In this post, I introduce a way to draw payment flows. This method should be helpful for anyone who needs to describe the flow of money as part of their job.\u00a0 So if you work in sales, management, solutions engineering or research, in fintech, tradfi or crypto, read on!<\/p>\n
Tl;dr: Use the Owner, Instrument, Ledger (OIL) schema to describe money at rest, and payments:<\/p>\n
Owner <\/sup>Instrument Ledger<\/sub><\/mark><\/strong><\/p>\n Alice<\/sup>USDJPM<\/sub> <\/strong>= Alice\u2019s USD at JP Morgan<\/p>\n Bob<\/sup>USDCSolana<\/sub> <\/strong>= Bob\u2019s USDC on Solana<\/p>\n Payments can be described with an arrow which indicates a movement of value:<\/p>\n Alice<\/sup>USDJPM<\/sub> <\/strong>\u2192 Bob<\/sup>USDCiti<\/sub> <\/strong>= Alice sends USD from her account at JP Morgan to Bob\u2019s account at Citi<\/p>\n Simple!\u00a0 But also super effective.\u00a0 We can make it even more useful for us though \u2013 read on.<\/p>\n <\/p>\n In my career I\u2019ve seen payments been drawn in many ways.\u00a0 It\u2019s usually boxes and arrows, or sometimes stickmen. There are often inconsistencies. Sometimes arrows mean an instruction, other times they represent payment flow. Occasionally, they indicate the passage of time.<\/p>\n Often these diagrams show little regard for whose liability<\/em> the instrument is.\u00a0 For instance we can\u2019t just write \u201cUSD\u201d.\u00a0 USD isn\u2019t just USD \u2013 it\u2019s USD owed to you by your bank.\u00a0 And as we should now appreciate, these are not the same:<\/p>\n So we need to describe the ledger on which the USD is recorded. In tradfi, this ledger is typically maintained by the liability holder (ie your bank!).<\/p>\n These diagrams often leave questions unanswered and sometimes create confusion.\u00a0 Misunderstandings are expensive!\u00a0 Poor communication of ideas between people can lose sales opportunities and waste tons of time.<\/p>\n We can do so much better\u2026<\/p>\n Crypto has shown us the way.\u00a0 Often, a coin can exist on multiple chains.\u00a0 For instance, Tether (USDT) is issued on multiple chains including Ethereum and Tron.\u00a0 They are the same instrument: both are a claim on Tether Inc for bank account money. However, they are recorded on different ledgers.\u00a0 The crypto industry has differentiated them by adding a small icon representing the chain on the main instrument\u2019s icon:<\/p>\n So why can\u2019t we apply something similar for payments in general?<\/p>\n I wanted to design something that was intuitive. It should be easy to draw on a whiteboard and it should also be easy to type or write in normal word processing or blogging software.<\/p>\n What matters when we describe payments?<\/p>\n So let\u2019s draw it as such:<\/p>\n Owner<\/sup><\/strong> <\/sup>Instrument<\/strong> Ledger<\/sub><\/strong><\/mark><\/p>\n You can verbalise this as \u201cOwner<\/mark><\/strong>\u2019s Instrument<\/strong> <\/mark>at Ledger<\/mark><\/strong>\u201d<\/p>\n For example, <\/sup>Alice<\/sup>USDJPM<\/sub><\/strong> means Alice\u2019s USD <\/mark>at JP Morgan<\/mark>.<\/p>\n We can add these optional values in like so:<\/p>\n [Country]<\/mark><\/sup><\/em> <\/sup>Owner<\/sup><\/strong> <\/sup>(#account number)<\/mark> <\/sup><\/em>Amount<\/em> <\/mark>Instrument<\/strong> Ledger<\/sub><\/strong><\/p>\n Bold <\/strong>items are always necessary<\/strong>, italicized red<\/mark><\/em> items are optional<\/em> <\/mark>if it helps the situation.