Payment infrastructure considerations

• [ ] Are there off-ramping, or other opportunities for fungible use of funds the recipients? (IE can stewards use the money, in the medium and currency in which they are compensated) This project focuses on direct payment to individual stewards. If there are no off-ramping opportunities for the recipients, their response to the project will be substantially different, including speculation on the currency value. Off-ramping opportunities within the community (IE the ability for a steward to transact using the currency OR easily cash out to local fiat without leaving their town) are optimal.
• [ ] Is there mobile money savviness and infrastructure among the recipients? This is essential for the easy onboarding of participants and ease of payments to local partners. Participants would not be weary of getting involved in the project and receiving payments over a mobile device. For example, Brazil leads as an example of mobile money readiness, while the Neduc community, in particular, is already familiar with GoodDollar.
• [ ] Is there crypto savviness and infrastructure among the recipients? This is convenient for onboarding participants and avoids compatibility issues with recipients and local partners. Ideally, thoughtful UX/UI should bypass the need for crypto savviness among recipients. However, if recipients have crypto savviness, it is easier to implement the project without having to debunk fears among participants.
• [ ] Do all partners share crypto infrastructure, and if not, is there interoperability? Integrating crypto infrastructure for all partners is key for a smooth implementation. If your partner operates on a different protocol and, for example, there is not a current bridge, unique development work will be required for implementation. We designed our solutions architecture to work with any partner building on Celo, however when we became interested in working with a partner building on NEAR (Open Forest Protocol), we realized we would need to first build a bridge prior to integrating.
• [ ] Can all parties effectively access the payments infrastructure? Too many frictions for on-ramping or off-ramping of the payments infrastructure will either frustrate participants or introduce delays in the project’s operations. For example from our project, legislative barriers to crypto On-ramping in Texas, USA, created difficulty in paying partners in a timely manner (and in some resulted in using traditional wire transfers).
• [ ] Are the payment administration fees for the direct payment and the required intermediate transactions affordable to all parties? When budgeting for the payment and later usage of currency by recipients, it is important to account for the transaction fees (in crypto, gas fees) involved. If there are intermediate transactions, gas fees will add up quickly. Even if they are a fraction of a cent, the lack of tokens to cover gas fees can halt operations or deter participants from using the currency.
• [ ] In which currency will you conduct payment to recipients? This decision will be key to assessing any currency fluctuation risks during the project’s life. We chose to pay recipients in G$, as it is part of a community around universal basic income and can be easily converted to cUSD or cREAL. The pilot benefits from existing off-ramping solutions in G$.
• [ ] In which currency will you conduct payment to partners? Tax liabilities and transfer costs, among other factors, can influence the currency in which you will pay your partners. Maybe on-ramping or off-ramping barriers or taxable events from purchasing cryptocurrency will affect your decision. Make sure that you know the overall cost and speed of transactions that covers regulatory requirements for your organization and your partners’.
• [ ] Who is covering recipients’ fees for the use or off-ramping payments in crypto? If participants have to pay fees, it will deter them from using the payment until they reach a certain amount that covers the transaction costs. In our pilots, we automatically subsidized transaction fees for participants. Conversely, other basic income experiences worked on Ethereum with no subsidy to off-ramp payment that deterred participants from using the basic income.
• [ ] How are recipients’ fees going to be covered? Following the last question, once you determine who will cover the recipients’ fees, the next step is to decide how they will be covered. For example, the Good Dollar Wallet uses crypto faucets that drip fractions of cryptocurrency to cover the cost of operating within the Celo protocol for the participants or stewards who validated their identity to use the wallet. The wallet that disburses funds to participants and the wallet that manages the grant funds do not use crypto faucets but have enough CELO currency to cover for gas fees.
• [ ] How will you do your bookkeeping and accounting? Ensure you fulfill your organization’s obligations and decide how to keep the project’s books and accounting. Our manual pilot requires significant time and effort to reconcile reporting done through DeTrash and manual payments done through Neduc, our partner organizations. The process involves reconciliation of accounts and random checking of reporting videos. Our automated pilot will not require manual bookkeeping but instead will focus on reporting and monitoring. If your project is fully automated as well, include humans in the process loop for organizational accountability. Humans should be able to trace and explain the automated processes.
• [ ] Will you expect your partners to do bookkeeping and accounting as well? If you require your local partners to keep bookkeeping and accounting of their side of the project, be sure to have the conversation early on to agree on the standards and reporting. For example, in our Brazilian pilot, our local partner Neduc has done bookkeeping on their transactions and stewards’ activity since before the project began. That eased our control and bookkeeping of our own.

In addition to the previous considerations, the administration of direct payments through crypto in coordination with local partners presents challenges that can be addressed beforehand.

Words of Wisdom

• Define the security measures for your disbursement of funds and bookkeeping.
  • If you use a multi-signature wallet, make sure that you can connect the wallet through the protocols you will use and the dapps you need for your project.
  • Why is this important? We used a multi-sig gnosis safe on Celo to store and administer project funds intended for GoodCollective funding. We didn’t know going in that the transactions necessary to administer the pilots (specifically the manual pilot with Neduc) would present compatibility issues in the connection between the gnosis safe, Wallet Connect, and Ubeswap. We consistently ran into issues with Ubeswap working with the gnosis safe, and ended up resorting to a workaround in which funds were first transferred into a team member’s wallet, then swapped and put back into the safe and then disbursed to the intended recipient. This process took unnecessary time (including initial troubleshooting), introduced increased potential for human error AND exposed us to risk.
• Define a disbursement schedule and monitor the implementation.
  • Why is this important? It helps you set expectations and provides guiding elements to assess budget and timeline deviations. Additionally, it helps you determine your best strategy to manage currency fluctuation risks. Our initial funds were available in cUSD, a Celo-based stablecoin that tracks the value of US dollars. Our target disbursement for the pilots in Brazil and Kenya tracks the median household income measured in local currency. And we disbursed funds in G$. The disbursement schedule allowed us to manage the currency fluctuation by dispersing the purchase of G$ during the execution of the pilot.
• Based on your schedule of payments, identify the most convenient source for acquiring the tokens or currency. A stream of small purchases will favor Web3 protocols with lower gas fees, whereas a more significant currency purchase will offer additional purchasing options.
  • Give yourself time to troubleshoot technical or regulatory issues for acquiring the currency.
  • Some of your infrastructure might not be fully compatible with the remainder of your tech stack. Otherwise, the exchange might not be fully authorized to operate in your country and will prevent you from doing any transactions.
  • Why is this important? Identifying your source for acquiring the tokens or currency helps you anticipate possible technical issues that delay or make the purchase of tokens more complex. You can prefer to switch to a network with more compatibility within your tech stack and higher gas fees if you have a scale of operations that justifies that. We preferred to operate within the Celo network to purchase the G$ tokens to avoid incurring higher gas fees due to operations in the Ethereum network. As a tradeoff, we had to switch exchanges from Ubeswap to Uniswap during the pilot due to regulatory issues that Ubeswap faced. Fortunately, the switch also meant higher compatibility within the tech stack and fewer transactions to fund the pilots’ wallets.
• Please talk with your local partners regarding their payment and invoicing. Given the nature of this project, there is a possibility that your local partner is not aware of invoicing or taxable events around the rendered services. Allocate time in the project to troubleshoot any problems or questions.
  • Why is this important? It helps smooth the relationship with your local partners and clarifies the expectations of both parties regarding their accounting and tax requirements. Local partners might not have experience in satisfying accounting or invoicing requirements that your organization must fulfill.