"It's The First Time We Can Really Connect Time and Money –Like an Hourglass on Steroids": Sablier's Paul R. Berg
You stream movies, now you can stream payments too.
Hello Defiers! This week’s interview is with Paul Razvan Berg, the co-founder of Sablier, which has enabled payments streams on Ethereum. Sablier, which means hourglass in French, is one example of a DeFi platform that’s using smart contracts and the decentralized Ethereum network to build something that just wasn’t possible before; real-time payments in exchange for labor.
Some key points:
- Plans to monetize this open source project include tokenizing cashflows so that one stream would be represented in a non-fungible token and enable a version of invoice financing
- Steps and fees involved in a money stream
- The number of streams and volume transacted so far
- Main use cases, like payroll and freelancing, more experimental ones, like equity streaming and plans to add streams to Gitcoin
- Being a B2B company in crypto, when most people are still paid in fiat
- How Brexit spurred the whole idea in the first place
This interview has been edited for brevity and I’ve bolded my favorite quotes.
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Paul Razvan Berg: I am an engineer, have been involved in startups and building companies for about six years now. Three years ago I discovered Ethereum and never looked back. The fact that I could build my own financial system was truly revolutionary. I was living I Romania and if you're in the U.S. maybe you can build a big financial company, but from here there was no other way for me other than Ethereum.
I moved to London where I worked for Aztec, which is building a privacy platform on Ethereum. And I just loved the idea of learning how zero knowledge proofs work. I think privacy is underrated and it should be bigger and bigger with time. So I spent some time there and helped develop their protocol that is being launched as we speak these days.
Image source: GitHub
Finance by the Second
While I was there a funny thing happened. Their payroll system had a delay of like four to five days. And normally if you budget correctly, it's not an issue. But that was during Brexit, and I didn't like to have pounds. And what I realized is that with smart contracts, you can do finance by the second, and there's no reason why we should wait 30 days or two weeks or something to be paid when we're going to work every day, every hour.
I loved the idea so much. I looked around like nobody was building something like this. I quit my job. I got a grant from MakerDAO, they were very powerful in getting Sablier off the ground. I got back to Romania where I met my cofounder. He was a very good high school friend of mine. He's building the end user product, I wrote the contract and we are now launched and up and running. We just now published a social money on our platform and I very happy that you are among the first ones on there.
Camila Russ: Me too! But wait, I didn't quite get the connection between, the pound and Brexit and how that made you realize smart contracts is finance by the second, what was of the link there?
PB: I was getting paid in Sterling from my company. But the moment they were in my bank account, I was going and buying dollars or stablecoins or ether or whatever. I didn't have any pounds because at one point everybody in the UK lost like 10% of their wealth because of Brexit. The price of the pound went downhill. The issue was that even if this was the case, I had to pay rent or whatever. So because of these delays I had to sell back dollars and get back pounds and I lost some money on the exchange rate. And the thing with with smart contracts is that if you have an Ethereum contract, you can just calculate the time and you don't need to wait. And that was the original idea: What if I could go to work every day and at the end of the day there was a contract that you gave me money and I could pull that money whenever I want, not when, some payroll system wants.
Image source: Sablier website https://pay.sablier.finance/
CR: So for you having to wait that full month while you realize that the pound was depreciating, you were losing money and that was the catalyst for saying, why can't I get paid right away? That's so fascinating. Living through those hardships really makes you see more clearly the value of cryptocurrencies and smart contracts.
So, at that time you were an engineer for Aztec, and then you went back to Romania with a grant from MakerDAO to start Sablier. When was the first version launched?
PB: I actually published a demo, a beta in June 2019. And that was my last month at Aztec. Two months later I use that demo to showcase what you can do with this. And I showed Sablier to MakerDAO and they loved the concept. And I got a grant in August 2019, and in four months, August to December, we had two audits and built the product and in December we launched.
In the meantime, I got back here and told my high school friends there's this thing called Ethereum and I have this idea and someone said, you know, I actually like the concept. I think it's cool. And he's a very good graphic designer. I'm not sure how he manages to do all these things so fast. But we make a good team. He focuses on the end user, so what do you use is his work, and I focus on the contract and Twitter and businesses and whatnot.
