Alluo - Builder Grant Cycle 11

Basic Details

Project name: Alluo

Author name and forum name (please provide a reliable point of contact for the project):

Didier / 0xec.eth

L2 recipient address:

0xc7061dD515B602F86733Fa0a0dBb6d6E6B34aED4

Which Voting Cycle are you applying for?:

Cycle 11

I confirm that I have read the landing pages for the [Builders 3] Sub-Committees and that I have determined my proposal is best suited to be reviewed by the Builders Sub-Committee: [Yes/No]:

Yes

Project Details

What are you going to build?:

A white-label payment API enabling fast on/off ramp for stablecoins to Optimism

By white label, we mean a payment API that lets builders create the experience they want directly within their dapps. Much like Stripe, we want to be below the surface, with no friction for the end-users.

First we want to focus on the on/off ramping of USDC and later to enable other currencies such as agEUR or sEUR for Euro. Today, USDC constitutes more than half of the stablecoins on the OP chain which is why we think it is the right focus to begin with.

Given Synthetix’s strength on Optimisim, it will also be possible for us to offer more native currencies in the future (Synhetix already offers sINR beyond sUSD and sEUR on L2 and more on L1 so we can only expect to see currencies such as sGBP and sAUD to come to L2s any time soon).

We also saw this announcement (Optimism (OP) Soars 30% Amid Binance's BUSD Integration) regarding the launch of BUSD on Optimism but that was before the SEC got involved with Paxos so this may be something we will continue to monitor for now.

Why is what you are going to build going to succeed?:

Today, we can already see that users are bringing funds on Optimism using Centralised exchanges so we can clearly see that there is demand from people to bring funds to OP - at the same time, because people have to use those Centralised exchanges in the first place, it limits the potential uptake from users who are less familiar with the blockchain given that Centralised exchanges don’t always make it easy for users to get funds out and onto the right chain. Particularly given that for CEXes, once funds are on chain they can no longer be used by the user to generate fees on their platforms.

For novice users, sending funds from a CEX to their wallet on chain can be a nerve wracking experience between the risk of sending funds to the wrong chain or making a mistake when copying their wallet address (it is not rare for people to send funds directly to an ERC20 token address like USDC by mistake).

We believe that letting end-users onramp directly on the Dapps themselves and with a convenient user-experience will lead to a significant uptick in the number of users experiencing Optimisim as their first blockchain in a way that is in line with their prior web2 experiences. Doing this without the need to go through a CEX like most of the times today is also something that is aligned with our and the foundation’s ambition to improve decentralisation.

Is your project likely to bring new builders to the Optimism ecosystem? If so, please describe how:

We believe that having a good on/off ramp to Optimism could help bring new builders to the OP ecosystem, much in the same way that Stripe’s arrival in the payment space has helped bring more developers to the e-commerce space.

Is your project likely to improve the quality of developers in the Optimism ecosystem? If so, please describe how:

This is relatively difficult to assert but in general, having a good payment API is one of the key components in making the ecosystem more accessible to less tech-savvy users and broadening the developer community, hence increasing the potential to bring in high quality developers.

Is your project likely to improve the commitment of developers in the Optimism ecosystem? If so, please describe how:

We believe that a good payment gateway and interface to the real world may broaden the scope of projects that are built on Optimism given that it lowers the bar to access these projects by less crypto-savvy users. This, in turn, should increase the commitment of the developer community towards optimism.

Provide us with links to any of the following for the project:

Demos

Do you have any metrics on the project currently? (TVL, transactions, volume, unique addresses, etc. Optimism metrics preferred; please link to public sources such as Dune Analytics, etc.):

We have more than 1k users with TVL of $2.6m across polygon and ethereum mainnet and 30k+ transactions

Our yield bearing USD (29k transactions Interest Bearing Alluo USD (IbAlluoUSD) Token Tracker | PolygonScan)

And the streamed version (13.7k transactions Streaming IbAlluo USD (StIbAlluoUSD) Token Tracker | PolygonScan)

Other metrics:

Regarding the on/off ramp itself, we have only recently started the build, initially on the Celo chain so it is too early for us to share metrics but we will create a dune dashboard that will let people follow our on/off ramp flows to Optimism and see how these are tracking against the benchmark metrics laid out below.

