Merchant Collider Network: The Blockchain Point-of-Sales Protocol

Version 2.0

March, 2022

 

Authors:

Doug DeSantis, Arindam Dasgupta

 

Abstract

We are introducing a decentralized protocol which allows retail merchandisers both on-premise and online capabilities to process credit card transactions through the use of blockchain technologies and away from the limited and expensive centralized solutions currently available in the industry.

 

Introduction

In 2021 retail sales surpassed $25,000,000,000,000, that’s 25 trillion dollars. The majority of these sales were made with credit and/or debit cards which incur a fee that both the retailer and the customer must pay. These are called “credit card processing fees” which can vary greatly but average to about 2.2% of the individual purchase price. A larger retailer typically processes a large number of these fees everyday which is called “processing volume” and in return they pay a lower fee to do the high amount of processing volume they handle. A small business which processes a low volume of credit or debit card transaction will pay a much higher fee usually between 3% – 4% and often times these small business require a minimum purchase amount to even accept a payment via a card and if not met require a cash payment.

Herein lies the issue, every business has overhead, these fees are a large percentage of it, and if it doesn’t cost the business money, it costs the customer money as this fee must be paid by someone. A small business may not want to charge the customer this fee because their prices go up and people will shop elsewhere so they typically pay this fee. A larger business will naturally have a higher sales volume, larger income, which means a lower processing fee typically 1%-2% but these fees add up over a fiscal year and become quite a large expense even for them.

Limited Options

The companies that handle these credit card transactions are called “Merchant Account Providers” and there are only a limited number of them to choose from, and not all of them are suitable for every business. This can pose a major problem for a business because you are often stuck between choose a “lesser of two evils” so to speak. One usually has a higher cost, while another may not even accept you as a client due to sales volumes not meeting their demand or if they do, the fees will simply be too high to be a viable option.

Solution

Blockchain network technology, despite being well over 10 years old, has not had much traction in the retail world as far as a viable real-world payment solution until recently. For many years blockchain networks have advanced and improved, pushing the boundaries of smart contracts, network performance, data security, and most of all ease-of-use. The early blockchain solutions pale in comparison to that of todays high performance, highly secured, and scalable options we now have to take advantage of.

In the world of finance, there are very important and strict regulations and standards you must adhere to in order to provide such services. With crypto and blockchain being a world-wide commodity, this poses several challenges for imposing and enforcing the proper standards as many countries do have their own, however there is one standard that is becoming the global standard or “common language” for domestic and international payments.

Now let’s talk money… Utilizing the Solana blockchain all but eliminates the transaction fees and the often times minimum sale amount to even processes a card transaction. With Solana, transactions on average cost only .00025 USD regardless of the amount of the transaction. It can be 0.25 or $25,000,000, the transaction fee will remain the same. This fee is however dependent on network congestion however Solana can handle up to 65,000 transactions per second and even under heavy congestion, the fee is still limited by their transaction fee range so transactions cannot ever be more than 0.01 USD. To put this into perspective, Visa© is typically processing around 1,700 transactions per second with an estimated peak of about 4,000 per second at times (which we assume are around holidays but this is not confirmed) so don’t expect those fees to ever reach that threshold.

ISO 20022

ISO 20022, first introduced by the International Organization for Standardization in 2004, has been the common standard adopted, developed, employed, and improved upon by several major financial institutions across the globe. In short, a digital payment is nothing more than a digital message sent in a language that both the sender and receiver can both understand to successfully acknowledge, understand, and accept the message, in this case, the payment being sent and received.

In order to facilitate cross border payments between any two institutions there needs to be a universal language and ISO 20022 has since its adoption, became this universal language despite all of the challenges many banks and other fintech institutions have imposed attempting to adopt or create their own.

 

PCI DSS Compliance

PCI Compliance was developed by a Council consisting of the 5 major credit card providers consisting of American Express, Discover, JCB International, Mastercard and Visa Inc. in 2006. Much like the aforementioned standards of ISO, PCI Compliance is a universal and agreed upon set of standards meant to ensure the security and data privacy of merchants, banks, payment processors, service providers, and technology providers.

The major focus of PCI compliance is of course, security. The prevention of fraud, chargebacks, data or identity theft, and loss of data or funds. PCI standards provide a set of requirements your network and components must meet in order to quality, and the Solana Network inherently provides many of these standards on it’s own.

Solana combines the speed and scalability of Proof of History with the security of Proof of Stake then hashes all transactions with SHA256 to ensure truly immutable data across the chain. All of our software releases will be audited to ensure we meet these strict guidelines. More about PCI Standards can be found here.

 

Online Payments vs Point of Sales Payments and its Challenges

Online payments are inherently capable of easily accepting and adopting digital currency in practically any form as they are not limited by the extra components of expensive hardware and Point of Sales software solutions or a lack of technology adopted into either. It’s much easier to update something that is web-based and end-point as opposed to something that is hardware based or remote software, as most of us know. Up until recent years, POS hardware and software has been very limited in it’s ability to conform to newer payment standards, technologies, and alternatives to fiat such as cryptocurrency. There has also been a major hurdle for this space in the way of lack of standards and compliance as every software solution and every hardware device is different from one another.

How do we remedy this?

