Velo: The Biggest Payment Network EVER

Something we've been talking a lot on this channel is about real life use cases for blockchain and cryptocurrencies. And one of the biggest use cases right now is cross-border payments. The fact is that you can send cryptocurrencies across any border with minimal fees. And this definitely challenges the dominance of the SWIFT network. So something that you probably might not know, and especially if you're not having been in Southeast Asia, is that this is one of the biggest applications and use cases for Southeast Asia. And it's mostly because of how close in proximity these countries are. So we have Thailand, Cambodia, Vietnam, Laos, Philippines over here, and Malaysia down here. And people very much travel and work between these countries. And they need a way to pay either money, send money back home or transfer money to their relatives. This becomes one of the major use cases for, well, crypto. So this has been one of the biggest areas I think we can tackle. And we always needed a big project to push this forward. Now, this is why I'm talking about Velo because Velo has some of the biggest names, name drops out there. So the chairman of Velo is Chachavar Jarravanon. So whilst that name might not ring a bell right away, you definitely heard of his companies. First of all, he's on the board of directors of True Corporation. They recently acquired Fortune Magazine. And definitely everyone heard about that. That's also when things get really interesting. He's a family member of the CP Group, which is the sole owner of all the 7-Elevens in Thailand. And trust me, there's a lot of them. So this guy means business. And this project also means quite a lot of business, which is one of the reasons why I wanted to get close to them. It's because they're going to do something huge in this space. And Velo is building up the biggest settlement network in the world using blockchain technology. Of course, our favorite, right? So what they're trying to do is they're trying to directly cut out the middlemen. So directly remove those layers of companies trying to take fees in the middle and directly replace that with a transparent blockchain network. And on top of this, they're not just doing this without integration into popular services that people use already. They're already working with money lenders to integrate this into their network and allow this directly to be used a lot of times direct to public. And full disclosure ahead, I definitely want to get involved in this project. So when this was pitched to me by one of my friends, I was like, wow, this is mind-blowing. I definitely want the guy from Fortune Magazine who bought Fortune Magazine on this channel. So full disclosure about my intentions there, I definitely want to get involved. And in this video and in this interview, I interviewed Goran Desai, who is one of the economists on the network, to talk about what they're trying to build and how they're going to build it. In many ways, I think the ways that they're going to build it will surprise you. It uses quite a lot of blockchain components, including the Stellar Network, but also a lot of integration into existing businesses. So it doesn't really require a new system for everyone to migrate to immediately. Rather uses an existing infrastructure of money lenders that are all around in Southeast Asia into this network to make things happen. So I hope you guys enjoy this video and this interview. Hey guys, today for this interview, we have Goran Desai, who is part of the economics team for Velo. So part of this interview, I really want to understand what is the key to the problem of remittance in Southeast Asia and how this can be solved, removing a lot of fees along the way. So Goran, first of all, can you just introduce what Velo is trying to do and the passion behind the project? So in order, I think, to get your audience up to speed on what Velo Labs is doing, I think it's best to maybe just like talk about what is remittance? Why do we need a remittance solution in Southeast Asia? I mean, generally the way things work now. So what's happening now is that, you know, Southeast Asia has a lot of different small little countries like Thailand, Cambodia, Laos, Myanmar. There's a lot of migrants going back and forth between these countries. A lot come into Thailand, for example, and they need to send money back home. And they're not banked. They don't have access to banking. They work through small agents. And what happens is it's a very informal process and they end up paying a lot in fees. It takes a long time for their money to get home. By the time it gets home, you know, their families get some percentage, like 90%, 85% of what they made, what they sent. And so it's a significant problem. We have millions of workers who have to, you know, deal with this situation. So the current remittance infrastructure, you know, has basically five parts. So one, you have the capture, which is essentially money being handed to the agent, messaging, settlement, liquidity, and disbursement. Now, capture and disbursement, it's basically money being handed to the agent is capture, right? And