Who are your competitors?:

There are a few widget providers like ramp.network, transak, moonpay etc. but they don’t focus on stablecoins and do not provide a white-label API to their services, instead they constrain developers in using their widget and function much more like a centralised exchange in an iframe rather than a genuine on/off ramp white-label payment API.

What differentiates you from your competitors?:

  • Software developer experience
  • End-user experience
  • Fees

On the software developer side, our ambition is ultimately to give developers an experience that is similar to Stripe, enabling builders to go from landing on our site to getting API keys and testing their first transactions within 5 minutes.

On the end-user front, we want to give end-users an experience that is on par with the best experience within the web2 space, where people don’t even realise that they are interacting with a different vendor, just like people ordering online will often interact with Stripe without ever realising that this is the case. We will also enable smoother fiat to on-chain experiences, enabling someone to go from money in their bank account to providing liquidity in a pool earning rewards (see the staking Demo example).

Finally, regarding fees, our objective is to have some of the lowest fees in the market from smaller (<100 Euro) to larger amounts (10k Euro+) where current providers only focus on one hand of the spectrum to the detriment of the other (e.g. MtPellerin is very competitive for <500 Euro transactions but quickly rises to 1.3% for larger transactions).

Beyond card transactions, we will also offer direct bank to bank transactions with a twist in that each customer will have a separate account (vIBAN in Europe) which means that users will effectively be sending money to an account in their own name rather than in Alluo’s or the Dapp’s name - this is helpful because some banks in Europe have started to block transactions to crypto exchanges. In this case, those transactions will appear just like if the customer was sending money to themselves.

Our focus on stablecoins rather than on a broader set of assets like most of the providers in the space should allow us economies of scale ensuring that we can consistently offer the lowest fees to our users.

Will your project be composable with other projects on Optimism? If so, please explain:

By definition, we are a white-label API payment gateway that brings fast on/off ramps for stablecoins to Optimism which virtually allows us to be used by any protocol on optimism - for the protocols who do not use stablecoins directly (e.g. NFT platforms using ETH as primarmy coin) we will use a combination of liquidity aggregators such as 1inch, 0x and paraswap to ensure the best price and execution for each transaction.

This would effectively allow any token on Optimism to be bought or sold with fiat, much like a centralised exchange would have allowed but without the need to go through a formal listing process and the expensive fees that those typically entail.

Team

Who are your founders?:

Didier Baclin https://www.linkedin.com/in/dbaclin/
Remi Tuyaerts https://www.linkedin.com/in/remituyaerts/

What makes your founders well-positioned to accomplish your goals with this project (1-2 sentences on each)?:

Didier Baclin: prior experience as CEO/CPO in Fintech/Banking (SME and Consumer lending) scaling lending to $100m+ and getting a UK bank licence - this experience is highly relevant given the need to work effectively with payment partners in a highly regulated environment which is something he has done for years.

Remi Tuyaerts: prior experience in Fintech in SME lending scaling to $50m+ in lending - again this experience is highly relevant given the need for Remi and the tech team to build the right technology infrastructure which is compliant but also delivers best in class experience for users.

Tell us about the rest of your team (if there are more teammates):

Bivu Das https://www.linkedin.com/in/bivu-das-17b4395/ - Bivu has a lot of experience operating within a highly regulated environment in operations and management functions

Julia Shaer https://www.linkedin.com/in/juliashaer/ - Julia has also worked within the Fintech space for the past few years and as Product design lead, constantly raises the bar for customer experience

Alastair Preacher https://www.linkedin.com/in/alastairpreacher/ - Alastair has a 20+ years experience building products across banking, consumer retail and within the fintech space

Also note that we have worked together in a previous fintech context so we are used to working as a team.

Is this your first Web3 project?:

Alluo is our first web3 as a team

If not, what else have you built? (Share links, Github repository, or any other useful information.):

I understand that Builders grants are subject to a 1 year lock-up, as explained further in [this post 1]: [Yes/No]:

Yes

Is your project funded? If so, provide an estimate of how many months of funding runway your project has:

12m+

Grant Request

What is the size of the grant request? (50k OP max):

30k OP

How do you justify the size of the grant?

