In the quest to enable native digital payments and credit on the internet, a new contender has emerged from the world of decentralized finance (DeFi). Anvil, a startup founded by Tyler Spalding, just launched its Ethereum-based smart contract protocol that aims to transform how collateral is managed to create what it calls “trusted money for the global economic system.”
The Big Vision: Fixing the Internet’s “Original Sin”
Despite decades of explosive growth in e-commerce, the vast majority of online transactions still occur through traditional payment methods like credit cards. These systems aren’t native to the internet experience, relying on third-party verification that adds cost and friction for buyers and sellers.
Marc Andreessen, creator of the first commercial web browser, famously referred to this as the internet’s “original sin.” He lamented that the early architects failed to build the ability to spend money directly into the core of the web.
One would think it was the most obvious thing to do to build into the browser the ability to spend money, but you may have noticed that didn’t happen. I think the original sin was that we couldn’t actually build economics, which is to say money, at the core of the internet.
– Marc Andreessen
The cost of this oversight is immense, with some estimates putting the total price tag of retail payments in the U.S. at nearly 2% of GDP – almost as much as the entire defense budget. Merchants frequently cite credit card processing as one of their highest expenses.
While the original bitcoin whitepaper proposed a “peer-to-peer electronic cash system,” much of the crypto ecosystem has drifted away from this use case. Spalding and his team at Anvil hope to get back to those roots and finally atone for the internet’s original sin.
How Anvil’s DeFi Protocol Works
At its core, Anvil is a system of Ethereum smart contracts that manage collateral to secure lines of credit. Users lock up ether or USDC stablecoins in the Anvil vault and receive a letter of credit (LOC) that functions like a crypto-native version of a cashier’s check.
- Users deposit collateral (ETH or USDC) into Anvil vaults
- Anvil issues a letter of credit (LOC) against that collateral
- LOCs can be transferred and redeemed by anyone for the face value
- No fees at the protocol level; open-source tech stack
In effect, Anvil letters of credit become a new form of “trusted money” collateralized by crypto assets. Spalding envisions broad applications spanning traditional lending, asset transfers between blockchains, DeFi exchange counterparty credit, and of course, payments.
By issuing transparent and generalizable credit, Anvil provides sustainable liquidity – essentially creating trusted money for the global economic system. Permissionless decentralized technologies can transform how collateral is managed by making the process more secure and more transparent.
– Tyler Spalding, Founder of Anvil
Putting Anvil to Work in the Real World
While the protocol itself is open-source and community-governed, several partners have already signed on to build services powered by Anvil’s technology:
- Amdax – digital asset trading and custody
- Empowermint – retail cash loans
- Flexa – collateral for its payments network
By providing the underlying credit infrastructure, Anvil allows these types of businesses to plug in and start issuing LOCs to their customers – without needing to worry about the complexities of collateral management or building it themselves.
A Veteran Team on a Mission
Spalding himself is no stranger to the payments world, having previously co-founded Flexa, a digital payments network utilizing blockchain tech. After two years of heads-down development, the Anvil protocol has been battle-tested through multiple security audits and bug bounty programs.
With a mission-driven team and a robust protocol, Spalding is laser-focused on catalyzing real-world adoption and ushering in the future of internet-native finance.
We’ve been doing it a long time. We love this stuff. We want to get other people to get to use this. It’s a real-world use case. That’s the only thing that matters to me.
– Tyler Spalding
With DeFi hitting an inflection point and the crypto markets showing renewed signs of life, Anvil could be a project to watch in 2023. If successful, Spalding and team may just help the internet finally atone for those original economic sins – and unlock a new era of financial innovation in the process.
