Now You Can Pay Your Bills Using Your Digital Wallet, and Even Earn Interest!

Now You Can Pay Your Bills Using Your Digital Wallet, and Even Earn Interest!
By Brian Rogers

November 4, 2024
Introduction

How we bank and use money is undergoing transformative changes. Whether your funds are in traditional banks, brokerage accounts, or crypto wallets, we now have numerous options for where we “park” our money. These options are generally either custodial (like traditional banks) or non-custodial (such as crypto digital wallets).

For most people, keeping their money in a traditional bank account is simpler, thanks to established systems that make it easy to link to third parties for auto-payments (e.g., Comcast or Spotify) or to receive automatic deposits from an employer. However, this convenience comes at a price. You can place your money in a savings account to earn interest, but there are often restrictions on the number of withdrawals allowed, and some banks even require advance notice for withdrawals.

If you want to access your money freely, a checking account is usually better, but there’s a catch: keeping your money in a checking account means you’ll earn little to no interest.

Having instant liquidity and earning on your money is now becoming a lot easier with digital currency or the tokenization of real-world assets. Among the most exciting recent innovations are yield-bearing stablecoins and programmable smart contracts. Together, they open the door to a future where we can easily withdraw as much as we want, transact in seconds, and earn interest through a self-rebasing mechanism.

Solana’s new stablecoin, sUSD, is unlike traditional stablecoins, which are simply pegged to the U.S. dollar with minimal returns. While sUSD maintains a dollar peg, it also offers a yield-bearing model, generating passive income for holders. When combined with the powerful capabilities of smart contracts, sUSD has the potential to transform how we manage recurring expenses, effectively turning a decentralized wallet into a fully automated, self-sustaining “bank account” that not only handles payments but also grows in value over time.

In this article, I’ll go deeper into what sUSD is, how it works, and how combining it with smart contracts could create a hands-free solution for managing monthly bills — a vision of decentralized finance (DeFi) that has the potential to redefine our relationship with money.

What is sUSD? The Next-Generation Stablecoin

Before diving into the transformative potential of using sUSD for automated payments, it’s essential to understand what makes it unique.

sUSD is a stablecoin created by Solayer, a staking platform on the Solana blockchain. Unlike typical stablecoins, which simply mirror the U.S. dollar’s value, sUSD is backed by a real-world asset, U.S. Treasury Bills (T-bills). This structure allows sUSD to not only maintain a stable 1:1 peg to the dollar but also generate a yield, estimated at around 4-5% annually.

The yield is generated through investments in T-bills, one of the safest forms of short-term government debt. This yield-bearing property gives sUSD a significant advantage over other stablecoins, which generally do not accrue interest. For users, this means holding sUSD is more than just a way to store digital dollars — it’s a way to grow their balance while preserving stability.

This unique combination of stability and income generation makes sUSD an ideal tool for managing recurring expenses. Rather than sitting stagnant in a bank account, your digital dollars can work for you, generating passive income (through a self-rebasing mechanism) to help cover your monthly bills.

How sUSD Differs from Staking Digital Assets

While yield-bearing stablecoins like sUSD share some similarities with staking, they offer a unique value proposition that sets them apart.

When you stake digital assets, you’re usually committing cryptocurrencies like SOL, ETH, or DOT to a blockchain network to help secure it and process transactions. In return, you receive rewards in the form of additional tokens, typically paid out in the staked asset. Staking requires locking up your assets for a period, which can sometimes be restrictive if you need quick access to funds.

sUSD, on the other hand, does not require you to lock up assets in the same way. It’s a stablecoin backed by T-bills, providing a yield that is more predictable and not dependent on the price volatility associated with traditional cryptocurrencies. This structure makes it a more stable and liquid option for users who want to earn passive income without the risk of losing their principal or facing delays when accessing their funds. Additionally, sUSD’s yield is based on real-world, low-risk assets, which typically offer more stability compared to the high rewards (and high risks) seen in staking volatile digital assets.

