How Does It Work?

Permissionless non-custodial payment gateway

ATLOS is a permissionless non-custodial payment gateway. It is built with new web3 technologies, and it has a different mechanism under the hood in comparison to the traditional custodial payment processors.

Why Permissionless and Non-custodial?

Permissionless means that anyone can use the system without asking for permission. In other words, there is no paperwork, credit check, contract signing, or KYC (know your customer) process required to start using ATLOS. It also means that any business can use it. As a result, anyone can just connect a wallet and start using the service immediately.

Non-custodial means that the system doesn't receive and hold users' funds. In non-custodial services, funds flow directly from buyers to sellers without middlemen. These systems are superior to custodial systems in many ways, including resilience to hacker attacks, no possibility of mismanagement or theft, and scalability.

As the history of crypto indicates, even the largest well-known centralized exchanges were all, with very few exceptions, hacked at some point of their existence. The latest collapse of another large centralized exchange shows how user funds can be mismanaged by its owners. The non-custodial model prevents all that.

Probably the most significant drawback of the custodial model is that custodial processors typically use merchant's funds as a leverage to make the merchant comply with their policies and procedures. For instance, a processor may have an ongoing compliance requirement to resubmit some paperwork, such as statement of information or the ultimate beneficiary owner affidavit, once a year. If a merchant doesn't comply, the processor will disable withdrawals and freeze merchant's funds.

Finally, if done right, non-custodial systems are also infinitely scalable. There is no bottleneck in the form of the middleman custodial, so they will allow as much throughput as the blockchain can handle.

The Custodial Payment Process

A custodial payment processor has its own crypto wallet for each currency or blockchain. It directs end-users to send payments to its wallet. It also keeps records of who paid how much to whom. Then, it periodically aggregates all payments in a certain currency and sends them to an exchange. The exchange converts that crypto into fiat currency, such as USD. It sends USD back to the processor, which is now deposited to the processor's bank account. Then, the processor makes periodic payments from its bank account to the merchants' bank accounts.

Custodial Processor Diagram

ATLOS (Non-Custodial) Payment Process

In the non-custodial model, there is no payment processor or exchange middleman. Instead, ATLOS uses smart contracts to perform payments. A smart contract is simply a program that runs on the blockchain. It is decentralized and immutable. That means that no one can stop it, and no one can alter it to divert funds somewhere else other than the intendent recipient.

When an end-user makes a payment, he or she connects a wallet to the merchant's website. From then on, ATLOS software automatically performs all necessary payment actions. The end-user only needs to approve them in his or her wallet.

Custodial Processor Diagram

This experience is much smoother and safer than the payment made via the custodial system. It doesn't require manually entering the recipient's wallet address or the amount, so there is no possibility of a mistake and less typing. In fact, the first payment takes only three clicks, including connecting the wallet. Subsequent payments at the same merchant website are done with just one click.

Another benefits of using a smart contract is that the user can authorize it to periodically pull funds from his or her wallet. ATLOS developed a proprietary technology called "Timed Allowance" that limits how much funds can be pulled by a smart contact to specific amounts and time intervals explicitly authorized by the user. The technology enables completely automated and safe recurring crypto payments.

Settlement Options

ATLOS provides three possible options for funds settlement.

1. As Is (No Conversion)

This is the easiest option to use, and it's the only one that doesn't require any custodial partners. It's also instant, which means that the merchant receives each payment immediately to its wallet, as opposed to having to initiate a withdrawal with custodial processors.

When using this type of settlement, the cryptocurrency is simply sent directly to the merchant's wallet without any conversion. ATLOS supports a wide range of stablecoins, such as USDC, USDT, DAI, and others, which is the preferred way for making payment for many crypto users. However, other coins, such as Bitcoin, may change in value after the payment has been made.

2. Conversion to Stablecoins

Merchants can optionally choose to convert all payments to a coin of their choosing. This would usually be a stablecoin, such as USDC. Whenever a payment is made, it is automatically converted to that coin via our exchange partner. The exchange partner does not typically require KYC, but may ask for it if it determines that a particular transaction has a high compliance risk. This settlement option is also nearly instant. Merchants receive each payment to their wallet shortly after it was made by the buyer.

3. Conversion to Fiat

Merchants can optionally choose to settle funds in fiat. For that, the merchant needs to open an account at a centralized exchange. This procedure will require KYC. The merchant also needs to connect a bank account at that exchange. Then, the merchant needs to provide ATLOS with its exchange API key. ATLOS will direct end-users to make payments directly to the exchange's wallets and automatically convert them into fiat. Additionally, ATLOS may automatically initiate withdrawals to the merchant bank account at predefined time intervals.

The Future of Payments

Here at ATLOS, we believe that in the not-so-distant future bank accounts will become the way of the past. They will be just as uncommon as landline phones are now. Most end-users will have crypto wallets on their mobile devices that will hold money, loyalty tokens, property titles, plane tickets, etc. All these users will be crypto savvy and will naturally prefer to avoid using custodial crypto services.

For any merchant, it's important to choose the right payment processing path now!