This amount is proportional to the effort that it will take for our development team to build the best API-first white-label on/off ramp for optimism.

We expect a team of 4 developers (across the blockchain and back-end API side) to work on this project for about 3 months, following which we would expect to be in maintenance mode where new features will be added on request but the bulk of the value should have been delivered.

Roadmap

Month 1: API enabling the on/off ramping of USDC on Optimism for UK and EU based-customers is live in Beta and available through a few protocols deployed on optimism.

Month 2: Geographical expansion to either one country in LATAM or Africa - note that every integration with a new payment partner requires us to do some additional development given that each local providers have their own custom interfaces (for instance SEPA in Europe and PIX in Brazil are not the same and require different payment partners)

Beyond geographical expansion, we would also like to provide unique features for an on/off ramp such as the ability to call a set of smart contracts after the funds have been brought on chain, enabling the ability to go from money in a user’s bank account to funds deployed in a liquidity pool in just 1 transaction (leveraging meta transaction and batched transactions to optimise user experience).

Month 3: Further geographical expansion to either one country in LATAM or Africa - in general, our ambition will be guided by the customer needs as they arise in the optimism ecosystem and the ability for us to strike new partnerships with local payment partners.

Describe in discrete steps your plan for accomplishing your project:

Generally, we work in an agile way where we start from the outcome we are trying to drive and go backwards on what we need to accomplish to deliver the goal.

In this case, our ambition will be to on/off ramp at least $25m within the next 12 months - whilst this may seem relatively low in comparison to the growth of some of the protocols, one has to remember that this money is currently sitting in people’s bank accounts so it means we will be bringing new users and money on chain rather than merely channelling funds from one chain to another.

With this in mind, our plan to accomplish this project is in 2 parts:

  • The build side, which we have already started given our recent Celo grant - with this in mind, the API structure of our on/off ramp is already well underway.
  • The distribution side, which we also have started and hope to further strengthen through this grant and eventually enable us to integrate with leading protocols on Optimism such as Velodrome, Synthetix, etc. In some cases, we may elect to write the front-end code for these protocols ourselves to accelerate the integration timelines and ensure the best user-experience possible.

Please provide any additional information that will facilitate accountability:(smart contracts addresses relevant to the proposal, relevant organizational wallet addresses, etc.)

Optimistim Safe: 0xc7061dD515B602F86733Fa0a0dBb6d6E6B34aED4

Does your plan depend on the receipt of OP tokens?:

Not really no, we are seeing the level of activity on Optimism picking up which is why we are interested in bringing our on/off ramp to OP but would see the grant as a mark of support from the OP team and the community which should help with future take up of our on/off ramp and spread its use within the OP builder community.

In general, we believe that lowering the bar for people to come on chain is something that is very worthwhile pursuing so any incremental support from the foundation and community is helpful to increase trust which then increases usage and reach which leads to further trust as part of a virtuous cycle.

What is your plan for the use of the OP token after the 1 year lock-up?:

We would like to participate in the governance of Optimism going forward.

This is something that we expect to do whilst also generating yield when Velodrome will roll out Velodrome V2 which should allow liquidity providers to keep their voting power for governance tokens such as OP (from Velodrome: The Road Ahead. The Promise of DeFi | by Velodrome (🚴,🚴) | Medium). We would then expect to redistribute this yield back to our users which would further increase activity on OP.

You can see that, of the Celo grant, we’ve only used 500 cUSD to convert to cEUR as part of some of our early tests.

Initial grant transaction here where we received 25k: CELO Transaction Hash (Txhash) Details | CeloScan

When we swapped 500 cUSD to cEUR here: CELO Transaction Hash (Txhash) Details | CeloScan

When we did our first cEUR transaction here: CELO Transaction Hash (Txhash) Details | CeloScan

You can also see that there was just a bit more than a month between the moment we received the grant funds and our first live transaction which is why we are confident that we can provide a first live API version on/off ramping USDC on optimism within 1 month of the grant.

Please provide benchmark milestones for this project. These milestones should guide the Optimism community on the progress of your project during the 1-year lock-up period.

As all predictions, it is always difficult to be 100% accurate but it is likely that it will take us a few months to become known in the market but of course, integrating with the likes of Velodrome or Synthetix could increase these volumes significantly in a very short timeframe.

