Fuse 2.0 - The next chapter

Fuse was launched in 2019 to create a vertically integrated decentralized payment platform. The Ethereum Virtual Machine (EVM)-compatible Fuse Network blockchain sits at its core.

At the time of writing, the Fuse Network blockchain has processed over 120 million transactions, generated over 1.3 million unique accounts, minted 4000+ tokens, and welcomed 100+ ecosystem integrators that provide services within the ecosystem, including business accounting, NFT marketplaces, decentralized trading, lending, relay, and indexing services.

Much of our most valuable learning comes from the prominent real-world-focused payments-based businesses building on Fuse. Many of which grow to become what we now define as “operators.”  A concept expanded on further below. 

These partners have helped us understand the value of decentralization for businesses. More notably, the factors determining which protocol elements need to be decentralized and which should remain centralized. 

We have learned through our work that decentralization has numerous benefits, but it is not always feasible or desirable to decentralize every aspect of a business. The essential advantage of a decentralized payments network is the ability to operate globally, without borders, and the reduced need to trust intermediaries. 

One of the main advantages of using a decentralized payment network is the reduced cost of conducting transactions because work and trust are externalized to a global network of validators instead of a single entity providing this service and creating a “walled garden.” However, the network does not handle underwriting or risk management for every transaction.  

Fuse Network’s target audience, small and medium-sized businesses (SMBs), need more than low transaction fees. They need solutions for building secure products without taking on the burden of custody and reaching customers. 

They need to be sheltered from the costs of compliance and licensing to provide exceptional consumer experiences without building wallets and other front-end interfaces from scratch. SMBs are the largest sector in the economy. SMBs comprise most businesses in the US and employ nearly half of the American workforce.

This is why we believe focusing on digital payment solutions for the “long-tail” of small and medium businesses globally will grow in importance over the coming years.Additionally, they need to be able to move value within and outside their companies without facing high fees and barriers.

To address these challenges and help the network evolve into a valid alternative to legacy payments infrastructure that leverages the benefits of decentralization for businesses where it makes sense, we will propose updates to the network's structure and tokenomics.

In our first three years, we successfully established a thriving and dynamic ecosystem by taking our platform from inception to implementation.

Now, as we look ahead to the next three years, our focus shifts to bringing the benefits of Web3 payments to the masses and empowering small to medium-sized businesses globally through the continued development of a cost-effective, private, fast, scalable, and secure platform.

With a clear roadmap that leverages our experience and insights, we position perfectly to shape the future of finance and drive the next generation of financial innovation
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Leveraging Vertical Integration to Enable Seamless Payment Experiences

Open-source money powered by public blockchain technology has the potential to revolutionize financial services and make them accessible to everyone around the world. We are building a payments network focused on mainstream business adoption. Our goal is to enable businesses that may not be technically or crypto-savvy to provide a user experience that is simple, fast, and secure.

To drive widespread adoption, we must compete with the dominant players like Visa, Mastercard, and Stripe rather than Ethereum or any other blockchains. 

Traditionally, a tradeoff between creating fully centralized payment systems with good user experiences or completely decentralized payment systems with poor user experiences is needed.  Our mission is to change this by focusing on the long tail of SMBs and recognizing the importance of providing a technology stack built of components that work in harmony to streamline the process of creating exceptional user experiences. 

We made it a vital part of our strategy to provide all aspects of the platform, from the payment network to core business-ready infrastructure to digital wallets. This allows us to optimize and streamline the user experience, making it faster, easier, and more convenient for our customers.

By leveraging vertical integration as part of our strategy, we aim to compete with major payment providers on a global scale. Web3 payments present diverse business innovation and advancement opportunities. The ability to facilitate the seamless movement of funds opens doors for new business models and consumer behaviors, ultimately fostering increased economic activity and improving the lives of individuals.

Fuse aims to play a pivotal role in shaping this future.

For businesses to provide user experiences that compete with Web2 applications, they need robust API endpoints, fast user data feeds, secure data storage, and more. These services need to be made available in a way that is accessible and easy to navigate. 

‍Charge provides a one-stop shop solution for developers. However, while Charge removes complexity for developers, the centralized infrastructure on which it is built does not provide the redundancy needed for long-term scale. 

The ideal solution is scalable Web3 business infrastructure that is easy to navigate and build on while being sufficiently decentralized to provide the redundancy and security needed to scale confidently to hundreds of millions of users. 

We propose a novel blockchain-based architecture that aims to solve this challenge. Power Validators are economically incentivized node entities that sit above the execution layer and establish the business layer of the payment network. 

They run the required services needed to conduct Charge-powered payment applications. While we defined the initial list of essential services, Operators and Power Validators can create new services independently, thus extending the business layer functionality. This will create a prosperous community of developers, operators, and infrastructure providers based on open-source software and uses blockchain technology as a distribution platform.

