn users HMQ. Outside companies from all parts of the world could potentially reach out to the Humaniq user base, giving them new revenue streams. They are also seeking other projects to help build and integrate new resources on top of the Humaniq platform. There are also plans on new features for the wallet such as “smart insurance” and a virtual debit card, but no details have been released.
LakeBanker hasn’t shown any plans for third party development but rather seem focused on improving upon the opportunities and capabilities of the LakeBanker network itself. The project intends to gather region-specific data to provide customized services applicable to certain areas. To truly compete with the traditional banking sector, it is paramount that they can have a system that is flexible to the conditions and circumstances of their users. Building a new system is fine and all, but if this system ignores the financial, economic, or regulatory reality of these regions, then progress will be severely impeded. In 2018, they will train and support 100,000 LakeBankers around the world and issue digital credit cards to select users.
All in all, the fact that there are projects like these in the blockchain/crypto space brings me joy. Financial inclusion is one of the most liberating use cases of the technology, but there are significant obstacles to overcome before the world’s population can truly benefit from these platforms. With the rate of change in this space, it is impossible to predict where these two projects will be two years from now or if another project comes in to tackle the same problems. I wish the best of luck to any project that wants to provide sustainable solutions to the problems of the world.
If you wish to learn more about these projects, check out the links below.
World Community image via Adobe Stock