Author: dpycm.eth

Compilation: DeepTide TechFlow

In the past decade, Cryptocurrency has undergone rapid development, evolving from an initial niche technology experiment to a mainstream financial tool. Web3 payment systems, based on Blockchain technology, ensure transparency, security, and immutability of transactions. These systems are increasingly integrated into e-commerce platforms, point-of-sale systems, and peer-to-peer payment applications, making the use of Cryptocurrency more convenient in daily life.

By 2023, the Web3 payment market is valued at $1.2 billion, and it is expected to continue rising at a compound rise rate of over 15% from 2024 to 2032. Web3 payments are expected to become a key pillar of the digital economy, bringing new opportunities and challenges to the global financial ecosystem, similar to traditional payment systems.

Current Web3 Payment Infrastructure

Web3 payment infrastructure

The existing Web3 payment infrastructure greatly simplifies the traditional payment process. Typically, payment transactions involve only three parties: the payer, the payee, and the blockchain (as a mediator). Since the blockchain itself does not have consciousness, it can be said that only two parties are actually needed, which makes transactions more advantageous in terms of speed and cost. All Web3 payment protocols are based on the same infrastructure, and the specific implementation may vary slightly depending on the requirements of protocol conversion.

Sphere Pay and Loopcrypto.xyz are two unique payment infrastructure protocols that allow businesses to integrate Web3 payment functionality, and we will explore their features in detail later.

What is PayFi?

With the integration of payments and Decentralization finance (DeFi), PayFi has emerged, which is a financial market around the time value of money. PayFi provides a way to meet current needs with future money, which is something that TradFi cannot achieve.

PayFi includes multiple forms of payment:

1. Pay Token, such as TOKEN representing the time value of US Treasury tokenization or income-generating stablecoin;
2. Providing financing for Real World Assets (RWAs) through Decentralized Finance lending, achieving on-chain revenue in real payment scenarios.
3. A new Web3 payment system seamlessly integrated with Decentralized Finance protocol;
4. Moving traditional payment logic to Blockon-chain, aiming to build a comprehensive Web3 payment framework.

One typical case of PayFi is Ondo Finance. This protocol aims to make institutional-level financial products accessible to more people by tokenizing US Treasury bonds. Ondo Finance brings low-risk, stable-yield, and scalable financial products such as US Treasury bonds and cryptocurrency market funds into the blockchain, allowing Stable Coin holders to earn profits from their assets.

Ondo Finance offers two products: OUSG and USDY. OUSG is a tokenization of US Treasury bond fund, while USDY is an income-generating stablecoin backed by short-term US Treasury bonds. As of August 23, 2024, the Total Value Locked of these two products has reached 556 million USD.

Through USDY, holders can not only price in USD, but also earn profits. Therefore, Ondo adds practical application value to the payment token, further promoting the development of PayFi in Web3.

Interesting Payment Innovation

This section will introduce some interesting or little-known innovations in the payment field, without involving encryption cards and up-and-down conversion functions.

Karrier One ( Pay x DePIN)

The combination of payment and DePIN has reasonable applications in the telecommunications network. Karrier One is an operator-level Decentralization network that integrates payment and DePIN functions. The Karrier One network consists of three modules: telecommunications, blockchain, and Karrier numbering system (KNS). They work with global telecommunications providers to provide seamless communication coverage worldwide. The network is managed by Karrier DAO, and Token holders can participate in governance decisions.

Through KNS, users can obtain a Web3 Wallet directly associated with their phone number. This integration enables users to participate in Decentralized Finance activities, send and receive Cryptocurrency, and achieve smooth payment processes, effectively combining PayFi and DePIN. With 7.1 billion mobile phone users worldwide, this provides enormous potential for the rise of the Web3 telecommunications network.

Huma Finance

Huma Finance is an income-based lending protocol. It allows borrowers to collateralize future income for lending by matching with global on-chain investors. The protocol has common credit facilities and is equipped with Decentralization signal processors and assessment agents, which are important infrastructure for integrating income sources, conducting credit assessment, and continuous Risk Management.

As of August 23, 2024, Huma has raised nearly $9 billion, of which $8.83 billion has been successfully repaid, and the current credit default rate is 0%.

Sphere Pay

Sphere is a payment API designed specifically for Digital Money. By providing a one-stop payment experience, Sphere connects ordinary users with stablecoins, accelerating the development of Web3 payment systems.