Power Validators supply essential services such as transaction relaying, running oracles, token bridges, Layer-2 scaling, and decentralized storage nodes. 

Operators essentially “purchase” these critical services to “resell” them to business users, filling demand.
Operators, therefore, act both as brokers and curators for those services. Operators are incentivized to boost the demand for their services to increase revenues.

Entities wishing to become Power Validators will need to stake Fuse Tokens as part of a new economic model for the Fuse ecosystem. We will provide more information on the tokenomics of Power Validators in our upcoming technical roadmap.

Private, Scalable Mobile Transactions

When considering the base layer, understanding which platform and programming languages are likely to be widely adopted is important to Fuse.

The Ethereum Virtual Machine (EVM) is widely considered a strong candidate to become the standard on which future applications are built, with smart contracts predominantly developed using solidity. For this reason, developer adoption of Ethereum is more potent than that of any protocol. 

Fuse Network has been running on the AuRa (Authority Round) consensus since the network launched in 2019. Its flexibility allowed us to upgrade the initial POA model to dPoS, enabling on-chain staking and governance. In addition, its EVM compatibility played a crucial role in driving ecosystem growth. 

The Fuse foundation, in collaboration with the decentralized network validators and thousands of delegators, will make critical decisions in the coming year about the future of Fuse’s consensus layer.

One of the apparent candidates is the Ethereum PoS which proposes a clear separation of consensus and execution and has a scaling roadmap that features sharding.

Other solutions we are considering are Avalanche, Polkadot, and Cosmos. The introduction of a new consensus layer means a tokenomic model which needs to account for the incentivization of power validators.

Self-custody on mobile devices using biometrics is regarded as a powerful solution to the private key management challenge for everyday, mainstream users. In addition, this method is a more user-friendly and accessible alternative to current hardware crypto wallets. Moreover, It can increase the adoption of this technology among non-technical users. 

Part of Fuse’s mission in this field is to develop and improve this method of private key management to make it more secure and convenient for users.

Increased mobile penetration worldwide and the continued development of self-custody wallet technology will significantly increase our ability to drive mainstream adoption of Web3 payments. In addition, as more people have access to smartphones and mobile internet, securely managing private keys through these devices becomes a more viable option for a broader range of users. 

Fuse’s core wallet has been forked over 100 times and is EVM compatible, meaning that it supports any Ethereum-based contract and is accessible to the largest developer audience in Web3. Built using Flutter’s open-source SDK, it also enables developers to build once and run on iOS, Android, and the web on any device.

Added advantages include customizable white-label templates that allow projects to get up and running or integrate the SDK into an existing mobile product.
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Smart User Accounts

On Fuse, we envisage every user or merchant represented using a smart contract. This smart contract architecture gives several advantages to Operators and developers for blockchain-based financial applications. 

For example, in a regular blockchain wallet, the user must manage their funds and interact with protocols and smart contracts directly, i.e., sign approvals and deal with the mechanics of fund management—a daunting task, even for veterans. 

With smart contract accounts, new features and business logic that can match the existing system's functionality, such as subscription payments, transaction insurance (consumer protection), and credit payments, can be non-custodial and frictionless by utilizing the power of smart contracts.

Imagine this as a non-custodial decentralized "bank account" that can help consumers retrieve and manage funds more safely or add new features or tools for easier and safer self-custody.

Smart user accounts give users more power while keeping better UX and allow us to reimagine old business models underpinning the traditional digital payments industry. This is why we intend to turn them into first-class citizens and integrate and reimagine those models behind the scenes to create better models for payments and enable further decentralization of digital payments silos. 

We want to give Operators the tools to experiment with better models for payments. When a user conducts a transaction with a merchant using fee abstraction, the transaction can automatically be programmed to process complex business logic. 

Some possible innovations using this method include:

Cashback - Send a certain percentage of the transaction back to the user - instead of only paying the payment processor as the key beneficiary of the revenue generated, the users can be incentivized directly with a microtransaction for every payment.

Revenue share - Most transitional payment processors are expensive because digital payments nowadays have a long value chain of intermediaries, and transactions usually take a long time to settle from the moment of payment until funds arrive in the merchant's account.

Subscriptions - While recurring payments are an important primitive of credit card systems and an important tool for businesses, digital memberships can be reimagined from the ground up using contracts behind the scenes. Fee abstraction allows Operators to set rules for how payments are collected, how installments are paid, who gets access, and under what conditions by combining it with NFTs.
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Fee Abstraction

With fee abstraction, the user signs a transaction with their private key while the operator handles the payment of any necessary fees behind the scenes.

This allows users to focus on the blockchain's benefits rather than worrying about the technical details of fee payment. Fee abstraction is a powerful approach that can help Operators find innovative business models.

By providing a range of incentives for Operators to build and experiment on Fuse, we aim to attract a vibrant community of Operators who can share tools and insights. This is a crucial part of our vision for Fuse Network.