Today startup Superfluid raised $9 million for its ‘money streaming’ startup. Despite the new lingo, Superfluid looks to be a foundational programmable money application on public blockchain. Currently, it may be targeting the crypto world, but the real-world business application potential is massive.
Blockchain is known for its hyperbole. Kyle Semani of Multicoin Capital, which led the funding round, wrote that Superfluid “represents the biggest step forwards in value transfer since the advent of Bitcoin.” And he might be right.
At its core, Superfluid enables recurring payments using cryptocurrencies or stablecoins. Given repeat payments are available outside of blockchain, that’s not in itself that novel. But when you combine it with programmability and composability, it turns into something quite special.
Think about salary payments, particularly for people who often need to resort to payday loans. What if you could pay them hourly? With Superfluid that’s entirely possible. It lets you open a “stream” where you set a rate over a period of time, say $15/hour. It converts that into a per-second amount and can continuously stream that amount to the recipient’s wallet. Sure, people don’t work 24 hours a day, but you get the idea.
One of the challenges with Ethereum is the sometimes high gas or transaction costs, and the gas only needs to be paid when the stream is opened.
Because it’s programmable money, the recipient could also set up a stream to use the incoming salary payment, maybe to pay their rent if their landlord has a wallet.
A solution for margin calls
The use of margin in stock market trading came to the fore after the Archegos family office defaulted. When stocks or any other assets are traded using leverage, as the price of the asset moves, the margin requirements change. But margin settlement is usually delayed, creating counterparty risk. Using Superfluid, the amount could be continuously streamed based on the value of the assets.
The core of this application has already been implemented using private blockchains, but the payment leg is done in a conventional manner. For example in 2019, JP Morgan adopted a system that uses distributed ledger for derivatives so that collateral and payment can be adjusted in real time. Don’t be surprised if, in the future, JP Morgan uses something similar to Superfluid linked to the JPM Coin for the payment leg.
Superfluid is still in its infancy, so we’ll have to see how it develops. But it shows massive potential and could be the start of a mindset change.
Uber and other technology startups have ushered in the on-demand economy. One of the reasons many things are still payable by the week or month is because that’s the way systems currently work. The question is whether Superfluid will make pay-by-the-second the new norm.