jakiro
Source: Gryphsis Academy
Payment is a key scenario in the cryptocurrency ecosystem. Tens of thousands of cryptocurrency payments occur on and off the chain every day.A new cryptocurrency usually adds value due to its actual payment purpose, and payments have become an important bridge to connect the Web2 and Web3 worlds.
In the Web3 payment business, some people make a fortune by providing payment channels, while others focus on creating safer wallet technology.So, how exactly is funds transferred in the Web3 world?This article will take you into the deep understanding of various business scenarios and projects in the Web3 payment industry.
1. Traditional payment industry layout Web3
In August last year, Paypal announced the launch of the US dollar-pegged stablecoin “Paypal USD” for transfers, payments and other businesses; in April this year, financial infrastructure platform Stripe said that stablecoin payments will be integrated into its payment suite within a few weeks.In June, Mastercard Crypto Credential, the infrastructure feature for peer-to-peer transactions, will enable cross-border payments across currencies on the blockchain by Latin American and European users.In the past two years, the traditional payment industry giants have entered the Web3 payment industry with high profile. Why is the reason?
1.1 What is the traditional payment process
Before uncovering the reasons, let’s learn what payment is.The essence of payment is the flow and transfer of funds.In the traditional payment industry, users complete the flow of funds through cash payments, card/bank transfer payments, and third-party payments.The completion of a cross-border payment usually requires the support of multiple participants. We take the payment link of the bank card as an example to briefly introduce the participants and the cross-border payment process.
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Card owner (user/buyer): The user selects goods/services at the merchant and initiates payment.
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Merchant: Merchants need to access the payment gateway of the payment service provider and receive and process payments through the integrated payment gateway.
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Payment Service Provider: Provide payment gateway and payment processing services.The payment information entered by the user sends a payment request through the payment gateway.Some payment service providers also provide acquiring services.
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Acquisition agency: A bank or financial institution that cooperates with merchants.The acquiring agency receives payment requests and forwards them to the card organization, and is also responsible for handling clearing and settlement after transaction authorization.
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Card organization (such as MasterCard, VISA): A global network that processes payment card transactions.The card organization receives payment requests from the acquiring agency, sends an authorization request to the issuing bank, and forwards the authorization response to the billing agency to ensure that the transaction request is approved by the issuing bank.
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Card issuing bank:The issuing bank receives authorization and requests from the card organization, first verify the user’s identity and account status, authorizes or refuses the transaction, and allocates funds after the authorization is successful.
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Settlement:The final stage of the payment process involves transferring funds from the user account to the merchant account.Settlement is usually coordinated by the acquiring agency and the issuing bank, and the actual transfer of funds may be carried out through the interbank clearing network.
The above payment process shows the clear authority and high maturity of traditional cross-border payments, high acceptance, relative security and the advantages of large-scale transactions.However, traditional cross-border payments also have some limitations:
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Long payment processing time: Since multiple participants are involved, cross-border payments processed through international card organizations usually take at least T+1 days to complete, that is, at least T+1 days to reach the merchant account, and the delivery is relatively immediateweak
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Multi-level fee structure: Since a transaction involves many relevant parties, there is a multi-level fee structure.For example, a credit card payment collection agency, bank, and card organization will charge different fees.
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Limited transparency and time-consuming traceability: If a bank card stolen occurs, it usually takes several working days to trace the source and query the transaction.
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Reliance on traditional banks: slow technology development, traditional banking system underperforms in dealing with emerging payment demand
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It is these limitations that drive technological innovation and lead us into a new era of Web3 payment links.
1.2 Why are traditional industries planning Web 3 payment
Today, when traditional payments are developing relatively well, why are giants gradually starting to focus on Web3?
1.2.1 A considerable industry profit
Mastercard’s net profit in 2023 was US$11.2 billion (about 33,400 people), while Tether, which issued stablecoin USDT, the crypto industry, had a net profit of US$6.2 billion in 2023, and the company had only about 100 employees as of last year.In contrast, the per capita wealth created by employees is much higher than that of traditional payments, and the returns are the same.
1.2.2 Fierce competition in traditional payment services and high operating costs drive the discovery of new businesses
We can see from the chart that from 2018 to 2023, the CAGR of cryptocurrency ownership level reached 99%, far exceeding the growth rate of traditional payment methods by 8%.During the same period, the growth rate of cryptocurrency ownership exceeded that of several US payment giants.
In 2022, in the face of fierce industry competition and relatively high operating costs (operating costs accounted for 70.8% of gross profit in 2022), Paypal also began to focus on its cryptocurrency business.The importance of the cryptocurrency business in PayPal’s overall revenue is gradually increasing.
In one year, cryptocurrency-related operating expenses increased from $800 million to $1.2 billion, an increase of 50%, and cryptocurrency-related net profit increased from $700 million to $1.1 billion, an increase of 57%.The increase in operating expenses for new cryptocurrencies-related businesses reflects PayPal’s continued investment in this area and its confidence, including technology upgrades, security measures and market expansion.
Its significant net profit growth not only shows the profitability of cryptocurrencies, but also proves PayPal’s effective operating strategy in the cryptocurrency market and its optimistic about the future growth potential of cryptocurrencies.Therefore Paypal has the motivation to continue to explore new industry opportunities.
1.2.3 BTC halving and BTC ETF compliance bring more recognition and payment needs to the crypto industry
BTC halving and BTC ETF compliance bring more recognition and payment needs to the crypto industry.The Bitcoin halving event has attracted widespread market attention by reducing the speed of new Bitcoin generation, increasing its scarcity and value growth expectations.The launch of Bitcoin Exchange-traded funds provides traditional investors with low threshold and convenient investment channels, enhancing market confidence.The expected implementation of Ethereum Exchange-traded funds has further aroused interest in the Ethereum ecosystem and innovative applications.Together, these factors drive more people to understand and participate in Web3 payments.
In addition, the increase in deposit and withdrawal demand has also driven the demand for conversion services between fiat currency and cryptocurrency (the deposit and withdrawal is the conversion between fiat currency and cryptocurrency).The ways to provide these services include centralized exchanges, independent deposit and withdrawal payment institutions, cryptocurrency ATMs and POS machines that support cryptocurrency payments.Through these channels, users can easily convert between fiat currency and cryptocurrency, thereby promoting the widespread use and popularization of cryptocurrencies.
1.2.4 Blockchain-based payment advantages and demand for payment diversity
Microsoft began accepting Bitcoin as payments for its online Xbox store in 2014; Twitch is Amazon’s leading gaming streaming platform that accepts payments for Bitcoin and Bitcoin Cash as its services; Shopify as the leading e-commerce platform overseasIntegrate with payment processors such as BitPay to support Bitcoin payments.Leading cryptocurrency payments in different industries illustrates that Web3 payments are bringing more possibilities.
