Hydro

The Cycles Pay app is available anywhere in the world, and brings together a set of features that you won’t find anywhere else (private transactions combined with a return on your balance, supported by AI account assistants that you can instruct in plain English). All of them will be live on @arc on day one of its mainnet launch (Sep, 16). In parallel to those features, we’re working on a new type of credit product that we intend to launch in LATAM first. Businesses there typically invoice on 30-60 day terms, but many can’t afford to wait that long to get paid, so they go looking for working capital. Banks price loans based on collateral and audited accounts, which a small business often doesn't have. Factoring exists, but it’s only available to a small percentage of businesses that need it (mainly the ones with big-name buyers on the other side). So small businesses are often forced to use informal lending services with high interest rates. Cycles Pay will offer multiple solutions to this. The first is dynamic pricing on invoices, with no lending involved. A supplier issues an invoice with a discount ladder attached, incentivizing the buyer to pay early for a small discount, or get charged a fee for paying late. This helps the supplier get access to working capital faster. The second step is actual credit, powered by Cycles’ graph. Businesses invoice each other via Cycles Pay, and obligations and payment history get tracked in the graph so that loan underwriting can then happen based on activity in the network (instead of collateral and audited accounts).

We’ve just passed our first SOC 2 Type I audit. An external auditor examined our data practices around security, availability, processing integrity, confidentiality, and privacy, and concluded that we met all the requirements. We did it primarily for Cycles Prime, our institutional product. This was an important step in providing assurance to enterprise customers that our system meets all industry standards when it comes to data protection. Cycles Pay (try it today below if you haven’t yet) and Cycles Prime are the first two products built on our general purpose privacy-preserving clearing protocol. But of course, we expect to see many more types of apps built on top of the obligation graph in the near future.

As far as we can tell, Cycles Pay is still the first payment app to offer both fully private transactions and a return on idle funds. Balances are stored in an encrypted state, inside a shielded pool. Every time a payment is made, a ZK proof gets verified to confirm the transaction is valid, and the amount and counterparty stay hidden. In the meantime, idle funds can be moved to vaults that automatically allocate (and frequently rebalance) across popular DeFi protocols like Aave, Morpho, Arcadia, etc. to achieve optimal risk-adjusted returns. Payments can be made straight from vault balances, so there's no withdrawal or unlocking step required before spending.

We’ve started work on the Cycles credit score. The score is built from payment activity in the app. Expense groups that get settled, invoices that get paid to businesses, debts that get repaid, etc. The popular US credit bureaus hold a record of payments that have already happened. Our private graph holds the obligation when it is still outstanding, along with the counterparty on the other side of it, and whether the obligation has been confirmed. That means the protocol can see what someone owes and what they are owed before any credit offer is made, and we can catch things a single lender has no way to see on their own. For example, if the same collateral has been pledged to two different lenders, that will show up in our graph. Both our personal and business accounts will feed into one credit score, which will be helpful for a new business with no transaction history. If the owner is someone who has paid off debts on their personal account, that history will carry into their business account.