CR: So you're paying yourselves in Dai. Were you kind of the first ones to actually use your product?
PB: Yes. So I'm glad you asked this question because the moment we had our dapp on mainnet, the first thing that I did was to pay myself a salary for the next three months. And we just set up another three months period. We got this small grant from Gitcoin and we just started another stream to ourselves a few days ago.
CR: Very cool. So that brings me to the question of your business model. You can’t go on grants forever. How do you plan to make money?
PB: So we are building a business here, even if our contracts are open source and free to use. We have a few ways which we can monetize this. The first one and the most obvious one is if you're using Sablier with a token like cDAI or Chai or some interest-bearing asset, we can take a small spread on the interest that gets generated while you're streaming the money. So let's say you use Sablier for like one month and you want to stream money to your employees. You will be receiving like 90% , or 95% or something like that of the interest you're generating. So you're still making money, but we would take a small fee. This fee is not in place today.
There’s a second option, and this is more about the future of Sablier and I'm super excited about this. This is not built yet, but it is an idea in the making. We want to tokenize streams. We want you to have a non-fungible token that represents a stream. And the interesting thing that happens there is that we can create a cashflow object. Let me give you an example. Say you have like a 3,000 Dai stream, maybe it's your salary, over the next 30 days. In traditional finance, there's something called invoice factoring where an entity can buy a company’s invoices.
The basic point here is that the moment someone wants to send the stream to somebody else or sell it to somebody, we could have a trading fee on that token. Which is pretty exciting. It's something that people have been telling me that, if they could go to a dashboard with all the Sablier streams and see the values, they would pay up front for them.
So imagine company A is paying a subscription to company B, so company A pays B. Instead of Company B having to wait for the payment, a third party, Company C, would buy the token stream, and pay Company B up front with some small discount and get paid back in full at 30 days time, or at whatever time is set. So we could create this market of cashflow. Those are the two main ways we can monetize this on chain.
CR: That's so interesting. And then the first alternative you mention, would be more for the near term. So now when companies use Sablier, they would be depositing their employees salaries and earning interest. That's already kind of different from what goes on in the traditional world, right? I don't think companies are usually earning interest on the cash they have to pay employees.
PB: Yes, exactly. There is one note there. If you're in the U.S. you can actually receive something like 1% or 2% on your assets. But obviously you have to be in the U.S., you have to be a company there, and I think the money is locked up for some amount of time. On Sablier, you can start the stream, you can cancel it within one hour, you can get it back, there's no friction involved. And the interest on DeFi is much higher.
Step by Step
CR: Can you walk me through how one stream works?
PB: Okay. So let's imagine I have 60 Cami tokens. And let's imagine that this was a call in which you provided me maybe some kind of consultancy. The way the protocol works today is that I would go on to our interface, I would put in the 60 tokens, I would select the duration to be one hour, and every second that passes a bit of money gets streamed, or allocated to you. If you have 60 Cami tokens and 60 minutes in one hour, you will have approximately 1 Cami token per minute, which would go to you.
And that is something that not even us at Sablier can touch. We are non-custodial, we have no control over your money. That is your money forever. And the cool thing about this is that you know, both you and me are entering a contract where nobody can be hurt. You as a consultancy provider, you get your money every second, while I on the other hand, am paying just for the exact time that we spend on the call. In the normal world, with invoices, you have to send it by mail, it takes time, there's more friction. So this solves a problem elegantly because you pay in real time and both of us are agreeing into this contract.
CR: When the person creates a stream where actually are the assets deposited? Is it in a specific smart contract for that stream and then that smart contract knows to transfer the funds to a specific wallet?
PB: This might change in the future, but for now, the way it works is that we have one main contract and a few proxies and those proxies are for the dapp. But the main contract is the one which holds the funds. And yes, the answer is that the money that is sitting in the contract is not in my wallet anymore. It's not in your Ethereum address, but it's in what we call “Sablier allocation.” So you could think of it as a smart contract wallet, but it's like a very pretentious wording. It's more like an allocation and you can claim that money at any point in time. So if you want to delay claiming until the end of the month, the money will be there waiting for you.