Enter Smart Contracts: The Power of Automation in Finance

Smart contracts are self-executing agreements coded directly onto a blockchain. These digital contracts automatically carry out actions when specific conditions are met. For instance, you could create a smart contract to send a fixed amount to your landlord on the first of each month, ensuring your rent is always paid on time without involving a bank or payment processor. This setup puts you in control of the auto-payment, rather than relying on a vendor, merchant, or bank to manage it.

When combined with sUSD, smart contracts enable users to create a programmable “bank account” that not only holds value but also automates financial tasks. Smart contracts eliminate the need for intermediaries, reducing fees and giving users complete control over their assets.

Imagine programming your wallet to handle every aspect of your monthly finances, from rent to utilities to entertainment subscriptions. By the way, this is exactly why banks and corporate treasury departments like tokenized deposits, it's all about programming money.

How sUSD and Smart Contracts Could Pay Your Monthly Bills

Let’s look at how you could use sUSD and smart contracts to create an automated system for managing your monthly bills:

Deposit sUSD into Your Wallet: The first step is to acquire sUSD and deposit it into a decentralized wallet that supports smart contracts, such as a Solana-based wallet. Since sUSD generates a yield, your balance will grow over time, giving you a buffer to help cover smaller recurring expenses.

Set Up Smart Contracts for Each Payment: For each monthly bill — whether it’s rent, utilities, phone service, or streaming subscriptions — you would create a dedicated smart contract. Each contract would include details like the recipient’s wallet address, the amount to be paid, and the specific date for the transaction.

Watch Your Bills Pay Themselves: Once programmed, the smart contracts will automatically execute on their scheduled dates, transferring the specified amount of sUSD directly to each recipient’s wallet (much like auto-payments that are setup with vendors). There’s no need to remember due dates or manually initiate payments — your wallet handles everything for you.

Balance Management and Yield Accumulation: Since sUSD generates a yield, your balance will continue to grow as long as you hold sUSD. This growth might cover smaller expenses or even offset larger ones over time. For example, if your sUSD balance grows by 4% annually, this yield could help reduce your overall monthly payment burden.

Replenishing Your Wallet: If your expenses exceed your sUSD yield, you can periodically add more sUSD to your wallet. You could also arrange for your employer to auto-deposit funds in sUSD or in a more common stablecoin like USDC or USDT. If the deposit isn’t in sUSD, a smart contract could automatically convert USDC/USDT to sUSD when it arrives in your wallet. Ideally, however, your wallet would become largely self-sustaining, with yield generation helping to offset your recurring costs.

The Benefits of Using sUSD and Smart Contracts for Monthly Payments

Adopting sUSD and smart contracts for monthly expenses offers several benefits over traditional payment systems:

Income Generation on Your Balance: Unlike traditional bank accounts, which often provide minimal interest, sUSD grows passively. Over time, this income can help cover expenses, creating a self-sustaining financial ecosystem.

Lower Fees and Full Control: DeFi eliminates intermediaries, reducing transaction and balance requirement fees.

Global Accessibility: sUSD and smart contracts are accessible worldwide, offering a financial solution for individuals who lack access to local banking. This system can be especially beneficial for people living abroad or in regions with limited financial infrastructure. However, traditional banks are also actively addressing these challenges by exploring tokenized deposits on shared and unified ledgers, as well as implementing retail and wholesale CBDCs (central bank digital currencies) as digital forms of fiat currency.

Security and Challenges

While the benefits are clear, there are also important security and logistical challenges to consider. Personally, I wouldn’t start moving all my money out of traditional bank accounts just yet.

Smart Contract Coding: Programming smart contracts requires careful attention to detail. Errors in coding can be costly since smart contracts are immutable. It's essential to test contracts to ensure they perform as expected.

Lack of Insurance: Unlike your money sitting in a bank, which is insured through FDIC, your sUSD has no protection if something happens, like a hack on the smart contract, your wallet’s balance could quickly go to zero with no way of recouping the loss.

Blockchain Fees: Although Solana has low transaction fees, fluctuations in network activity could impact the cost of executing smart contracts. However, these fees are still generally lower than those associated with traditional banking.