Monthly volume Cumulative
Month 1 $100,000 $100,000
Month 2 $160,000 $260,000
Month 3 $260,000 $520,000
Month 4 $410,000 $930,000
Month 5 $640,000 $1,570,000
Month 6 $970,000 $2,540,000
Month 7 $1,400,000 $3,940,000
Month 8 $2,000,000 $5,940,000
Month 9 $2,800,000 $8,740,000
Month 10 $3,900,000 $12,640,000
Month 11 $5,300,000 $17,940,000
Month 12 $7,100,000 $25,040,000

Please define critical milestones for this project. Critical milestones are meant to show good-faith efforts to accomplish the project. Non-completion of these milestones could lead to revocation of remaining grant rewards.

Critical milestone 1:

Having our API live and enabling the on/off ramping of USDC on optimism with best-in-class speed (ie <60 seconds from when funds are received), fees (<1% for bank transactions of any size) and ability for protocols to tailor the experience and look and feel the way they want to.

Critical milestone 2:

Having our API integrated in production with at least 5 different protocols on Optimism - this will demonstrate our ability to build partnerships with protocols and showcase the superior experience we aim to create for both end-users and developers.

Optimism Relationship

Does your project solve a problem for the Optimism ecosystem?:

We believe providing a white-label payment API is a core feature to lower the bar for everyday people to transact on Optimism. This, in turn, could enable a broader range of use cases to be developed on Optimism, particularly real-world applications where interfaces with more traditional payment methods are necessary.

How does your proposal offer a value proposition solving the above problem?:

We do believe that it is still difficult for new users to get funds on optimism today - particularly if they are not familiar with Centralised exchanges and bridges. We believe that a “native” experience that feels like web2 but gets funds on chain and deployed into protocols on Optimism is one of the keys to grow the ecosystem.

Similarly, the ability for people to easily get funds back off-chain should also limit any fear that people might have going on-chain in the first place. Often, people will want to make sure they can get their money out before committing larger sums on chain.

Why will this solution be a source of growth for the Optimism ecosystem?:

We believe bringing new users and money to the Optimism ecosystem is fundamental to its long term sustainability - we would love for Optimism to be the first chain that 1000s of new people would interact with for the first time.

How committed are you (and your team) to building on Optimism?:

Very committed given what the OP team has already managed to achieve in a relatively short period of time which gives us a lot of confidence in the future of the OP ecosystem. The recent announcement by coinbase to build on the OP stack merely reinforces that belief.

Is your project Optimism Native?:

No

Confirmations

I understand that I will be required to provide additional KYC information to the Optimism Foundation to receive this grant: [Yes/No]:

Yes

I understand that I will be expected to following the public grant reporting requirements outlined [here]: [Yes/No]:

Yes

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Hi, @0xec.eth I wanted to inform you that the Forum is an official channel and that you are expected to monitor and respond to any outreach here. I know this might sound obvious but as part of cycle 11 we are making sure.

I have a few questions about Alluo:

  1. Do I lose the self-custody of my assets when I deposit in Alluo?
  2. Is Alluo open source?
  3. Do you have any “proof of funds” where users can check the funds are on-chain and safe?
  4. Will “fees (<1% for bank transactions of any size)” be Alluo’s revenue? Is there any other source of revenue for Alluo that I’m missing?
  5. If I’m correct you got to 30k OP given that is the effort it’ll take devs to create this project. But Alluo is paying for their salaries and retaining the OP tokens to be used as governance?
  6. Is Alluo a traditional company or a DAO? do you have your own governance token or how do you decentralize the Alluo organization?
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Hi @Gonna.eth thanks for your questions:

  • Do I lose the self-custody of my assets when I deposit in Alluo?

No, Alluo is a non-custodial wallet which connected directly to the Alluo protocol which an on-chain liquidity direction protocol

  • Is Alluo open source?

Everything is open source today with the exception of the mobile app but that is something we plan on open sourcing in the future
You can have a look at our github here: Alluo · GitHub

  • Do you have any “proof of funds” where users can check the funds are on-chain and safe?