CR: Okay. So when are fees paid, like every time you withdraw money? How do fees work throughout the whole process? Both platform fees and gas fees.
PB: There are no platform fees for now. But there are obviously gas fees. So I would take briefly a step back and give a shout out to ERC1620, which is the backbone of all Sablier. It is a very general implementation of money streaming and that seam gas that you pay with that standard is the same gas that you pay here. To be more specific. If we go back with that 60 Cami example, I would pay gas only when I make a deposit at the beginning.
And then you, if you make one, two, three, four, it's up to you like how many withdrawals you make, you will pay gas then. And to get even more specific, in my case, the cost of creating a stream is around I think like 400k gas [$0.18 at the time of writing] and for withdrawal it's like around 80k or 70k [$0.04 at the time of writing]. If I want cancel the stream, let's say you cancelled the call, I can cancel the stream and get my money back. And of course if I do that, I'll have to pay gas again.
CR: As of today, how many people are actually using the system? And if you can give me details on whether companies that are using streams to pay their employees, are people using it like the example you gave for professional services or more color on how people are using it?
But the main one has been payroll, freelancing, the example that I gave before with professional services —somebody also connected an Aragon DAO with Sablier, which was cool to see. We are in touch with Gitcoin to build a product where you will be able to go to Gitcoin and start streaming or receiving money on the Gitcoin website itself, everything Web3, no centralized companies, so that will be awesome. And finally, we've also seen a lot of experimentation in this concept of equity streaming.
So if you have tokenized company stock on Ethereum there are two things you can do. One is founder vesting, which means that you vest your shares over the next four years so that founders don't have the ability to sell everything in one go. And the second thing relates to this idea of DAICOs Vitalik has been talking about. We can create a generalized version of DAICOs on Sablier.
If you have a company that has ERC20 tokens and investors who want to invest in Dai or some other token, the company can start two streams. The first one is the money that investors pay to the founders, the second one is the company streams equity to investors. And why is that cool? Well, you keep founders accountable. So if don't deliver or run with the money, you can just cancel the stream as an investor and get your money back. I was joking that this would helped alleviate thins with the Theranos scam.
Web3 in a Web2 World
CR: That's like a completely different model of investing then, where founders and investors are both depending on each other to get the money in the end.
Okay, so I know you're a pretty young company, but if one of the main use case for you is payroll, that means that you need to be working with other, other companies, but most companies don't pay with crypto. So how is it like being kind of a B2B company in crypto? It must be difficult at this stage. Like what's your experience been like?
PB: It's super hard. It's really hard. There are many things to unpack here. So the first one is if I'm talking to Web3 companies that hold ether or Dai or whatever, it's easy. They get it. They say, okay, I want, I've wanted to try to, I want to, you know, put in a small amount of Dai and see how it works. If I'm talking to a Web2 company that knows nothing about Ethereum, they immediately are scared because they think that we are keeping the money on server and they have to trust us. I think the hardest thing, not just for us but for anyone in this space who is building like a B2B product, the hardest thing is to explain the trustless nature of our software.
The other thing is obviously we have an issue of legal compliance and what I do want to say here is that I am very convinced that in the longterm if we are successful, the law will have to change. At the moment I'm not aware of any legislation that handles money streaming because it never existed before. So the point here is that you can be compliant and use Sablier but you have to handle taxes in advance. In Europe you withhold tax for the month in advance and you keep that money in the bank and you pay it at the end of the tax year.
CR: I'd love to hear more about where are Web3 at in paying employees with crypto. Are they paying a people in crypto in your experience? If no, what do you think is missing for them?
PB: This is a very hot topic that I have debated a few times. I think people should have skin in the game and they should use crypto for themselves. Now the issue is again, with the legislation and the regulatory environment because people are scared. So it depends if you are a venture backed startup, or if you are a big company. Like ConsenSys used to pay their people in crypto but they stopped when they became big. So for the big ones I understand. It's very hard to keep payroll and be compliant.
But with the small ones, again, I've been impressed with people that actually want do this and there's all kinds of startups all over the place. There was just someone from Indonesia who just put two of their salaries on Sablier. And I'm happy to see that you can actually build a financial product that works in Europe, in the U.S in Southeast Asia. And the bottom line there is that it depends, on where you're located, and if you're a big company. But small startups should do it, and I'm happy that there's interest for this.