money being handed out to the immigrant worker's family is disbursement. Everyone understands that. Even in traditional remittance from, like, say, U.S. to Thailand, you know, you go into either an agent, it might be a money gram or Western Union. You give them money. That's the capture part of it. And the disbursement's on this other end where, you know, the agent for MoneyGram will give the money to the recipient. So what's happening between is what's actually more complicated. And that's where Vela Labs is trying to, you know, create a solution. Because you can only do so much at the capture and the disbursement stage because it is kind of instantaneous. You hand out money, you receive money. But what's happening between is what there's many steps and there's a lot of delays, there's a lot of fees. And so that's what we at Vela Labs are trying to solve using the blockchain. So let me just talk through those middle steps, messaging, settlement, and liquidity, so your viewers can understand, you know, generally what is the current process. So messaging. So messaging. Now that's like basically sending how much money, who's sending the money, maybe some KYC on the actual sender, and also who it's being sent to, right? And so that messaging layer is where, you know, some of the current solutions like say, you know, Ripple or Swift, that's where they come into play. Also settlement, right? Settlement layer is all the intermediate steps of moving that money. So you have essentially someone sending money from Cambodia or say Thailand to Cambodia, for example, right? And they will send that money. It goes sometimes back to the U.S., converts to dollars, converts from dollars into the local Cambodian currency, and it comes back. And it takes three days. There's multiple. Yeah, there's maybe three or four steps. And each one is taking a fee out of that. So you send $100. Step one, you have $95 left. Step two, you have $90 left. And by the time it gets to the family, it's like $80 is left of that. That's ridiculous. I mean, that's essentially almost 20% or whatnot of the fees. And we're so used in crypto to sending even large amounts of currencies for very little fees. We complain right now about Ethereum. It costs $0.40 to send the transaction. But that is nothing compared to what the middlemen are taking between these layers. So there's definitely room for a lot of optimization there, it seems. Yeah, absolutely. I mean, you know, the strength of DLT and blockchain, it's everyone's sharing the ledger, right? So you don't need to do approval processes at every step. Like, so you send it to one correspondent bank, then they have to confirm that it was sent properly. Then they send it to the next correspondent bank. That chain of confirmation happens again and again and again. Everyone's keeping their own ledger, right? And because of that, it just takes a long time because each stage has to confirm each step of the process. And that's why the DLT and blockchain is so powerful in financial applications and transferring value because you just do it once. That's the strength of it. And that's why Bello's solution is using that technology to basically solve this problem in Southeast Asia and eventually, you know, in a wider, wider landscape, like around the world. But we're focusing here because we have expertise in the area and we know the problem. We know the players. So it's something that we feel like we can make an immediate impact in. Got it. So it's really about cutting out the middleman between getting the money from one location to another. So in this case, how would it work then? So how would your solution work or fit into the current system? Can you walk me through how, say, if I'm trying to transfer money from Thailand to Cambodia, how would that work? And how would the Bello solution work in? Well, the Bello solution, what we do is we partner with these money transfer operators, right? So some of these money transfer operators might have agents in the villages. They might be aggregators of agents. So we partner with the money transfer operator and we connect them into a network of all the other money transfer operators, small operators. We're not talking about big ones like MoneyGram or Western Union, even though we could connect into them. We're trying to help the small operators. We don't have the funding or the liquidity to basically set up shop in all these different countries. Because in the traditional space, in order to have liquidity, a small operator would have to have a bank account in their country. They would have to have a bank account in all the other countries as well. And so what we're doing is like you sign up with Bello Lab as an MTO and you sign up once in your local currency, in your local country, and then you have access to everything, right? And then you can instantly transmit to any of these different locations and different networks. And you're all using basically digital credit. So the Bello Labs, Bello Protocol is a digital credit issuance mechanism, right? And we're trying to do it so these digital credits are guaranteed on the blockchain by Bello tokens. And so that's where Bello