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Reduce exchange rate risk
Cross-border e-commerce often involves transactions between multiple currencies, which have certain risk of exchange rate fluctuations.Shopping using cryptocurrencies can reduce this risk, as cryptocurrencies do not involve exchange losses from exchange exchange between different currencies.
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Reduce transaction costs
Traditional cross-border payments are usually accompanied by high transaction fees and layers of institutional intervention.In contrast, the handling fees for cryptocurrency transactions are usually cheaper because they save the intermediate links between banks or other financial institutions. If you pay on-chain, you only need to pay a network fee, which is usually lower.If the transaction is obtained through payment service providers (such as Coinbase, BitPay), there is a handling fee.Compared with the layers of increase in traditional payment institutions, this means that cross-border e-commerce with large transaction volumes can effectively reduce handling fees.For example, cross-border payments using traditional methods may incur a handling fee of 3 – 5%, while payments through cryptocurrency can be reduced to less than 1%.Since the transaction fees of the Ethernet main network are relatively expensive, it has also inspired more public chains to achieve cheaper network fees through technological innovation.As shown in the figure below, since the network fee of the transaction has nothing to do with the amount and is related to the degree of network congestion, for some large-scale cross-border chain payments, there is only a handling fee of less than USD 0.5 USD, which greatly reduces the payment of handling fees.cost.
Source: dune @bnbchain
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Strengthen payment security
The decentralized and distributed ledger characteristics of blockchain technology make every transaction open and transparent and unchangeable once recorded.This reduces the possibility of fraud and hacking.Due to the transparency of blockchain, merchants and consumers have increased their trust in transactions.Consumers know that their payment information is secure, while merchants reduce the likelihood of fraud and refusal.
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Open up the global market
Payment in cryptocurrency is not restricted by the international banking system, and transactions can be completed quickly; at the same time, transactions in cryptocurrencies (7 * 24) are not affected by holidays and working hours.For many countries and regions, consumers may not be able to use traditional payment methods from cross-border e-commerce platforms, but they can be replaced with cryptocurrency.
1.2.5 Tax avoidance needs
Whether it is a cryptocurrency industry, companies and individual investors will be attracted by tax benefits.For example, Portugal does not tax individual cryptocurrency earnings; Singapore does not impose capital gains tax on cryptocurrencies; Bermuda has attracted token issuing companies and cryptocurrency custody service providers with its secure and transparent regulatory environment and the Digital Assets Business Actand blockchain R&D companies have become an important hub for digital assets and innovative technologies.
And, since 2019, the Bermuda government announced that it is acceptable to pay taxes, utilities and other administrative services in the form of USDC.In addition, based on a decentralized network system, Web3 transactions themselves bypass many centralized institutions and banks, avoiding regular tax processes.Therefore, the internal bonuses of some digital assets will also be issued in the form of stablecoins.
1.2.6 The demand for safe-haven funds caused by local currency depreciation
Argentina has been facing economic difficulties for decades, and the cyclical nature of extreme currency depreciation has damaged residents’ savings ability and made daily financial activities difficult. Therefore, Argentina is also the most active place for Latin American cryptocurrencies.In 2023, Argentina’s inflation rate reached 211.4%, and according to Chainalysis data, Argentina has about 10.9%, with about 5 million people (the total population of 45.8 million) using cryptocurrency to pay for daily life.
To prevent the peso from depreciating, Argentines will immediately exchange it for USDT or USDC after getting their peso-denominated salary, and everyone knows the exchange rate between the US dollar and the peso.Similarly, Türkiye is also one of the places where cryptocurrencies are developing rapidly.Therefore, where there is a need for depreciation, where cryptocurrencies become “hard currency”, it is easier to launch cryptocurrencies-related payment services.
1.2.7 Ways to realize political needs
For the United States, cryptocurrencies are a powerful tool for canvassing the election.In this US election, Trump promoted a high-profile attitude towards cryptocurrencies and criticized the Biden administration’s hostile attitude towards cryptocurrencies.Trump encouraged his supporters to make cryptocurrency donations through Coinbase Commerce, and some of the Trump-concept meme coins were once popular. Before the election debate at the end of June, there were also obvious changes in the related concept meme coins.
For Venezuela, cryptocurrency is a weapon against dictatorship.During the COVID-19 pandemic in 2020, the interim government led by Guaido decided to use cryptocurrency to provide direct assistance to doctors and nurses in the country.The reason is that the corruption of the Maduro regime and its control over banks makes it difficult to provide international aid in normal ways.The program directly helped 65,000 doctors and nurses, at the time, the average salary for doctors was $5 per month.Paying cryptocurrency for assistance can earn $100 per person.As a result, the decentralized crypto payment method effectively supports the local democratic movement.
2. What is Web 3 Payment
Web3 payment is based on blockchain technology. As long as the other party’s “wallet address” is available, the cryptocurrency can be transferred on the block network and can be viewed and traced instantly to realize decentralized peer-to-peer payment.This implementation path solves problems such as low transparency, long transaction arrival time, and high cost of multi-level institutions in traditional payments.
2.1 Market size
With the passage of BTC ETFs, the BTC halving and the implementation of ETH ETFs, more and more countries are inclusive of cryptocurrency payments into the regulatory scope, and more personal and institutional funds are pouring into the crypto market.As of 6.23, the BTC market size has reached $1.27 T, while Ethereum has reached $15.2 B.
According to a Tripple A report, the global penetration of cryptocurrencies was 6.9% as of 2024, with about 560 million people owning cryptocurrencies worldwide, an increase of 33% from last year’s 420 million people.Among them, Asia is the continent with the largest number of cryptocurrencies, South America and Oceania are the fastest growing areas (116.5%), and Dubai’s population penetration rate accounts for 25.3%, making it the country with the highest proportion of cryptocurrencies.With the advantages of local financial free zones, personal income tax and capital gains tax exemptions, this also explains why Dubai has become the headquarters of many exchanges and crypto companies in the past two years.
Therefore, whether it is the region with the highest population share or the region with the fastest population share growth, it is essentially a relaxed policy and the need for real transactions, which will give crypto payments a good opportunity to explore and develop.
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fromCorporate perspectiveLooking at it, as early as the traditional field, well-known brands in the real economy such as Starbucks, Coca-Cola, Tesla and Amazon have embraced cryptocurrencies, and the market adoption rate and consumer familiarity of cryptocurrencies in mainstream markets have gradually increased.This year, more traditional companies have begun to accept cryptocurrencies and expand their payment methods.Ferrari has now partnered with Bitpay to accept payments from Bitcoin, Ethereum and USDC in the United States, and plans to expand this option to Europe and elsewhere in early 2024.In Singapore, Grab users can now order drives and takeout in their daily lives using Bitcoin, Ethereum, Singapore dollar stablecoins, USDC and USDT.Therefore, when industry giants on the B-side start to adopt crypto payment, this is not only an recognition of the crypto industry itself, but also a door to cryptocurrency payment for C-side users with the credit endorsement of the B-side companies themselves.
