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NFC (Near Field Communication) is a method of wireless data transfer that allows smartphones, laptops, tablets, and other devices to share data when in close proximity.
NFC technology powers contactless payments via mobile wallets like Apple Pay, Android Pay, as well as contactless cards. When both reader and payment devices are close together and activated, then there is an exchange of encrypted data from the NFC chips which complete the payment.
NFC chips use a RFID frequency of 13.56MHz and this only works when both are within very close proximity of each other. The same thing like you key or card will use to let you into your Hotel room or give you access to an area of your workplace when you place your ID on the reader.
Payments using RFID are measured as being “Online” when using a point of sale machine.
What About Offline?
Offline payments are usually transactions that are either processed without a data connection or where the transaction is recorded offline and processed at later date.
Some of you maybe old enough to remember the sounds of the old school sliding credit card imprinter. Believe it or not these machines are still manufactured and used today, particularly in rural areas or areas that are subject to frequent Internet down time.
Who Needs Offline Payments?
There are countless reasons why the offline payment issue has never been solved. You may live in a large connected city with a stable internet and you have zero issues using NFC on your Google or Apple device, watch, etc and so offline payments are not really a big deal to you.
The same cannot be said for the smaller retailers who unlike your average McDonald's, Starbucks or Supermarket chain who can easily roll out world wide instillation of NFC payment points it is cost prohibitive.
These are very expensive to buy and set up, and although over the years the overall price has been decreasing it is still limiting for many. Especially those in Rural areas, Third World countries or you might be a retailer at a Farmers Market where you want to use your funds to pay for your fresh vegetables.
You may have no electricity or internet connections.
New Technology Makes It Possible
There is a new technology called Holochain (No its not Blockchain) which operates on a model of agent centricity using DHT or Distributed Hash Tables.
Which decoded in retail speak means customer or client centric, “You” centric if you like and in retail it is a preferred business strategy that’s based on putting the customer first.
In this technology they use the term Agent-Centric to cover all walks of life and industry, meaning the technologies underpinning design is to put you or the end user first above all.
Or to be even more precise an agent-centric ontology views data as a perspective or an observation shared by multiple individuals.
Remember those last few words, “shared by multiple individuals”, it will help you understand this technology.
What Can This Tech Do To Solve This?
The Holochain architecture has just completed its proof of concept. In a nutshell it is an entire architecture for building and cloud hosting many different kinds of applications. You can also build digital currencies with it and it is open source and free for anyone to build upon.
If you have a credit or debit card, when you make a payment the banks EFTPOS (Electronic Funds Transfer at Point Of Sale) will digitally speak to the bank saying John the farmer wants to pay $10 for his lunch.
John will swipe or tap his card, maybe enter a PIN (this varies from bank to bank with ceiling limits for no PIN) and through the magic of the internet the bank has looked at Johns balance and sees that he either has enough funds using his Debit card or he has enough Credit on his credit card and the transaction is approved.
The way this has happened is the retailer spoke directly to the bank and the bank said yes this is okay to proceed.
But what if the retailer being in a rural area has had his internet down all day?
John the farmer doesn’t have any cash on him because he expected to pay with his card.
The retailer doesn’t own an old school credit card swipe machine because he doesn’t trust them after having been burned before.
What will likely happen is there will be no sale or John will have to try and find an ATM which may be take a long drive to do so.
If your bank, your credit card company or whomever you use to access your funds have created their application on Holochain then you can still make this payment offline.
Assuming there is electricity at the merchant but no internet, John will be able to pay for his items without the bank verifying the status of his funds directly via their device because John’s fund status is already verified.
How? Because it has already be verified buy hundreds if not thousands of others whom are using the same application.
This is the distributed hash table I spoke of, if your bank or any entity uses this technology, what it does in layman's terms is through cryptographic signatures, peer validation and random gossip it will validate randomly the state of everyone using the application.
Say Johns last online transaction was for $50, he had $100 in his account, the software will randomly broadcast an encrypted instance of Johns transaction to random people (Peers).