Given we’re non custodial and the protocol is all on chain I don’t believe we have the same sorts of risks as centralised exchanges such as Celsius, FTX etc. Alluo stakers vote on the where the liquidity of the protocol should go - today that is all on mainnet in curve/convex pools but as part of further work, we would like to Alluo protocol to also be able to deploy funds on Optimisim (e.g. Velodrome)
The list of all our deployed contracts is here: https://library.alluo.com/ (you may notice some deployments on Opti already :eyes: )

  • Will “fees (<1% for bank transactions of any size)” be Alluo’s revenue? Is there any other source of revenue for Alluo that I’m missing?

The bulk of Alluo’s revenue today is coming from the difference between the advertised APY and the realised APY - for instance if the USD Stablecoin farm is fixed at 7% during a governance cycle (2 week period today) and the actual yield was say 10%, then the difference, 3% is considered protocol revenue redistributed to Alluo stakers. Conversely, if the yield delivered is lower (say 5%), then the -2% (annualised) would be slashed from the Alluo stakers. This ensures that Alluo stakers balance risk and rewards given they get an upside from positive spread but a downside from negative spreads.
We see this initiative as a way to lower the bar for people to get on chain after growing increasingly frustrated with the current on/off ramp offerings.

  • If I’m correct you got to 30k OP given that is the effort it’ll take devs to create this project. But Alluo is paying for their salaries and retaining the OP tokens to be used as governance?

That is correct

  • Is Alluo a traditional company or a DAO? do you have your own governance token or how do you decentralize the Alluo organization?

We operate as a DAO through a governance token, the Alluo token, which can be locked (staked) for voting rights (vlAlluo) and is used as part of governance cycles every 2 weeks to determine the liquidity direction for the 4 types of assets the protocol caters for today (USD stables, EUR stables, ETH and BTC). Alluo stakers receive the yield described above in the form of CVX/ETH which is further compounded in our boosted farms where CRV & CVX rewards are converted to CVX and staked in Curve/Convex for maximum rewards.

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Thank you for all your answers, and for the alpha here:

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Quick question, how many devs are on your team?

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These milestones need to be tracked somehow. Can you set possible dates?

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Hi @Gonna.eth
Today we have 3 backend devs + 1 QA + 2 smart contract developers.
The majority of the dev team is located in Portugal if you want to come and say hi :slight_smile:

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We believe that we could achieve milestone 1 within 4 weeks of grant date

Regarding milestone 2, we believe we could achieve it within 12 weeks of grant date - of course this milestone is also dependent on other protocols but we still think is achievable in that time frame

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Further to the dates @0xec.eth has mentioned, we have been users of dework to keep track of progress and post bounties for the rest of the community for a while, we will keep using it and are planning to setup a separate project on it specifically for the items mentioned above.

Here is a link to our space so far: https://app.dework.xyz/alluo

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Hey, quick question on this: where does the interest come from on this? You make references to it but I’d like to see mechanically what you’re doing, what pools you’re using, etc.

The reason i ask is that it’s not obvious to me that you would capture as much yield spread on L2, as much user friction on L1 has to do with gas fees. Less so on Optimism.

From your site:

When you deposit money in the Alluo app using one of our on-ramp partners, the funds are automatically converted in dollar stablecoins, from there, they flow to the Alluo protocol which is a decentralized yield optimization protocol on the Polygon and Ethereum blockchains.

If you work with other onramp partners, exactly what in the entire onramp flow are you responsible for? Is this all already built, and what makes this solution faster, better, cheaper than others working on this game-changing issue?

  • The distribution side, which we also have started and hope to further strengthen through this grant and eventually enable us to integrate with leading protocols on Optimism such as Velodrome, Synthetix, etc. In some cases, we may elect to write the front-end code for these protocols ourselves to accelerate the integration timelines and ensure the best user-experience possible.

What exact service will you provide for devs, and how will you be compensated for it?

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Today, the yield is coming from yield farming on Convex
On optimism, it would mostly come from Velodrome and Curve to begin with

To your point on yield capture I think that’s a fair point but in general, our view is that we would rather to take the smallest spread we can over a higher TVL rather than a bigger spread on a smaller TVL so we’re not worried about the spread % itself but more the total spread amount (ie spread % * TVL)
Although you are right that there are fewer barriers for people to manually manage funds on an L2 (given the fee) we still believe that there is still significant value in a protocol that constantly optimises for risk and reward and takes a small fee in exchange - we believe that this is particularly true for more casual normies who may not want to check pools every day to see if they are still the best yielding or worry about some of the underlying assets depegging.

