Getting businesses to accept Circles

Circles general
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Circles had a successful launch in the sense thousands of people signed up and already formed one of the biggest Web of trust in existence.

The next important step in the journey of Circles will be businesses actually Circles and thus commerce happening in Circles. It should be one of the biggest goals of Circles to make sure that within a few months various businesses are accepting Circles. To reach this goal we need to overcome at least three challenges:

1) Technical/ Practical requirements.
2) Business case
3) Accounting/ taxation challenges

  1. There needs to be tooling in place that practically allows businesses to accept Circles. Ideally, Circles payments can be integrated into already existing/ used payment/ POS (point of sales) systems.
  • Online sale vs. in-person sale
  • How does a business define what Circles to accept (e.g. subscribe to a list)

Conceptionally Circles smart contracts have already so-called “organizational wallets”. Those are part of the trust graph (they can only trust and do not receive trust) but they do not generate Circles.

  1. Business case
    It needs to make “sense” from a business perspective. Ideally, Circles would just be widely accepted and therefore a business might just accept it as well knowing they can later spend the Circles for whatever they need. Until we reach this level of acceptance there might be different strategies to reduce the risk of businesses accepting Circles.

a) give them guarantees that they can exchange (some) Circles for $$
b) give them guarantees that they can later buy specific products or services they need with Circles
c) they might only accept x% (e.g. 20%) of the price in Circles - the rest in a currency that covers their costs
d) a business might set aside a limited amount of their products and sell it for Circles (kind of as marketing)

Of course, any combination of the 4 is possible.

  1. Accounting and taxes
    At least at any larger scale activity with Circles, accounting and taxes will become an issue. E.g. in Germany, there is generally a 19% sales tax. Businesses will likely need guidance on how to treat Circles transaction from an accounting perspective and what the tax consequences are.

Ultimately, for Circles to work, it is important that businesses accept and - at least for some time - hold Circles directly. To get started Circles “group currencies” might make things a lot easier.
Group currency could have liquid markets against stable coins (e.g. xDAI) and thus topics 2) and 3) would be fairly straightforward to address. In the most simple case, the business could even convert the group currency into a stable coin directly as part of the receiving transaction and thus effectively not face a higher risk than accepting stable coins. Note that this was also at the beginning of merchants accepting Bitcoin to the most common appraoch.

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That all sounds great, just to add another aspect: “virtual communities” are not really included in the concept which probably is not a good idea, I can imagine providers of “digital services”, manual or automated, who have quite low investments (ie. the costs can be covered easily), but lack marketing and outreach and would be very happy to start a Payback-like bonus programme as you mentioned in 2.

How do you want to get this done? There must be some incentive for people to work on it and I assume relying on volunteer work will probably work, but slow down adoption a lot. Is there a possibility to get “business” on board right away?

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1) Technical/ Practical requirements.

Integrating into existing systems / POS is quite a large undertake, which is not likely to happen anytime soon.

From the technical / practical part the fastest and simplest way is offering a self-checkout flow for users, just like any online shop has, even for traditional in-person sales. To hand over the product, the seller just has to check the payment notification on any device of their choice.

We’ll be looking into user-interfaces for the organizational wallets feature during the next weeks.

2) Business case

Apart from 4) the marketing budget of small contingents of products, any combination of solutions has to be financial self-supporting in the end either on the business side or on the investor side. I believe in order to get there, a tradeable group currency layer, which sets some sort of official exchange rate at least as a daily reference, is the most promising possibility to get the community self-thriving without always needing to subsidize everything at least for the middle and long term.

In the beginning to kickstart the first businesses it might make sense to break the ice, with pre-investing in a range of different products and services across various industries, to cover the production and operation costs and push the risk of the “hard costs” to the investors rather than the business, while sharing the surplus profits in circles, creating a nice win-win solution, in case of general success.

3) Accounting/ taxation challenges

The by far largest hurdle for businesses to start accepting Circles is the taxation topic. I think many are willing to start playing with small contingents as additional marketing, but are scared of the tax paperwork.

Which brings me to the following marketplace platform proposal:

Have you come across https://gumroad.com? Gumroad is a checkout snippet marketplace for digital goods and services. Gumroad is the official seller of the products and is making a weekly payout to the original content creators, while doing all the international tax work for them as a service taking a cut of the turnover.
I am imagining our marketplace, that we are working on, a little in this direction. The marketplace becomes the official seller making monthly payout to the original business while keeping a percentage of the sale for its operational costs and tax work. The complexity of monthly payouts in circles to the business becomes a much easier handleable tax work, which is manually do able, since its just one larger sum and invoice instead of many small ones.

Group currency could have liquid markets against stable coins (e.g. xDAI)

How do you imagine to attach circles to a stable coin like xDai? How is the exact flow of “real” values here?

Currently I don’t see how this could work, I see here 2 larger challenges:

  • How do you decide who can turn their Circles into valuable stable group coins?
  • Who and why will someone invest with which incentive?