Note: These peers do not physically actually see these transactions or even know who the transacting parties are, there is no identifying information about John or that he even exists.
All these validating peers know (The hosts of the application) is that that XXX funds left one particular anonymous address and moved to XXX address on the DHT so one address is credited the other is debited, thats been confirmed and the information is stored on the DHT. The application owner/creator (Bank or other financial company) has this information and will make your personal actions available to you because it is known as your “Chain”, hence Holochain.
Johns balance has been verified automatically by hundreds or thousands of random peers to be correct at $50. (Without knowing about the transaction itself this is done in the background)
Now John wants to pay $10 for his food but the merchants internet is down, so if the merchant has the same application or software (or if multiple banks adopted this medium or Visa or MasterCard), he just needs to insert the amount for payment and John can agree to make it (while still offline) and because there are thousands or hundreds of thousands of other validating peers randomly checking the DHT through gossip, they know that John has the $10 to spend and will still have a $40 balance after doing so.
But how can John spend the $10 if the merchant is offline?
The DNA in the application from when it was last online knows that its last valid state was that John had a balance of $10, so when he attempts to make a payment or transfer of that $10 his own application will go:
“yep that’s okay, last time I was online and communicating with my peers you had $10 so I will let this go through as a valid transaction”.
If he had zero balance or not quite $10 it would not allow it to be processed.
So the merchant swipes Johns card or reads the QR code on his application and receives the $10, even though he himself is offline the last time his device gossiped with the net work John may or may not have spent his $50 balance but the merchant knows the application will not allow him to spend what he doesn’t have.
So there is inbuilt trust in the system from the getg0.
All that will take place in milliseconds because there is no need for this transaction to be broadcast and verified by every single user of the application, random validators are chosen to form a consensus that yes this is okay to happen, they will then publish the transaction as being valid to the applications DHT and John walks away happy and the merchant is also happy he made a sale.
That’s how simple it is.
And the beauty of this technology, unlike traditional websites or cloud hosting is that the more users it has, the faster it becomes.
Instead of struggling under pressure it actually thrives on it.
Then the merchant comes online a few hours later (Before or after John does, it doesn’t matter) and the merchant has now also randomly gossiped to validating peers okay I just received a $10 payment from John, the random peers will individually say yep we have audited Johns chain state from the last time he was online and he had $50 in credit so therefore this transaction is okay and his new balance is $40.
The reverse would apply if John came back online before the Merchant did, the application knows that John has spent the $10 to this particular merchants address and the merchant accepted it.
So both of their chains status would be gossiped about and published over the DHT showing their new state (balances).
The merchant has already previously given John a paper receipt or he will elect to receive it digitally through the application.
So you see it is possible for either scenarios the retailers internet is down or the customer has no internet, or even if they both have no internet, or even electricity.
If the devices holding the application have power the transaction can take place.
Can I Spend More Than I Have?
As I stated above, the last time your device was online your application knows what your balance was, even though it is offline now, it knows it cannot spend more than it last had.
So the answer is no you cannot. Even if someone were to transfer funds into Johns account while he was still offline and that transfer may have been validated by peers and gossiped as being correct, until Johns device is back online that will not show as being a credit.
As soon as John comes online again his chain will gossip its status randomly to others and it would be validated as being at XXX balance.
The DHT is like a pulse, constantly blipping but it is in very small packets and uses minimal data and battery, it is so light weight that this technology is being studied by scientists for IOT devices as being their go to technology for log preservation because it has such high security and low power usage.
So What Just Happened?
It was just demonstrated in a very basic way how a person can purchase from a merchant when either one or both parties were offline.
This technology is not available yet anywhere else in the world, the closest I could find was RFID payments up to to $100 where the bank or card company was willing to take a risk.
With Holochain technology as you can see from above that risk is mitigated.
Holochain is also HTTPS agnostic and can use any medium that allows the transfer of data so it could be Bluetooth, SMS, Ham Radio, it doesn’t matter, it is always able to connect via regular internet or Mesh-networks.