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fromUser perspectiveIn 2021, Binance, the world’s largest cryptocurrency exchange, had only 3 million registered users.However, by June 2024, Binance’s registered users had surged to 200 million, with daily trading volume reaching $189 billion.This significant increase proves that more and more people are joining the ranks of cryptocurrency use, and crypto payments are gradually becoming a vast blue ocean.
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fromOn-chain dataFrom January 2020 to March 2024, on-chain transaction volume and transaction activity continued to grow.Driven by a series of positive events, these indicators have repeatedly broken through record highs and are about to break through the $150 billion mark.
In the Web3 field, many project parties and exchanges have seen the upward trend in the industry and huge opportunities for crypto payments, and have accelerated the application for payment licenses in various regions, expanded the card issuance business and other businesses that link Web3 payments with the real economy, and accelerated theConstruction of exchange and on-chain wallet settings.
Recently, Coinbase announced the launch of a self-custodial wallet platform, which integrates functions such as asset and identity management, purchase, sending, exchange, NFT and transaction history, providing its users with a more convenient on-chain transaction path.This not only provides more convenience to the user base of Coinbase, but also becomes an important part of Onchain Summer activities, further promoting the development of Web3 payments.
3. Category of Web 3 Payment Scenarios
3.1 Category 1: Inlet and Exit
3.1.1 Deposit
definition:
It refers to the process of converting fiat currencies (such as the US dollar, the euro, etc.) into cryptocurrencies.This process is equivalent to entering the entrance to the cryptocurrency economy.The payer transfers to the fiat currency through a centralized exchange or a third-party decentralized deposit and withdrawal platform. The centralized exchange can directly exchange it into cryptocurrency and transfer it to the on-chain wallet; a third-party decentralized deposit and withdrawal platformThe market maker exchanges cryptocurrency through the market maker, and after receiving the fiat currency, the market maker will transfer the equivalent cryptocurrency to the payer’s on-chain wallet.
Market makers here are usually crypto-friendly banks (such as Silvergate Bank, Silicon Valley Bank, and Signature Bank that have already collapsed). After the bank goes bankrupt, more stablecoin issuers (Tether, Circle), payment service providers (BCB Group) assumes the role of liquidity provider.
How to deposit:
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Centralized exchange: Users can create an account after completing KYC on a centralized exchange, and purchase cryptocurrencies in fiat currency through bank accounts, credit cards or e-wallets.
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Peer-to-peer platform: These platforms directly connect buyers and sellers to realize the exchange of fiat currencies and cryptocurrencies.The transaction is usually kept by a third party until the buyer and seller complete the operation agreed upon by both parties.
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OTC counter:OTC counters can facilitate direct transactions between buyers and sellers in large-scale cryptocurrency.This is usually used by institutional investors or high net worth individuals
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Decentralized cryptocurrency wallet: The most common type of cryptocurrency wallet is a self-custodial wallet. Since no third parties are involved, users can have full control over their cryptocurrency.
Depositsand subject:
Centralized exchanges, third-party decentralized deposit and withdrawal platforms, banks, liquidity providers (crypto-friendly banks, stablecoin issuing institutions, payment service providers)
Charge structure:
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Payment channel fees: For example, fees charged by credit card issuing agencies, Paypal, Apple Pay, etc.
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Exchange rate fees for fiat currency against cryptocurrencies: USD and USDT are usually not 1 (usually, the exchange of middlemen will make the difference)
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Internet fee (Gas fee is required to transfer from a self-hosted wallet to another wallet address)
3.1.2 Withdrawal
definition:
Contrary to depositing, withdrawing refers to the process of converting cryptocurrencies back to fiat currency.Users can sell their holdings, exchange them into traditional currencies, and withdraw them to their bank account or other payment methods.This process is equivalent to exiting the export of the cryptocurrency economy.
The subjects involved in withdrawal:
Centralized exchanges, third-party deposit and withdrawal platforms, banks/card vendors, liquidity providers (crypto-friendly banks, stablecoin issuing institutions, payment service providers)
How to withdraw money:
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Centralized exchanges, peer-to-peer platforms, OTCs, crypto wallets
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Encrypted debit cards (virtual card, physical card): Debit cards associated with cryptocurrency wallets or platforms can convert cryptocurrencies into fiat currencies and be used for normal consumption.
Cost structure:
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Transaction fee: When withdrawing funds, the service provider (exchange or third-party deposit and withdrawal platform) may charge certain transaction fees.
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Exchange rate fees for cryptocurrencies against fiat currencies: If withdrawal involves currency conversion (such as converting US dollars to euros), exchange losses may occur
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Bank handling fees: The bank receiving funds may charge handling fees for deposited funds.
3.2 Category 2: Use cryptocurrency to purchase goods or services in the real economy (independent card payment, third-party payment platform)
3.2.1 Independent card payment (virtual card/physical card)
Traditional payment card dealers or Web3 native payment card dealers support the consumption of cryptocurrencies in the real economy, here is4 subjects, help card issuers’ technical service providers, issuers (traditional card dealers, Web3 native card issuers), and card organizations.
In the current market environment, most of the more popular ones areEncrypted prepaid debit card: There is no need to bind an existing bank account, you only need to convert the cryptocurrency into fiat currency and recharge it into the card in advance.
Subject 1: Virtual card/physical card technical service provider
Issuing credit and debit cards is the patents of banks in the Web2 world, and the business has a high technical and qualification threshold; but this is not the case in the crypto payment card track.
Card issuing technology service providers provide “issuance as a service” solutions.When a user sees an encrypted card with a certain VISA logo, behind it is actually the cooperation model between the issuer and the technology provider.The API of card issuing technology providers has integrated with payment networks such as Visa and MasterCard, and has also established cooperative relationships with upstream and downstream industries such as card issuing banks to provide users with real-time transaction authorization and fund conversion services.
The card issuer only needs to issue and manage encrypted credit/debit cards by calling the technology provider’s API or SaaS solution under compliance supervision or license.
* Technology providers often have to hold licenses in multiple regions, providing services including:Necessary security technology, payment processing systems and user interfaces to support crypto card issuance, currency conversion and payment, transaction monitoring and risk control, etc.
Subject 2: Traditional payment card dealer
Visa has partnered with Web3 infrastructure provider Transak to launch cryptocurrency withdrawals and payments through Visa Direct solutions.Users can withdraw cryptocurrencies directly from wallets such as MetaMask to Visa debit cards and convert cryptocurrencies into fiat currencies, and pay at 130 million merchants who accept Visa.Therefore, the absolute advantage of traditional payment card dealers in making cryptocurrency payment cards is the payment licenses accumulated in history, brand credit endorsement, large-scale user and merchant entrances, and absolute financial strength.