Unregulated: Since sUSD is not a regulated asset, there is a potential risk that the groups or organizers managing this asset could make decisions that would not be in the best interest of sUSD holders.

Restricted Access to US Citizens

Some of you might be thinking, “sUSD sounds great! How do I buy it and set up my digital wallet?” Hold on just a moment! Unfortunately, if you live in the U.S., you're restricted from acquiring, redeeming, or trading sUSD. The U.S. has been slow to provide clear guidance on digital assets and has taken a strict approach toward any organization that ventures beyond the current laws governing traditional finance. For those of us who have been involved in the digital currency and asset space, this can be incredibly frustrating — especially when much of the world is moving forward and embracing these new financial innovations.

Amazingly, only five other countries prohibit their citizens from using sUSD: Cuba, Iran, North Korea, South Korea, and Syria. It might seem surprising to some that the U.S. is included on this list.

For Non-US Citizens Wanting sUSD

For all of you who live outside of the US, luckily you can easily get sUSD:

Connect your Solana wallet, such as Phantom, to a decentralized exchange (DEX), such as Orca and Raydium (some exchanges allow you to swap USDC and USDT for sUSD)
Swap your SOL for sUSD.

Connect your Solana wallet, such as Phantom, to the Solayer Platform (solayer.org)
Navigate to the sUSD section on Solayer
Swap or mint for sUSD using SOL or USDC

Whichever method you use, if you want to verify your transaction, it should show up in your wallet in a few seconds or you can search for the transaction on Solscan.

In Conclusion

The fusion of sUSD and smart contracts highlights the broader potential of DeFi to streamline and automate personal finance. A programmable wallet that autonomously manages monthly bills and grows in value marks a significant shift away from traditional banking. As blockchain technology and DeFi platforms continue to advance, more people could adopt this new form of self-sustaining financial management. In future articles I will go deeper into programmable payments, this is the real power of this innovation in financial services.

However, I don’t see these DeFi innovations fully replacing the demand for traditional banking in the future. Major banks are investing billions to modernize financial services — from real-time settlements to tokenizing real-world assets. It’s only a matter of time before they start moving these innovations out of the proof-of-concept stage and into production. Regarding regulatory challenges, I strongly believe that laws will eventually adapt to accommodate these new technologies, or at the very least, regulators will feel increasing pressure to keep pace.

We’re living in exciting times. The potential of sUSD (or tokenized deposits) and smart contracts goes beyond simply paying bills; it’s a vision for a more autonomous, flexible, and efficient way to manage money. As more users and developers embrace these tools, the boundaries of finance are likely to expand, bringing us closer to a world where our assets don’t just sit passively but actively work for us.

Disclaimer

The information in this article, or on which this Article is based, has been obtained from sources that the authors believe to be reliable and accurate. However, such information has not been independently verified and no representation or warranty, express or implied, is made as to the accuracy or completeness of any information obtained from third parties. The information and conclusions are provided as at the date of this Article and are subject to change without notice, and Brian Rogers undertake no obligation to update or revise any information or conclusions contained herein, whether as a result of new information, future events, or otherwise. The information and conclusions provided in this Article take no account of any relevant persons’ individual circumstances, should not be taken as specific advice on the merits of any investment decision, product or service and should not be deemed to be a reasonably sufficient basis upon which to make an investment decision or undertake any product or service. This Article is not intended to provide, and should not be relied on for, accounting, legal or tax advice or investment recommendations. Please consult your own tax, legal, accounting or investment advisor concerning such matters. Brian Rogers accept no liability for any loss arising from any action taken or refrained from as a result of information and conclusions contained in this Article or any articles or sources of information referred to herein, or for any consequential, special or similar damages even if advised of the possibility of such damages. This Article has been provided solely for information purposes and does not constitute a recommendation, advice or an offer or solicitation to buy or sell any securities or financial instruments or of any product or service. It should not be so construed, nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Further, this Article shall not be considered advice on the merits of acquiring or disposing of any particular investment or as an invitation or inducement to engage in any investment activity or other product or service. By accepting this Article, you agree to be bound by the foregoing limitations.