Sphere provides merchants with customizable or preset front-end and user experiences, making it easy for them to flexibly apply Sphere Pay. In addition, Sphere offers multiple pricing models to meet merchants' different needs for products or services. Sphere does not charge a software usage fee, but instead charges a fixed fee of 0.3% per transaction, making the software freely accessible to all users. This makes Sphere an ideal choice for small businesses, especially those with low volume or low startup costs.

Loopcrypto.xyz

Loop is a Web3 payment infrastructure that helps companies organize or automate collections and payments. With automated payment capabilities, Loop improves operational efficiency and reduces customer churn. The platform supports all ERC-20 Tokens and offers the option to settle in Cryptocurrency or Fiat Currency, reducing the complexity for enterprises in fund conversion.

Loop provides plug-and-play software that minimizes resistance for businesses during implementation. It also integrates with top platforms like Stripe, Zapier, Xero, allowing business owners to seamlessly integrate Loop into their existing financial management systems. As a result, businesses using traditional invoicing systems can easily add Crypto Assets as an additional payment option for their customers without the need for large-scale system modifications.

Orbita

Orbita is a Decentralization L1 payment protocol based on Cosmos, which is still under development and has not yet launched a test network. The team may still be writing documents and White Paper, and these materials have not been made public yet.

The core functions of Orbita will include direct irreversible payments, reversible payments, Decentralization subscription, and e-commerce integration. As an L1 protocol focused on payments, this is a new direction in the payment industry that may bring interesting changes.

Market Data and Updates

Stablecoin总Market Cap

Stablecoin: Transfer Amount

With the prosperity of Cryptocurrency over the past decade, Stable Coin has also developed rapidly. The total market capitalization of Stable Coin has skyrocketed from $20 million in 2017 to $170 billion in 2024. By 2024, the total transfer volume of Stable Coin reached a peak of 60 billion. With the continuous rise in transfer volume, Stable Coin is becoming increasingly common in payments and other applications. As Stable Coin is widely accepted, the demand for payment systems will also increase.

Major stablecoin providers are also actively expanding their market. Tether recently announced the launch of a dirham-backed stablecoin in the UAE, aiming to become the preferred digital payment token in the UAE. Circle's CEO Jeremy Allaire also stated that they plan to develop an instant payment method using USDC on the iPhone. This plan was proposed after Apple allowed third-party developers to use the iPhone secure payment chip. This will make using USDC for payments as simple and smooth as using traditional banks and credit cards.

Since entering the Stable Coin market in August 2023, Paypal has been actively promoting PYUSD. After about a year of online, PYUSD has risen to become the sixth largest Stable Coin, surpassing veteran coins such as FRAX and BUSD. Paypal's expansion on Solana and the incentive program with Kamino have also become strong attractions. In addition, Paypal recently partnered with Anchorage Digital to provide incentives to institutions holding PYUSD, further attracting capital inflows.

Thinking: The Impact of Web3 Payments

One of the major advantages of Web3 is the ability to achieve secure, low-cost, and almost instant global transactions. Although the Web3 industry is still in its early stages, institutions, businesses, and individuals have already started using blockchain for payments.

However, if Web3 payments become mainstream, how will banks react when intermediary costs are reduced? In order to compete for market share, we see banks starting to build their own private blockchains, but even so, their income will still be much lower than the current transaction fees. Resistance can be foreseen, and the popularization of the retail end may still take some time. Obviously, the opacity and centralization of private blockchains will continue the characteristics of traditional banks.

In addition, Web3 payments are particularly advantageous in global transactions, especially in import and export, but have little impact on the needs of ordinary local people. If there is little difference between paying with Cryptocurrency and traditional bank cards at my local grocery store, why should I choose Cryptocurrency? The appeal of self-management? For most people, such minimal benefits are not attractive. Therefore, the conversion cost may hinder the adoption by ordinary users in the short term.

I believe that with the development of Web3 and the payment market, the Stable Coin market will continue to rise in the next decade. Innovations in telecommunications networks such as Karrier One and future revenue financing such as Huma Finance will undoubtedly promote the emergence of more innovations and promote the popularization of the market. Therefore, if there are appropriate catalysts such as regulatory green lights, the prosperity of Web3 payments will be inevitable. In fact, as we have seen in the past few years, the market may continue to rise with or without regulatory clarity. I remain optimistic and look forward to Web3 payments becoming the natural choice without further questioning.