tokens comes in. But essentially, before we even get to that, what's happening is that these digital credits are now in the system. All these MTOs are connected. So a Thai MTO can send digital Thai bot equivalent or just a digital credit to Cambodia directly. No reason to go through the U.S. dollar chain. And it's just instantly converted with FX into a digital version of their currency. Then it can be cashed out for actual cash with their endpoints in Cambodia. So if I was using this, I would just go up to any, say, any random shop in Bangkok. Maybe they sell some. There may be like a tiny convenience store. I've seen a lot of these shops around. They're almost like tiny convenience stores. Like you go there, you give them your cash in terms of Thai bot, and then they'll be able to use the system, connect directly to the MTO, say, in Cambodia, and directly send it to any small village or anywhere on the network. Basically, now it's almost replacing that system, the archaic system that was there in terms of the banking system, directly and leapfrogging that with the blockchain. And for me, I don't really have to access the tokens or whatnot if I choose not to. So if I'm just a consumer, it's just. Exactly. Yeah. Yeah. Precisely. Like as a user, it's just, what you'll see as a user is just things are happening faster. They're happening cheaper. And you have more access to send and receive points. Like you can get money from more places and you can send money to more places. And then what the MTO is seeing is like they can operate much easier with lower cost of funding and they can pass that on, that saving on to their customer. Then they have to because essentially if they don't pass it on, then another MTO will underprice them. And then so prices just go down, right? Right, right. Because the middlemen aren't taking as much as no, you're removing like four layers of middlemen. So now that's directly passing the savings on to consumer. So, okay, on that front, roughly how many MTOs are involved? Like how big is the network right now that you're saying you're trying to implement and trying to get connected to? Well, I mean, you know, in Southeast Asia, we have some like sister companies and partners that are already like building out the MTO network at the village level, right? In Cambodia, in Indonesia, in Thailand. And so we're talking about hundreds and hundreds of agents, like, I mean, sorry, like thousands of agents and hundreds of MTOs, like all throughout Southeast Asia that aren't part of the traditional network, like say MoneyGram or Western Union. They're actually new in terms of being connected into this kind of global tapestry. Got it. Got it. So it's all about using blockchain to solve an existing problem, to cut out multiple layers of middlemen that were existing prior to this and make these currency transactions easier. Now, obviously with the blockchain, this is not something that's absolutely new. We've been able to send cryptocurrencies around. What makes Velo special in this case? So, I mean, you know, there's various solutions. Like I said, there's messaging solutions, right? Like football is a messaging solution. You have, you know, very stable coins that you can, like some people use to transmit, but there's no one solution. The issue with all of these, especially in a situation where like you're dealing with a small MTO is like there's an issue of trust, right? When you send something, do you necessarily know it's going to be able to be cashed out on the other end in fiat if they need it? So we're trying to, what we're trying to do is build a system that has the messaging settlement and liquidity all together. It's kind of, we're trying to build like a trustless system in that the digital credit itself is tied to value of Velo token. So in a situation where there isn't settlement, where the digital credit cannot be exchanged for the fiat, then the Velo token comes into play. It has value and it will basically be a collateral to that entire transaction, but it's done in a smart contract. It's done in a trustless way. Got it. Got it. So when it comes to the token, so now you touched a bit about the token. So the token, one of the use cases is for collateral. Do you expect everyone to hold this token or how does this whole token ecosystem work? Well, like for example, it will have a aggregator, a trusted partner who signs up with Velo, right? And so these trusted partners will use the Velo token when they want to create digital credits to use in their business. They will do that by taking Velo token and locking it in a smart contract. And this smart contract is tied to the fiat deposit and is tied to the digital credit. So, you know, normally if there's proper settlement and the trusted partners are settling things on all the ends and end of day settlement, everything's fine. The Velo token doesn't really come into play. It's just there as a backing. Now, in the case where the settlement fails, then the party will receive automatically Velo tokens, which are the equivalent value of the send, right? And so that's when they will be able to hold the Velo tokens and exchange that back for fiat. But