Subject 3: Web3 payment card dealer
Onekey and Dupay, which make hardware wallets, have launched virtual and physical cards last year, providing mainland users with the possibility of purchasing OpenAI ChatGPT. The business model is mainly to earn card opening fees and transaction fees, and cards of different levels includeDifferent limits and handling fee standards.In addition to Web3 native payment card dealers, major exchanges have also launched business models that earn handling fees and card opening fees based on their own business forms.
For example, Binance’s crypto payment card consumption can receive a certain BNB cashback, similar to the “cash back” in reality, Crypto.com’s crypto payment card can obtain a certain free card fee by pledging different amounts of platform tokens CRO.and other payment rights.Based on its own user traffic and brand endorsement, as well as the natural consumption scenario of withdrawing funds after transactions, the exchange tries to expand more C-end payment scenarios.
This business logic is that the exchange itself has a payment scenario for post-transaction withdrawal, and compared with traditional payment card vendors, exchange users have lower educational costs when using encrypted payment cards; from the perspective of usage, the user’s exchange appBorrowing the original transaction product matrix allows you to interact directly with the card, greatly improving the user experience of switching to different platforms such as transfer and recharge.
Subject 4: Card organization
VISA and Mastercard authorize the network to technical service providers to obtain more profits by cooperating with technical service providers.The more crypto payment card transactions and overseas transactions, the more processing fees they receive, the larger the amount, and the higher the revenue; therefore, they do not need to issue cards themselves, but rely on their own payment network and credit card brands to endorse them.You can earn this “authorization fee”.
evaluate:
Although the roles of the card issuing business chain are different, each participant has his own logic and advantages in doing the card issuing business.For example, the business that the virtual card/physical card issuing technology service provider is SaaS. Once the license and technology are opened up and the transaction channels of the Web3 ecosystem are aggregated, then this business model can be replicated, effortless business, and itsThe audience is very wide, and it can not only provide services to the native Web3 card issuer, but also expand it to other payment business scope with compliance and technical advantages; the native Web3 card issuer can earn cryptocurrency trading through outsourcing technology model.Or card payment fees can easily reach more native Web3 communities, and have lower customer acquisition costs for users with cryptocurrency use habits; traditional card dealers or traditional payment giants have the most extensive fundsThe user group and strong brand endorsement are easier to obtain recognition from virtual card payment users, recognition from non-encrypted users, and earn B-side authorization fees from payment service providers.
3.2.2 Third-party payment platform
Traditional / Web3 related third-party payment platforms expand deposit and crypto payment services to realize the use and consumption of cryptocurrencies in the real economy.The following two platforms have their own usage advantages: Revolut app supports fiat currency exchange, card payment, etc. in traditional payments. It can naturally be a exchange platform for cryptocurrencies and fiat currency. Binance Pay is backed by the largest crypto exchange Binance, which is also natural.There is a demand for consumption, forming a closed loop of deposits, transactions, withdrawals and consumption of cryptocurrencies.
Revolut:Fintech company and global new bank Revolut were established in the UK in 2015. It provides services such as transfers and payments, and has more than 40 million users worldwide.The company launched Revolut Ramp in March 2024, a service that allows Revolut users to buy cryptocurrencies in their own wallets and trade between the platform and Revolut accounts without paying additional payments by working with MetaMask developer ConsensysFees may be restricted.At the same time, the traditional payment application links the Revolut card to the user’s cryptocurrency account. When payment is made, Revolut will automatically convert the cryptocurrency into the purchase currency for payment.
Binance Pay:Shopping platforms can choose a variety of cryptocurrencies to purchase gift cards for different retail brands and games (ranging from dozens to hundreds) according to their preferences, thereby spending in the real economy.For example Coinbee:
Source: @Coinbee
3.3 The third category: payment scenarios for blockchain native payment (on-chain payment scenarios)
On-chain payment is also based on the needs of a payment scenario in the Web3 world, and is usually a payment requirement derived when participating in the project party’s activities and transactions.
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Payment and transfer: Web3 wallet (taking Binance Web3 wallet as an example) provides peer-to-peer payment and transfer functions. As long as you have the other party’s wallet address, you can transfer money across space, which usually requires a network fee (Network Fee / Gas Fee)The cost can be received within minutes.Users can easily transfer assets quickly and at low cost around the world.
Source: @binance
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DeFi/NFT: Users can interact with the DeFi application through the Web3 wallet to perform deposit and loan, borrowing, liquidity mining and other operations of cryptocurrencies.Users also purchase and trade digital assets such as NFTs.
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DEX: Web3 wallet supports users to trade cryptocurrencies on DEX. These exchanges do not rely on centralized order books, but use smart contracts to match transactions.
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Cross-chain interaction: Multi-chain wallets support users to transfer assets between different blockchains and realize the interoperability of different blockchain ecosystems.
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GameFi: In GameFi, Web3 wallets can be used to purchase virtual goods, land, or other in-game virtual assets.
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Social networking and content creation: Web3 wallet supports users to create and monetize content on decentralized social platforms, as well as receive rewards and payments.
4. Payment-related projects
4.1 Project 1: Stablecoin Project Paypal PYUSD
In August 2023, PayPal launched its first stablecoin, PYUSD, with the issuer being Paxos, which regularly provides proof of reserve assets.The stablecoin PYUSD is issued on Ethereum (currently available on Solana).PYUSD maintains a 1:1 value with the US dollar and can be redeemed through the PayPal ecosystem.Stablecoin PYUSD is powered by U.S. dollar deposits, short-term U.S. Treasuries and similar cash equivalents to ensure its stability without being affected by other cryptocurrencies’ fluctuations.
Use scenarios:It is mainly used for games, remittances, and as a payment medium in Web3 platforms and decentralized exchanges; currently PYUSD is only for local users in the United States, and PYUSD trading pairs are provided on Coinbase.Due to the limited public chains and regions supported, the scope of use of this stablecoin still needs to be expanded.
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transfer:Users can use PYUSD to transfer money by zero fees
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Payment:Payment is made using PYUSD when the product is settled
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Convert cryptocurrency:PYUSD can be converted to other cryptocurrencies supported by Paypal. The handling fee varies according to the number of conversions, ranging from 1.45% to 4.9%, and the handling fee is relatively high. Since it only supports Ethernet chains, stablecoins are transferred out.The network fee will be very expensive.
Source: @Paypal
Market value:Currently, the market value of stablecoins issued by Paypal is $270.37 M, ranking 13 in the stablecoins market value.The total market value of stablecoins is $170.2 B, the proportion of stablecoins issued by Paypal accounts for 0.15%, and the highest market share is Tether at 65.9%.From this we can see that even if payment giants enter the crypto industry, it is difficult to quickly take the lead in the crypto market due to the late entry time, few public chains involved, geographical restrictions, and limited use scenarios.However, Paypal is also working hard to expand its application scope and has been launched on Solana. PYUSD’s development goal is to log in to major exchanges and form higher circulation, aiming to be system compatibility between the Web3 and Web2 ecosystems.
source: @Defilama
4.2 Project 2: Infrastructure of peer-to-peer payments Mastercard
Mastercard launched Mastercard crypto credentials, which is the first peer-to-peer pilot transaction in cooperation with the exchange.Its characteristic is that the use of alias instead of a lengthy blockchain address when transferring money.This new system is designed to simplify cryptocurrency trading for exchange users and provide a more user-friendly peer-to-peer transfer method.