We begin by addressing and implementing the simplest and most affordable solution, software. As mentioned above it is much easier to modify and update software than it is with hardware, however there are many different providers of POS software so we have yet another challenge head of us. In order to create and develop a universal solution for retailers we need to accomplish some key goals which requires the open-mindedness and cooperation of several companies. To accomplish this we must:

  • establish strong relationships with leading software and hardware providers
  • incorporate standards for software integration policies among industry leaders
  • communicate the importance of future-proofing payment solutions in the blockchain space
  • ensure we meet and/or exceed the strict ISO and PCI required standards and compliances
  • make it simple for retail merchants to incorporate and migrate to the Merchant Collider Network
Merchant Collider Software Solutions and Solana

By establishing and solidifying relationships with current POS providers, we are able to develop software solutions that integrate with existing software suites to expand the capabilities into the blockchain space. By leveraging software API’s, specifically that of the Solana blockchain we can easily and affordably create “plug-ins” for these Point of Sale software suites that allows them to communicate with the Solana network in order to process payments over their blockchain.

There are already small handful of companies out there already offering some sort of integration with blockchain payment systems however these solutions focus on accepting cryptocurrency as payments, not fiat. Merchant Collider however is focused on existing payment methods and existing Point of Sales systems and simply introducing them into the blockchain ecosystem. This means you do not need a special credit or debit card, a business does not need to perform any expensive upgrades, in fact most businesses can move along as usual after simply installing a “plug-in” that is compatible with most existing systems and performing a very simple configuration.

Ease of Use

Our primary focus is making the Collider Network simple for everyone to use. There is no wallet to setup and configure, no crypto needs to be purchased or held, it’s simply plug-and-play. Our Merchant Collider Network software communicates with the Solana network RPC endpoint to initiate transactions and validates those transactions however it does not rely on remote validators across the network like a typical blockchain node would. The Merchant Collider plug-in and future software actually takes a different approach, something that is unique to Solana.

How Merchant Collider Works

Our software does not make each Point of Sale system a Solana validator, it instead becomes what is called a “Light Client” on the Solana network. While a validator consumes a large amount of processing resources by being a network end-point that contains and processes the entire Merkle Tree which includes the Merkle Root along of the hash data and all of the signatures in a block, a “Light Client” never even sees the transaction signatures or most of the Merkle Tree.

Instead, the Validator generates a “Merkle Proof” from the transaction to the root of the Merkle tree in the block, which is passes along to the client which the client, then the client simply has to verify that the Merkle Proof it received belongs to that Tree in the transaction block without having to hash the entirety of data in the block. If it sees that it matches, it then considers it a legitimate transactions and confirms it. This lightweight and simple means of confirming a transaction is not only more secure than if it were a validator itself, but it consumes far fewer resources meaning there is no need for expensive computer upgrades for merchants who use our software and also uses far less bandwidth for slower internet connections.

What’s more, do to its Proof-of-History protocol, it is extremely fast and efficient. As soon as a Solana validator sees a transaction, it is pre-fetched by their networks Processing Engine aptly named “SeaLevel” and the network actually starts to execute the transaction before it is even encoded into a block which is one of many reasons transaction finality time is so fast, sub-second in fact which means instant payment verification.

 

Payment and Payout Mechanics

As we’ve gone over, every transaction on Solana is extremely cheap, fractions of a US penny. Because it is so remarkably cheap, we can take advantage of this in two ways.

  • We can lower transaction costs of every purchase for both the seller and the buyer
  • We can keep the transaction cost at almost nothing while rewarding investors

By rounding every transaction up from the thousandths or ten thousandths to the tenths (depending on network congestion, but remember visa peaks at 4k per second and Solana peaks at 65k per second so we assume ten thousandths), we retain the merchant a card processing fee of between 0.1 and 0.4 cents while taking the rounded up balance and through our smart contract, evenly distribute it to MCCN holders’ wallets dependent on the amount of MCCN each individual wallet is holding. Now you may think, that does not like seem like it would be worth it, right? Think about this, there are on average approximately 1 billion credit card transactions per day worldwide. Now while we are building a web based payment system on this platform, we are also offering focusing our efforts to target the retail brick-and-mortar market, something that no one has done yet.

Basically it is the same premise as the popular cryptocurrency “reflections” that have caught on recently, except you are earing reflections from the real world while providing an invaluable service to business owners and individuals alike.

 

What About the Future?

We think this is the best part… Another unique quality of Solana is its ease of scalability. Validators or Light-Clients do not have to store massive amounts of data like a Proof-of-Work node does, and they also require a minimal amount of resources to run as we’ve gone over already. Solana has many moving parts, and as this is not a piece explaining how Solana itself works, here are some links to help you better understand their network.

 

A Little More About Solana and it’s Mechanics (provided by Solana-Labs)

  • Proof of History (PoH) — A clock before consensus
  • Tower BFT — A PoH-optimized version of PBFT
  • Turbine — A block propagation protocol
  • Gulf Stream — Mempool-less transaction forwarding protocol
  • Sealevel — World’s first parallel smart contracts run-time
  • Pipeline — Transaction processing unit for validation
  • Cloudbreak — Horizontally scaled accounts database
  • Archivers — Distributed ledger storage