it's that collateral that basically is backing everything. So you don't have to trust, you know, the receiver. You don't have to trust any particular party. Everything is tied to this value. So it's almost like a decentralized finance application. You're using kind of your own kind of Velo token as your collateral. And then you're making sure that this all works. And if it doesn't work, the collateral can come out into play and it will provide trust for everyone there. Yeah. So, I mean, ideally in a situation, you don't need to use it as collateral, but it's there as a backup. Got it. Got it. Okay. So we talked a little bit about this. Now, when it comes to the crypto side of everything, how do you ensure, obviously you can expect a huge amount, number of transactions per second. Because now this is a real life use case. I don't expect one or two people. You expect thousands or if not hundreds of thousands of people sending money each day. How are you going to handle that amount of transactions? So, I mean, we're going to use Stellar blockchain as what Velo token is issued on. Stellar is able to do thousands of transactions per second. And then on top of that, our developers are coming up with a second layer solution to aggregate some of these transactions. And, you know, like much like the Lightning Network, but we're doing that also for Velo as well. Got it. So, okay. So now this whole system is coming in play. So it's a high performance network. You have your own Velo token. Now, in terms of the Velo token itself, so what differentiates this token from, say, a stable coin? You know, we've seen a bunch of things, a US dollar, et cetera. Where does that come in? How is this different? Yeah. So, like, as I mentioned before, you know, there's different layers, messaging, settlement, liquidity. What we're trying to do is make Velo token flexible enough and, you know, regulatory compliant enough to be able to do all of those, not just be a part of that chain. So instead of just like doing messaging or just doing the liquidity portion, Velo and the system will do all of them. And so, you know, as I mentioned before, Velo signs up MTOs and trusted partners, right? And so at that stage, we do a great deal of KYC and AML. We want to be regulatory compliant. See, a lot of these stable coins, a lot of the cryptos, unfortunately, just the nature of their business is like they cannot have some of the, they cannot collect that information. And they cannot, that's why they run into problems with regulation. When you're moving money around as much as we would like in, I think, the blockchain space and the crypto world to be truly decentralized, to be anonymous, it just, you're not going to get the approval. You're not going to be able to get the adoption for this unless you do it through the regulatory authorities. Right. And then once they're in the system, then they can just freely move these credits around and everything is regulatory compliant. Right. Right. And you talked a lot about regulation. And obviously in Southeast Asia, it's all about who you know. It's a lot about connections as well. So how do you plan to achieve this? What advantages do you have over everyone else when it comes to getting connections and more regulation clearance? Right. I mean, so like, that's one of the, I think one of the main selling points, the strength of Velo Labs is we've partnered with, you know, sister companies and a lot of them have, we have like joint investors with some major conglomerates in Asia who are connected, you know, in all of Southeast Asia and other parts of Asia as well. You know, one of the main founders is a family member of the CP group family, the business all over Asia. I mean, you know, 50, $60 billion worth of trade every single year. They're huge. And so, you know, you still have to do the proper application, the regulatory approval, but, you know, at least we have a sense of what the landscape is like. And we have, in each of these countries, we have connections that will, you know, help basically give us a heads up on what regulations are coming down the pipe and so we can be compliant. Got it. Awesome. So, okay. So lastly, just to know more. So obviously if my audience wants to know a little bit more about Velo Labs and what you guys are doing, how can they know a little bit more? How can they find out? Well, we have a website with a white paper and all the standard crypto project stuff at Velo.org. Additionally, I think there'll be an English language telegram, AMA. I'm not sure exactly what it is, but you guys can sign up to the telegram group for Velo Labs and find that information there. Got it. Awesome. So make sure, guys, you can check out the telegram and also an upcoming AMA. That's going to be awesome. So hopefully I can join that and learn a little bit more about what's happening, guys. And if you do want to check it out, definitely join the telegram to get involved. And with that, guys, thank you so much, Karang, for coming on to this interview. And I hope to see you guys very soon. Great. Great to be on. Thank you so much. OK, guys. Thank you. Thank you. Amazing. Thanks. Thank you. You're welcome.