Pilot scope: Users mainly in Europe and Latin America, including Argentina, Brazil, Chile, France, Guatemala, Mexico, Panama, Paraguay, Peru, Portugal, Spain, Switzerland and Uruguay will be able to cross multiple currencies and blockchains across multiple currencies and blockchains.Transfers from both domestic and domestic funds.The selection of these locations for piloting is mainly due to the relatively loose environment for cryptocurrencies in these countries and the great demand for cryptocurrencies in Latin America due to currency depreciation.
Cooperation Exchange: Bit2Me, Lirium and Mercado have enabled real-time trading
Source: @Mastercard
Steps to use: The exchange first conducts KYC according to Mastercard encryption credential standards.At this point, the user will get an alias to send and receive funds between all supported exchanges.When a user initiates a transfer, the MasterCard encrypted voucher verifies whether the payee’s alias is valid and whether the payee’s wallet supports digital assets and related blockchains.If the receiving wallet does not support the asset or blockchain, the sender is notified and the transaction will not continue, protecting the parties from potential losses of funds.Finally, enter the amount to transfer, and you need to enter the mobile phone verification code to complete it.
4.3 Project 3: Deposit and withdrawal payment infrastructure Moonpay
MoonPay was founded in 2019 and is positioned as PayPal for Web3.MoonPay is now one of the few companies that have obtained licenses and compliance in all states of the United States through an MTL license. In short, it is a cryptocurrency service provider whose main business is deposit and withdrawal.
MoonPay provides APIs and SDKs to enable developers to integrate their services into Web3-related applications, establish connections with centralized exchanges and wallets, and provide deposit and withdrawal services.
Users can also purchase digital assets such as NFT on the MoonPay app or through various Web3 exchanges such as Coinbase, OpenSea, MetaMask and Bitcoin.com.Currently serving more than 15 million individual users.
The latest news shows that Moonpay has been integrated into PayPal, and users in the United States can use their existing PayPal balances and bank cards to purchase more than 110 cryptocurrencies.
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Financing History: The first round of financing raised $555 million, led by Tiger Global Management and Coatue Management.Valuation of $3.4 billion.It also includes Justin Bieber, Maria Sharapova and Bruce Willis, a total of 60 investors.
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Login channel: Moonpay platform (KYC), cooperative centralized exchanges and wallet service providers (including Metamask, Bitcoin.com, OpenSea, Uniswap, Sorare, etc.)
source: @Moonpay
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Business scope
￮ Ingress and withdrawal:MoonPay provides individual users with the ability to buy or sell cryptocurrencies in fiat currency.34 fiat currencies are provided in more than 100 countries to deposit services for 126 cryptocurrencies and withdrawal services for 22 cryptocurrencies.Supports local payment methods such as credit and debit cards, EUR/GBP/USD bank transfers, PIX and Yellow Cards
￮ Cryptocurrency Trading Platform:MoonPay provides a secure, non-custodial cryptocurrency trading platform that enables users to exchange different cryptocurrencies without paying a handling fee.Users can connect crypto wallets to MoonPay for cross-chain exchange; as of April 2024, MoonPay-backed wallets such as Trust Wallet, Ledger, MetaMask, Rainbow, Uniswap, and Exodus.In terms of deposits and withdrawals, MoonPay focuses more on establishing connections with large projects such as exchanges and wallets, and obtaining user traffic by establishing traffic portals on these platforms, while Alchemy Pay’s deposit and withdrawal services focus more on expanding different local areasPayment channels, strengthen the ability to localize the product itself.
￮ Enterprise-level cryptocurrency payment:MoonPay supports multiple payment methods for enterprise-grade cryptocurrencies.Users can nest APIs into enterprise applications, and payment methods range from credit cards such as Visa and Mastercard to wire transfers and bank transfers to Apple Pay.MoonPay has an anti-money laundering monitoring system, fraud engine and anti-fraud stack of more than 50 people to handle business issues of credit card refunds, fraud or disputes for corporate customers.
￮ NFT product-related services:
MoonPay Concierge Service: Provide advanced services for NFT purchase and hosting to high-net-worth clients.MoonPay is close to partnerships like Yuga Labs, helping promote blue-chip NFTs like BAYC and CryptoPunks through concierge services and selling them to celebrity clients.
NFT Checkout:Moonpay provides the purchase and sale of NFT services through partnerships with platforms such as OpenSea, Magic Eden, ENS and Sweet.io.Users can purchase NFTs using credit or debit cards, as well as payment methods such as Apple Pay and Google Pay, without having to buy cryptocurrencies first.
HyperMint: Self-service infrastructure platform and Web3 API provided through a codeless platform, with the main users of creators and brands.Users can:
i. Writing, designing and deploying smart contracts
ii. Create, manage, mint and sell tokens to end users
iii. Guide funds, royalties and large-scale distribution of NFTs
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Moonpay’s business model:
￮ Processing fee, service fee, NFT casting/concierge fee:MoonPay makes money by drawing a certain percentage from the total transaction.The main types of transactions are buying and selling cryptocurrencies and buying and selling NFTs, which charge service fees and transaction commissions, and NFT minting fees for concierge services.The company charges a 4.5% handling fee for buying and selling cryptocurrencies through credit cards and a 1% handling fee for bank transfers (minimum $3.99), so it is not friendly to small and frequent deposits and withdrawal users.For NFT, it charges a 4.5% fee, with a minimum of $0.50; high net worth users of NFT will also have high service fees, etc.
￮Exchange rate difference:MoonPay earns income by dividing and withdrawing users, as well as when they buy or sell cryptocurrencies.
￮API integration costs:MoonPay provides APIs that enable third-party platforms and developers to integrate cryptocurrency buying capabilities into their applications.MoonPay may charge these partners for integration or subscription fees to access their APIs and leverage their services.
4.4 Project 4: Payment Solution Provider Alchemy Pay
Founded in Singapore in 2017, Alchemy Pay is a crypto payment gateway serving businesses and individual users.It supports payments in 173 countries and mainly serves Southeast Asia, which is where it differs from Moonpay’s service scope.Due to the different economic levels of Southeast Asian countries, each country supports different mainstream payment methods, which puts higher requirements on the types of payment methods they aggregate in different countries.Alchemy Pay provides one-stop payment-related solutions.
Recently, Alchemy Pay invested in LaPay UK Ltd, obtaining a license to authorized payment agency regulated by the FCA.The company also partnered with Hong Kong Victory Securities to provide virtual asset trading and advisory services, especially for new Bitcoin and Ethereum spot ETFs.It can be seen that Alchemy Pay is more able to respond to market hot spots to provide corresponding services for expansion.