CR: It’s interesting too, what you said that people from all over the world are using this product. I think that's another big difference from building a Web2 FinTech company because you're able to do this from Romania and build a product that anyone anywhere can use. You had experiencing in startups before coming to Ethereum. What has your experience been like, comparing building in Web2 with building in Web3.
PB: Oh, I could never go back. From a finance perspective that was horrible. We had our company here for four years before I learned about Ethereum and we couldn't have access to USD, even if our clients were from the U.S. And it was just like a horrible experience to pay 10, 20% in fees just to get your money here in Romania. And Romania is part of the European Union.
It is certainly a new way to think about how you can run a business. And I'm looking forward to seeing how this space with DAOs and decentralized organizations will play out in the near future because there's a lot of potential there. It's just a question of how we can make the bridge between regulations and Web3 and when you've figured it out, you’ve nailed it. I'm looking at startups like OpenLaw, which is a legal wrapper tool that allows you to attach like PDF to a smart contract and I think that is awesome. They even did a few demos with how you can make a legal wrapper for Sablier. They added a contract with clauses; what happens when you stream money, so on and so forth. So it's like a generalized platform where you attach a legal document that is connected to a smart contract.
CR: What if you wanted to create Sablier on Web2 or in the traditional fintech world?
PB: To the best of my knowledge, it's not possible to build Sablier onto Web2 at all. The reason for this is that the SWIFT payment network and the banking system has no knowledge of “money streaming.” They view every payment as a discrete transfer of wealth. Now, there is actually one way. If a challenge bank like Revolut wanted to provide a Sablier-like feature to their customers, they could, but it would only work for their bespoke users, not the whole world.
The beauty of Sablier and Web3 is that it implicitly works for every participant in the Ethereum network.
Hourglass on Steroids
CR: I wanted to ask you what the very next steps are for Sablier. Like what are you most focused on right now? What, what kind of features or developments can users expect in the coming month?
PB: We love to ship. For the first quarter we want to talk to users grow v1, understand what people want, what features and just add them. In the second quarter, so in like April, I want to go back to the whiteboard and implement that protocol that I told you about with the non-fungible tokens. So that some time during the second half of the year, we will be able to ship Sablier v2 which will be even more awesome.
CR: That's exciting. I'm interested in kind of your bigger vision for both of Sablier and DeFi. Where do you see your company and this space as a whole going?
PB: I love this question. About Ethereum as a whole. I'm certain that it will not just be a platform for finance. I mean finance is certainly going to be among the big ones. But the way I like to describe Ethereum is that it's a Darwinian platform. Every other day you have another company being built and maybe it's in India, maybe in Russia, wherever. So my point there is that I think in the long term Ethereum or something like it, will generate a lot of new use cases for decentralized platforms and applications.
About Sablier, I want to mention two articles here from Nick Szabo: Shelling Out — The Origins of Money, and the second one is called A Measure of Sacrifice. And they're important for Sablier because they helped shape my understanding and vision of for money streaming. So Nick argues, or actually he proves, that for the better part of civilization humans have been using all kinds of items for representing wealth; necklaces, shell gold bullions and so on and so forth.
And what happens there is that we have been entrenched with this idea that money or wealth is this discrete, separate kind of object that has value. But the interesting thing that happened, now we are talking about the second article, is that the Europeans in the 15th century invented the hourglass and you know, Sablier is hourglass in French, that's where our inspiration came from. What Nick argues is that the hourglass and also the the church bells were extraordinary important in making the world that we live in today. That is, a world where anyone can have a job and anyone can live a comfortable life. And that is because we now have a way in which we can track time.
My thinking with Sablier is that now with Ethereum is the first time when we can connect time and money. That is, you can start the contract with somebody and they could do work and with that work being done, you pay them at the same time. So it's like an hourglass on steroids. Hopefully the goal of our company in the long term is to —it is a bold statement— but become a black hole for recurring payments. So anything, from subscriptions, professional services, salaries, any scenario where people trade time for labor, Sablier can be a very efficient solution to connect the two.
The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money.
About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.