To be clear, we initially worked with other onramps (like moonpay) because we didn’t have a choice, we eventually built out our own out of the frustration of trying to work with them.
To be fair, we may continue using them in geographies we don’t yet operate in (e.g. Latam, Africa, Asia etc) but we would ideally find partners who are aligned with us in terms of cost and user experience.

I had tried to highlight some of the differences between us an competitors under “What differentiates you from your competitors?” but specifically what makes this solutions faster, better, cheaper than others is:

  • A focus on stablecoins which simplifies the problem compared to all others which are effectively centralised exchanges in a widget
  • A focus on EUR/GBP to begin with where we have personal experience in the payment/banking space and were able to negotiate good terms with payment providers (to be able to provide sub 1% transaction fees for bank transactions)
  • The experience integrating with moonpay, ramp.network, mercuryo etc. (most of the current providers have not built their solution from a protocol’s point of view) which is where our white-label approach came from

In terms of the flow we are responsible for, it really goes from:

  • Creating a new bank account for the user (in their own name)
  • KYCing them if necessary
  • Receiving funds (fiat) into the user’s newly created bank account
  • Converting those funds into usdc on the desired target chain
  • Sending this usdc to the user’s wallet address

And in the opposite direction (offramp)

  • Receiving usdc in a wallet that is in our control
  • Converting the usdc into fiat
  • Sending the fiat back to the user’s regular bank account

In terms of the build, we have managed to do a couple of test transactions already on Celo and Polygon but we are of course still at the beginning in terms of being able to do this at scale and will need to do quite a bit of work to polish our software experience and enable a developer to go from landing on our site to getting an API key and performing their first live transactions within 5 minutes.

As mentioned in the previous replies though, we are very happy to be judged by the milestones we have laid out above and for the grant to be withheld/delayed if we were not achieving those within the indicated timelines.

The exact service we will provide for devs is a white-label API to enable their users to go from fiat in their bank account to usdc in their wallet on the target chain (see the Velodrome gif above for the sort of experience we had in mind)
Specific endpoints would include:

  • User creation
  • Starting the KYC verification process (also get the required KYC information for a given user and transaction and general state of the KYC process)
  • Bank account creation
  • Get the expected exchange rate (ie from EUR/GBP to USDC and vice versa)
    In addition, a few Getters would allow one to get a view of the ongoing on or offramp.

In terms of how we would be compensated for it, we would charge a small on/off ramp fee either to the user or the protocol depending on the fee model chosen by the protocol (ie some protocols may be willing to fund the on/off ramp fee whilst other protocols may prefer for the user to pay this fee)

In the long run, we believe most protocols will pay for the fees but we appreciate this isn’t the norm today in crypto whilst it is actually the norm in the regular world (ie people don’t expect to be charged a separate payment fee when they purchase something at Nike or eat out at a restaurant)

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I listened to the spaces with Alluo and thought it was a great breakdown of the way this project works. I have it on my list of different dApps to explore now !

I see the need for on/off ramp technology on NFT marketplaces being a big help to provide liquidity on layer two scaling solutions.
Currently the only option is transak and don’t believe moonpay is integrated with any L2 technology from my knowledge.

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Hey @jackanorak a couple of other things worth highlighting, that may not immediately be obvious are

  1. The virtual-IBANs we create for every end-user
  2. The fact that our solution is API based

Today more and more banks are restricting payments to Centralised Exchanges and crypto companies. However, with a virtual-IBAN approach, you are simply transferring funds to yourself removing this issue and increasing acceptance rates.

Secondly, our solution is API-based as opposed to just being another widget. This provides protocols integrating our on and off-ramp in their dApps with complete control over the customer experience.

We know from firsthand experience how important this is. No matter how hard we worked to smooth our on-ramp journey at Alluo, this switch to the partner widget journey was a major source of frustration, confusion and dropout for our customers (sufficient enough to build our own solution!). With complete control of the UI & UX these issues can be eliminated.

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