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Financing background: Alchemy Pay completed a $10 million financing with a valuation of US$400 million, with DWF Labs participating.
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Alchemy Pay’s business:
a. Subsidies and withdrawals of fiat and cryptocurrencies:
Provides channels for deposits and withdrawals and purchases of cryptocurrencies, and currently sold cryptocurrencies can be transferred to bank accounts in over 50 fiat currencies.Compared with Moonpay, which is more popular in the European and American markets, Alchemy Pay needs to integrate more payment channels in Southeast Asia and Latin America, where e-wallet payment is more popular, to explore businesses in developing countries more actively and improve user experience.B Customer business mainly integrates API for Dapp to realize deposits and withdrawals.
b. Payment gateway:
Enterprise-level payment gateway: Alchempy Pay provides online payment and banking solutions within the regulatory framework, allowing traditional businesses and Web3 businesses to manage multiple fiat accounts on the platform and facilitate conversion between fiat and cryptocurrencies.The payer and the recipient’s users can choose to use cryptocurrency/fiat currency as a means of payment.At the same time, Alchemy Pay also provides customized cryptocurrency collection services for large enterprises.
Source: @Alchemy Pay
Personal payment:Pay for all popular global and local payment methods.Including debit cards, credit cards, bank transfers, mobile wallets, etc.
Source: @Alchemy Pay
c. Crypto card issuance technology solution:
Alchemy Pay virtual card is a Mastercard pre-dumping card, and users can directly recharge US dollars into the issuer’s virtual card using a variety of cryptocurrencies.
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Currently supported currencies: USDT, USDC, ETH, BTC, and merchant platform tokens
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Supported networks: Trc20, Bep20, Erc20, Sol, Bitcoin, Polygon
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Currently supported cards BIN: 558068 (Mastercard), 531847 (Mastercard), 404038 (Visa card)
Source: @Alchemy Pay
Cooperation model:The card issuer cooperates with Alchemy Pay, which generates customized branded credit cards for merchants.It supports users to directly recharge USD amounts of USDT and platform coins for consumption, and can instantly exchange the remaining amount to a cryptocurrency wallet.
Use scenarios:It can be consumed on all online platforms that support Mastercard consumption (such as Amazon, eBay, etc.), and can be linked with Apple Pay to meet offline store payment scenarios.
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Alchemy Pay’s business model
￮ The transaction fee for individual and corporate deposits and withdrawals, the exchange rate difference between fiat currency and cryptocurrency exchange
￮ Integration Service Fee for APIs provided to entities and Web3 enterprises
￮ Card issuing technical service fee
￮ Profit of platform tokens: $ACH
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Project evaluation
In 2024, in terms of business, Alchemy Pay will mainly strengthen the promotion of deposit and exit services, crypto card services, launch innovative Web3 bank accounts, and obtain necessary regulatory licensing.
In terms of license acquisition, Alchemy Pay is expected to submit and obtain more than 20 licenses worldwide this year to launch a horizontal and horizontal business expansion in its geographical scope and business depth.Alchemy Pay gradually expanded from the initial Southeast Asia region to Europe.Currently, I have applied for licenses in Singapore, Hong Kong, the United States, the United Kingdom, South Korea, Indonesia, Australia and other places, and are seeking compliance certification in more regions through acquisitions or applications.
Therefore, for payment service providers, the relaxation of global regulation, the gradual progress of BTC to compliant, and the project party’s own active acquisition of different business licenses in different regions are very favorable and important links.Once the payment service provider obtains a license in the early stage, it opens the user portal of a region, making it easier to obtain the most original and extensive B-side resources in the region (not only can it be a business, but also can provide services to banks) and C-sideWith more resources and accumulation, it is easier to cooperate with more traditional industries and project parties that require on-chain transactions, and develop more forms of payment derivatives based on resource and user accumulation.Serve.
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Token Economics
Source: @Alchemy Pay
Token usage:
Alchemy Pay’s token $ACH is a practical token that has related uses such as payment of handling fees, corporate network fees, participation in Defi services, governance, etc.
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Payment fee:Users can enjoy fee discounts when paying for transactions using $ACH, and users can also receive rebates, discounts or other forms of rewards through payment network users.
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Enterprise Payment Network:Businesses can receive corporate transaction rewards based on their network size and transaction volume.
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DeFi Rewards:DeFi participants can receive rewards through staking and other DeFi services
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Governance:ACH holders can obtain voting rights for key business decisions and agreement changes based on their holdings; ACH token holdings can be used to promote non-government voting scenarios such as polls and promotions
Token Economics Evaluation:
We can see from the economic tokenology chart that the token has released about 77.7% of the total amount. Although there is no token release speed chart, according to the token allocation chart, we found the seed wheel, Backers and IEO partsAll have been released, which shows that the private equity round institutions (18%) may concentrate on holding very low-priced chips; at the same time, 40% of the tokens of early participants were allocated through payment mining, which isA double-edged sword, a high proportion will encourage participants to join, and may also cause certain selling pressure in the future.
4.5 Project 5: Card issuer Bit.Store
Bit.Store is a crypto payment card infrastructure solution.In the early days, Bit.Store was mainly a cryptocurrency exchange platform for the Southeast Asian market. It can be understood that they connected with many large centralized exchanges to buy and sell tokens on the platform.Not long ago, Bit.Store launched crypto payment cards, including virtual cards (USD standard denominated) and physical cards (Euro standard denominated). These cards are powered by Mastercard or Visa, and the payment technology service provider is Alchemy.
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license: Currently holds Hong Kong MSO license; US MSB license; European EMI license; Canadian MSB license; Indonesian trade license/South American trade license and other licenses.Its payment technology service provider Alchemy Pay also holds business licenses in multiple places, which can help it conduct payment business in many places.Furthermore, Alchemy Pay acquired 15% of Bit.Store’s main goal is to “check out the gaps and fill in the gaps”, and to acquire a “shared license”, expand the original accumulation of Alchemy Pay in Southeast Asia in North America, Europe, South America and other regions.Payment business.
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Bit.Store physical card & virtual card:Many card dealers have launched more virtual cards, and their highlight is that physical cards can be withdrawn from offline ATMs.
Source: @Bit.Store
In the Bit.Store case, we can see that he develops his business model by earning transaction fees, card fees, exchange rate differences, etc. The advantage is that in the direction of Web2 payment channels, he relies on multiple types and multiple types.Regional license, his physical card is connected to the widest traditional online payment channels (Apple Pay, Paypal, etc.), and his offline payment has achieved physical card cash withdrawal services that card dealers cannot do; in the direction of Web3, heNot only does it rely on large exchanges and custody platforms to provide them with sufficient cryptocurrency liquidity, it also actively cooperates with project parties to launch joint cards for different projects through hot narratives.