<\/p>\n [US] <\/mark><\/sup><\/em>Alice <\/mark><\/sup>(#123) <\/sup>50<\/mark><\/em> EUR Citi<\/sub> <\/strong>means US-based Alice\u2019s account 123 has 50 EUR at Citi<\/p>\n I\u2019d probably write the beneficiary just after the account number:<\/p>\n [Country]<\/sup><\/em> <\/sup>Owner<\/sup><\/strong> <\/sup>(#account number) (for beneficiary)<\/mark><\/sup>Amount<\/em> Instrument<\/strong> Ledger<\/sub><\/strong><\/p>\n Paxos <\/mark><\/sup>(for tokenholders) <\/sup>15m<\/em> USD <\/mark>DBS <\/mark><\/sub><\/strong>means Paxos <\/mark>holds 15m USD <\/mark>in their \u201cfor tokenholders\u201d trust account at DBS<\/mark>.<\/p>\n An arrow (\u2192) means a change of state of the world. Either money has moved, or the state of an account has changed.\u00a0 It is usually obvious with context:<\/p>\n Alice<\/sup>10USDCash<\/sub><\/strong> \u2192 Bob<\/sup>10USDCash<\/sub><\/strong><\/p>\n The above means Alice gives $10 to Bob in cash.<\/p>\n But what about this?<\/p>\n Alice<\/sup>100USDCash<\/sub> <\/strong>\u2192 Alice<\/sup>90USDCash<\/sub><\/strong><\/p>\n The above means Alice has fewer dollars in her pocket, but is silent on where they went. Perhaps she gave them to Bob, perhaps she lost them \u2013 it doesn\u2019t matter.<\/p>\n Let\u2019s build this up.<\/p>\n Note: In some cases \u201ccash\u201d can be used to mean bank account money (eg cash vs collateral), so if you need to differentiate or be specific, you could say Alice<\/sup>10USDBanknote<\/sub><\/strong><\/p>\n Can you see how powerful this is?\u00a0 Now you don\u2019t have to draw silly diagrams like this:<\/p>\n
\nPart 1: Background and the problem<\/h2>\n
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\n ![\"\"\/](\"https:\/\/i0.wp.com\/bitsonblocks.net\/wp-content\/uploads\/2024\/11\/USDT-on-Ethereum.jpg?resize=40%2C40&ssl=1\")
<\/td>\nTether on Ethereum\u2019s ledger<\/td>\n<\/tr>\n \n ![\"\"\/](\"https:\/\/i0.wp.com\/bitsonblocks.net\/wp-content\/uploads\/2024\/11\/USDT-on-Tron.jpg?resize=40%2C40&ssl=1\")
<\/td>\nTether on Tron\u2019s ledger<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n
\nPart 2: The OIL schema<\/h2>\n
We always <\/strong>care about:<\/h3>\n
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Sometimes<\/strong>, we care about:<\/h3>\n
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Occasionally<\/strong>, we care about:<\/h3>\n
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What about money movements?<\/h3>\n
\nPart 3: Examples<\/h2>\n
Starting with cash\u2026<\/h3>\n
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\n Description<\/strong><\/td>\n OIL schema<\/strong><\/td>\n<\/tr>\n \n A USD banknote in Alice\u2019s pocket<\/td>\n Alice<\/sup>USDCash<\/sub><\/strong><\/td>\n<\/tr>\n \n Alice gives $10 cash to Bob<\/td>\n Alice<\/sup>10USDCash<\/sub> <\/strong>\u2192 Bob<\/sup>10USDCash<\/sub><\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n Moving on to wallets and banks\u2026<\/h3>\n
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\n Description<\/strong><\/td>\n OIL schema<\/strong><\/td>\n<\/tr>\n \n Alice sends USD to Bob on Venmo<\/td>\n Alice<\/sup>USDVenmo<\/sub> <\/strong>\u2192 Bob<\/sup>USDVenmo<\/sub><\/strong><\/td>\n<\/tr>\n \n Alice moves money between two different accounts that she owns at JP Morgan<\/td>\n Alice (Acc1)<\/sup>USDJPM<\/sub><\/strong> \u2192 Alice (Acc2)<\/sup>USDJPM<\/sub><\/strong><\/td>\n<\/tr>\n \n Alice converts some USD into EUR at JP Morgan<\/td>\n Alice<\/sup>USDJPM<\/sub><\/strong> \u2192 Alice<\/sup>EURJPM<\/sub><\/strong><\/td>\n<\/tr>\n \n Alice who banks at JP Morgan, sends USD to Bob who banks at Citi<\/td>\n Alice<\/sup>USDJPM<\/sub> \u2192 Bob<\/sup>USDCiti<\/sub><\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n
![\"\"](\"https:\/\/i0.wp.com\/bitsonblocks.net\/wp-content\/uploads\/2024\/11\/Payment-whiteboard.jpg?ssl=1\")
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