It could even be the case that John had connectivity through his Cellphone and the merchant didn’t, using Bluetooth John could provide the merchant with access to his own personal hotspot, as could the merchant to John but as I described above there isn’t really a need for that.
Holochain technology is very light weight and ideal for cellphones, even if you posted on your phone over one years worth of Twitter comments using Holochain it would end up being the equivalent of a 12 megapixel photo at the end of the year.
It uses very little data.
What Are Random Peers?
As I described in my scenario with John and the retailer once they come online their status (balance) is updated and validated by random peers.
Lets use an example to explain how the random peers work with Holo hosting.
You likely know that most of our internet transactions are now on the cloud, with the big players being AWS, Google & Microsoft Azure. These companies run hundreds of giant data centers across the globe.
There is many varying degrees of service and redundancy they offer, and even this website you are reading this on spends over 2 Million per month on such services to host them.
The way Holo hosting works is if I am an individual, SME, startup or even Government when I build my application on Holochain, if I choose to use Holo hosting I then can also choose my hosts.
These hosts are across the globe and are even using a purchased Holoport or are using their own PC with spare computing power to host sharded parts of data.
I may choose my hosts based on their PC uptime, latency, reputation, storage capacity, internet speeds, company needs etc etc.
So depending on the size or scope of your application you could have a relatively small application that only needs a few local hosts all the way up to running something the size of Twitter or Facebook.
So in our example lets say Johns application is from a bank, or it could even be the supermarket or retail chain themselves, either way, depending on the number of stores, or customers their locations the application will need to be hosted by real people in a decentralized way to validate all transactions.
Rather than paying USD or other currency to AWS or Microsoft Holo hosting has its own in-built currency called Holofuel which is a mutual credit system and when live you can purchase it in many foreign currencies.
Holochain applications have unlimited scaling abilities as they operate similar to a torrent in that the more seeds/leeches you have (Application hosts/Publishers the faster the application becomes.
This is why as I stated earlier the heavier the workload the faster it becomes.
It should also be kept in mind that hosts cannot see or understand ANY of the data, it is encrypted and sharded (meaning split up into very tiny pieces), so even if a host did manage to capture some of the data they are hosting it would just be gibberish and make no sense or have anything identifiable about it.
The other beauty of Holochain applications is they can point directly to HTTPS regular websites this is part of the cutting edge technology, there has never been an entirely decentralized application that points to regular web pages, they have always been just “applications” without web page interface.
So you can see how this technology can obviate the need for even owning POS machines, all of this could have been transacted from cellphone to cellphone or Tablet etc.
It would come down to the banks or card companies or application creators to decide what they use but it is a very practical solution to a real world problem that can empower people in rural and disadvantaged areas of the planet to still function as a community or individual business for the sale and transfer of goods without the need for a constant internet.
Thanks for your time and if you liked this article please share it and slap a wave on it.
p.S Holochain is the entire architecture which is open source as I said earlier however the company is named Holo,Holo will provide the hosting of applications and there is an internal payment digital currency called Holofuel.
Please keep in mind this isn’t some blockchain cryptocurrency scam,its a hosting company using its own internal digital currency to pay for hosting, that said you can create cryptocurrencies on Holochain but that is not its target market.
Decentralized Applications even if the application is owned by a centralized finance company or other financial business the hosting is done peer to peer around the world with sharded data, this is how the distributed hash table works, random peers validate encrypted packages of data.
And even Government could create their own applications like this, I know the Reserve Bank of India is very much looking into offline payments to help their citizens.
The beauty of hosting a Holochain application on Holo is that you can choose your own hosts. So say a single large bank in India wanted to use this for its citizens, it could choose its staff, their family etc to host and actually reward them with the payments for hosting and keep the entire application on their own soil.
It could also be the case that the creator of the application rewards the users of it if they also host it on their device or smartphone, there is unlimited choices when it comes to hosting, rewards and payments for doing so.