4.6 Project 6: Payment Network Technology Provider Ripple
Rippl is a fintech enterprise whose innovative blockchain protocol, Ripple, aims to allow banks and financial institutions to trade various assets quickly and at low cost around the world by building a decentralized ledger, Ripple Net.Solve the challenges traditional banking systems face when dealing with global transactions.Ripple Net is a distributed ledger that provides transaction transparency, immutability and instant settlement.Its token is $XRP.
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Why Ripple Net: The problem of traditional banks dealing with cross-border transactions
In the traditional banking system, each bank has its own internal ledger, recording the creditor-debtor relationship with its customers.Transfers between customers within the same bank are relatively simple and fast, but transfers between different banks become complicated and need to be completed through trust relationships or third-party intermediaries, which leads to slow transaction speed, high cost and prone to errors.
Example: Suppose Client A deposits US$100 in Bank A in the United States and wants to transfer US$50 to Client B of Bank B in Indonesia.In a traditional banking system, the transaction may need to be completed through multiple intermediate banks, involving high handling fees and a few days of settlement time.Through the Ripple ledger, Bank A of the United States can directly issue a loan note representing US$50 on the Ripple network, and transfer the funds to Bank B of Indonesia quickly, at low cost and in a timely manner through the Ripple ledger network.
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Solutions provided based on Ripple Net ledger innovation technology
a. xCurrent:xCurrent allows real-time messages between banks to confirm payment details and track payment progress, enabling end-to-end instant settlement.
b. xRapid:xRapid is like a “liquidity assistant” for banks and payment providers.When it is necessary to quickly convert funds between different currencies, xRapid helps them obtain target currencies at a lower cost and extremely fast speed.It reduces the need to set up currency accounts in advance by leveraging the liquidity of XRP.
c. xVia:xVia handles the rest of the complex process.
In short, xCurrent is the bridge of interbank communication, xRapid is the accelerator of liquidity, and xVia is the interface that simplifies the payment process.Together, these three products form Ripple’s payment ecosystem, aiming to make global payments fewer payment middlemen, faster payment speeds, lower payment costs, and more secure and transparent decentralized networks based on.Currently, more than 100 banks, payment providers, exchanges and enterprises around the world have joined Ripple Net, using real-time remittances and international P2P payments, electronic invoices, global currency accounts, real-time cash pools and other services.
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Token Economics:
XRP’s supply is fixed at 100 billion tokens, 20% owned by the token founder and 80% owned by Ripple itself, i.e. 80 billion tokens.The 25 billion XRP initially allocated by Ripple was distributed and sold, and an additional 55 billion XRP was deposited into 55 smart contract custody accounts, each containing 1 billion XRP tokens.
These contracts systematically distribute 1 billion tokens to the market every month, with a total cycle of 55 months.At the start of the next unlock, the unused XRP will be put back to the escrow account, and when each transaction is made on the XRPL, some XRP will be used as transaction fees and destroyed, creating deflationary pressure, but because the fees themselves areLow, so the pressure to deflation is very small.
Source: TokenInsight
Token usage:
a. Wallet reserve:
In the Ripple network, each account needs to hold a certain amount of XRP as a “wallet reserve”.This is to prevent network congestion and spam transactions and ensure the smooth operation of the network.The amount of wallet reserves is calculated based on the degree of activity of the account. For example, the more IOUs (that is, debt vouchers representing other currencies) the account holds, the more wallet reserves it needs.
b. Trust line:
The trust line is a debt relationship established between accounts in the Ripple network, allowing one account to borrow assets (such as US dollars, euros, etc.) from another account.This borrowed asset exists in the form of IOU in the Ripple network.The setting of a trust line requires both parties to agree and is usually not related to XRP, but XRP can be used as an asset in the trust line.
c. Transaction fees:
When trading in the Ripple network, transaction fees are required, which are paid in the form of XRP.Transaction fees are used to maintain the operation of the network, including verification and recording of transactions.The transaction fees on the Ripple network are relatively low, usually less than 1 cent per transaction, and transactions are very fast, with an average trading time of about 3 to 5 seconds.A portion of the transaction fee will destroy the tokens equally.
evaluate:
Neither the economic token allocation model nor the release speed chart of the project are very healthy.First of all, founders account for a very large proportion of the token release chart, about 20%.Secondly, a large part of the total supply is concentrated in the top 100 wallets, with very high concentration.
According to the economic token release chart, the token release speed is very fast, the changes and floating are large, and the deflation mechanism of burning transaction fees is not obvious.Another factor that affects XRP prices is its ongoing legal dispute with the SEC.The lawsuit alleges that Ripple Labs conducts an unregistered securities offering, posing a huge uncertainty and risk to investors.
Despite some rulings that favor Ripple, the pending state of the case continues to affect investor sentiment and market FUD; when its legal risks are resolved, the actual purpose of the token is operated, and there are better ways to solve it.Only with an effective token deflation mechanism can the value of its tokens be better realized.
5. Regulation and compliance
5.1 United States
The regulation of cryptocurrency in the United States is composed of the federal level Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) and state regulations.The United States has very strict requirements on AML, KYC and investor protection. It has frequently taken legal action against cryptocurrency companies in recent years. Although it faces the complexity of federal and state regulation, cryptocurrencies are gradually clarifying their regulation with the approval of ETFs.The path, towards the center of narrative.
5.2 Europe
The EU has achieved unified supervision of 27 member states through the Crypto Assets Supervision Act (MiCA) on the Market. All Crypto Asset Service Providers (CASPs) must obtain licenses stipulated by MiCA and can be used to “passport mechanism” across the EU.Operations directly form a large market for crypto assets that radiate to 27 countries and 450 million EU population.
Since you can operate in the entire EU by registering a VASP license in an EU member state, Lithuania, a region with the loosest cryptocurrency regulatory policy in the EU, has obtained registrations from many centralized exchanges and payment institutions.
5.3 Hong Kong
Hong Kong’s cryptocurrency regulation is jointly responsible by the Securities and Futures Commission and the Hong Kong Monetary Authority. The main types of licenses in Hong Kong include:
a. Virtual Asset Service Provider (VASP) license:
VASP license is mainly suitable for virtual asset trading platforms.
Case:On May 26, 2024, OKX withdrew its application for VASP license in Hong Kong and will stop providing centralized virtual asset trading services to Hong Kong users.
b. Virtual Asset Trading Platform (VATP) License:
These platforms usually allow users to buy, sell, exchange virtual assets and other transaction services. Compared with VASP licenses, the functions of this license are more concentrated on the functions of the transaction itself (transaction matching and market manufacturing, order types, advanced trading tools, etc.).
Case:Gate.HK and OKX withdrew their applications for the license this year, and the withdrawal of these exchanges reflects the exchange’s decision to deal with Hong Kong’s strict regulatory environment and to adjust its business strategy.
c. Stablecoin issuance license:
Regulated by the Hong Kong Monetary Authority, stablecoin issuers must hold reserve assets of equivalent value to their par value and provide reserve reports regularly.
