Real-time Payment and Automatic Savings using Compound’s cDai and OpenLaw

Bitcoin was released in the shadows of the 2008 financial crisis, creating the first truly global peer-to-peer electronic payment system. Through the use of cryptographic primitives and the proof of work consensus algorithm, the world was able to interact with a global payments network free from central bank control, with the aim to create a more inclusive and decentralized financial system.

Bitcoin’s initial vision has matured over the past decade with Bitcoin, Ethereum, and other blockchains providing an array of tools that enable a great degree of financial inclusion, stripping away the need for high remittance fees with low-cost transfers of digital assets.

Bitcoin and Ethereum’s vision of low-cost asset transfers offers a tremendous opportunity to expand the reach of financial services, including to the 1.7 billion people globally who lack access or are restricted from traditional bank accounts or other savings mechanisms.

The Evolution of Savings Accounts

Today savings accounts generally are structured as interest-bearing deposit account held at a bank. People use these accounts to park their cash to save for short-term needs and emergencies and they can be easily liquidated without any tax implications. We’re also pretty familiar with other saving vehicles like 401(k)s which puts part of an employee’s paycheck into retirement via an employer — allowing employees to invest a piece of their paycheck before taxes are taken out to save for retirement

These financial tools are often cumbersome and opaque and difficult for people to manage, without financial knowledge or experience. More concerning, they are unavailable to those without traditional banking relationships, depriving families and individuals with the ability to build wealth over the course of their lifetimes.

With Ethereum and advances in decentralized finance, we’re beginning to see new tools that may update the way people save and earn interest on their salaries, democratizing access to important and fundamental savings tools that are universally available. For example, through Compound’s recent v2 protocol update, the development of cTokens enables individuals to earn a stable salary and interest, all in the same financial instrument. Think of it like a savings account as a coin.

Painting the Future of Savings

At OpenLaw, we can show what the future of savings may look like. Previously, we used an Employee Offer letter to show how people could be paid in real-time, with U.S. federal income taxes turned into code. By codifying law into code, we were able to start imagining a more efficient future where an employer can pay an employee in ether every minute, eliminating the costs of payroll processors or the need for other centralized intermediaries in the process, while at the same time decreasing the tax gap and the needless waste of resources associated with tax compliance.

By incorporating cDAI, we can show how an employee can get paid by an employer in real-time while saving funds at the same time.