5.4 Dubai
Dubai has attracted international exchanges, blockchain technology companies and businesses that provide payment services through its financial free zones and tax-free policies.The local cryptocurrency supervision is managed by the Virtual Assets Supervision and the Dubai Financial Services Agency respectively. The licenses mainly include VASP licenses, investment tokens and cryptocurrency licenses, payment service licenses, etc.
a. Virtual Asset Service Provider (VASP) License:
It is suitable for companies that provide virtual asset-related services. Its business mainly involves transactions, custody, payments, lending, etc., including secure custody of customer assets, internal control, AML and KYC compliance, periodic reporting, etc.
Case:Binance is licensed to offer a variety of services in Dubai including spot trading, margin trading and pledged products.
b. Invest in tokens and crypto token licenses:
Regulated by DFSA, it covers the issuance and transaction of investment tokens and crypto tokens to ensure compliance and transparency.
Case:Ripple’s $XRP is approved for use in cryptocurrency services at Dubai International Financial Centre.
c. Payment and remittance service license:
Mainly used for the reception, transmission or transfer of virtual assets.
6. Industry barriers and innovation trends
On different tracks of the crypto payment industry, the competitiveness of advantageous companies is reflected in the following aspects:
a. Deposit and withdrawal services:
In the field of deposit and withdrawal services of cryptocurrencies, especially with the strictness of withdrawal compliance and the improvement of anti-money laundering standards, the acquisition of regional cryptocurrency licenses has become particularly critical.For deposit and withdrawal service providers, it is not only necessary to find crypto-friendly cooperative banks and stable liquidity providers, but it is even more difficult to find banks such as Silvergate Bank after bankruptcy, but also to build a strong compliance system.
Given the regional characteristics of license acquisition, companies that obtain local operating qualifications faster through strategic cooperation, companies that already have a payment license foundation, and companies that establish in-depth cooperative relationships with crypto-friendly banks are often able to show stronger competition.Advantages.In addition, service providers who entered the market early also have the opportunity to enjoy the dividends brought by the market’s first-mover advantage.
b. Purchase goods or services in the real economy using cryptocurrency:
The competitiveness of businesses that use cryptocurrencies to purchase goods or services in the real economy is mainly reflected in whether the company has a strong brand influence, a wide network of payment partners, and in-depth integration with merchants and payment platforms.Companies with a broad user base, especially those that have established brands in the traditional payment field, such as Visa and Mastercard, are more likely to win non-cryptocurrency users with strong brand endorsement, technical processing capabilities and large-scale transaction processing capabilities.Trust.
However, in the early stages of cryptocurrency payments, more of the crypto users who use this payment method are Web3 native to encrypted users.Therefore, increasing the awareness and trust of these users through education and marketing activities is crucial to leveraging a large non-encrypted user base.This is also an opportunity for native crypto payment companies.
c. On-chain payment
The competitiveness of on-chain payments mainly comes from innovative blockchain technology and its applications.For example, on-chain identity aggregation technology enables users to freely verify and use identities between different platforms by improving user privacy protection and security.Fund flow technology realizes real-time flow of funds, providing an innovative payment model for demand-driven and time-sensitive services.
Through a simplified payment process, the NFT Checkout service lowers the threshold for users to enter the NFT market and further promotes the popularization of crypto payments.Therefore, native on-chain payment companies focus more on improving payment efficiency, reducing on-chain transaction costs, and enhancing user-friendly functional innovation.
7. Risks and Challenges
a. A complex global regulatory environment
Cryptocurrency regulations vary significantly in different countries, and companies need to comply with legal requirements in different regions.Regulations in the cryptocurrency field are still evolving rapidly, including new tax policies, anti-money laundering regulations and market behavior rules, the difficulty and slowness of license application, etc., which increases the difficulty and cost of corporate compliance.For example, the EU’s MiCA regulations and the US federal and state regulations have different compliance requirements for enterprises and require a large amount of compliance resources.
b. Macroeconomic impact risks, systemic risks, and liquidity risks
￮ Macroeconomic impact
In some emerging markets and low-income regions, widespread adoption of cryptocurrencies may undermine the effectiveness of monetary policy, which may lead to capital outflows and currency fluctuations in the local banking system, which in turn affects the stability of the financial system.
￮ Cybersecurity and technological innovation
Cryptocurrency trading platforms and wallets are at risk of cyberattacks.The complexity of blockchain technology and the irreversibility of transaction processing increase the difficulty of technical management.Once an error or hacker attack occurs, it is very difficult to recover the loss.Data security of block networks still requires a lot of resources and advanced technology to be invested.
￮ Market volatility and liquidity risks
After the bankruptcy of exchanges such as FTX, crypto-friendly bank Silvergate Bank suffered a serious outflow of funds due to banks’ over-reliance on cryptocurrency deposits, most of which are uninsured and have no interest.This over-concentration and rapid expansion of business models brings multi-level financial risks.The collapse of the FTX exchange has triggered a crisis of trust in the entire cryptocurrency, and a large amount of funds have been withdrawn from cryptocurrency-related financial institutions.However, with the passage of BTC halving and the passage of spot ETFs, more regulators and funds are pouring into the market, which will help alleviate market volatility.
c. Fierce industry competition and financing
For traditional payment companies, user education will be a big problem. Many users lack the awareness of cryptocurrencies and lack the necessary knowledge to use cryptocurrency payment services securely.For Web3 native enterprises, we need to make good use of their own community foundation and native encrypted users with low education costs, and constantly use innovative technologies, interesting narratives, and good services to maintain market competitiveness. If we can win a good reputation, we can continue to use innovative technologies, interesting narratives, and good services to maintain market competitiveness.Investment in institutions will naturally bring more attention and traffic.
8. Summary
In recent years, traditional payments have been deploying Web3 payments and launched products such as stablecoins and peer-to-peer transaction infrastructure.The driving forces behind this trend include the high profit potential of the cryptocurrency industry, the fierce competition and high operating costs of traditional payments businesses, and the payment advantages brought by new technologies.
Web3 payment scenarios are diverse, and individuals can implement fiat and cryptocurrency deposit and withdrawal services through MoonPay and Alchemy Pay, to global fast and low-cost transactions that financial institutions can conduct on RippleNet, and to low-cost transactions that everyone can participate in,Multi-style on-chain payments.These innovations not only improve the transparency and efficiency of payments, but also meet users’ needs for payment diversity and cross-border transactions.
Looking ahead, the popularity of crypto payments will further increase as more countries begin to regulate and legalize cryptocurrency payments.The development of blockchain technology and applications will further promote the convenience, efficiency and security of Web3 payment services.
As users and enterprises increase their acceptance of crypto payments, we can foresee that Web3 payments will become part of daily payment methods as the crypto industry develops, driving the global financial system to a more decentralized, transparent and efficient direction.
