To better understand how the crypto works, BNB Chain Research The team draws a map of the web3 payments ecosystem
Setting aside both philosophical issues and monetary policy independence of central banks and intermediaries of all kinds, Bitcoin was born as a network of payments between individuals. Including pre-Bitcoin experiments such as DigiCash and BitGold, payments have been a cornerstone of cryptocurrency since its inception, but its use is growing, but not yet on a large scale. Aside from the apparent reluctance of some individuals to use cryptocurrencies, there are certain technical barriers that impede adoption as a primary means of payment.
Today, the current cryptocurrency landscape is very different than it was at the end of the first decade of 2000 and has evolved by leaps and bounds, but some of the limitations inherent in permissionless P2P networks still exist. , which limits the possibility of payment in virtual currency. On a daily basis.
web3 payments overview
Before attempting any restrictions or modifications, we need to review some concepts to easily map out the web3 payment ecosystem (powered by blockchain technology).
A payment can be simply defined as an exchange of assets between two individuals generated by an agreed transaction. What are the reference assets for web3 payments? Where and how are those assets stored? Web3 payment transactions involve digital account units issued on a permissionless, decentralized blockchain such as the BNB chain. may include cryptocurrencies that are
Due to the high volatility of cryptocurrencies, they may not be particularly suitable for large payments. Stablecoins were created to avoid this volatility. A stable is a value derived from fiat currency in such a way that it maintains 1:1 equivalence with the underlying asset (which is deposited in the stablecoin issuer’s account in the form of cash or cash equivalents). It is a cryptocurrency that Simply put, 1 BUSD is equivalent to 1 USD and is much more ideal for use as a unit of account. Cryptocurrencies are stored in digital wallets. This is the starting and ending point of the payment transaction.
In recent years, several centralized entities have recognized the advantages that blockchain technology offers when it comes to speed, traceability, settlement, and especially the endless possibilities offered by programmable money. Financial institutions have already launched blockchains with their own monetary policies.
Governments, especially their economic arm, the central bank, are also looking to implement central bank-issued digital currencies using blockchain technology.
It is considered a CBDC (Central Bank Digital Currency), not a virtual currency. Note also that some CBDC experiments did not use DLT.
Both CBDCs and cryptocurrencies issued by centralized entities do not share the differentiated characteristics of the general concept of cryptocurrencies. Be it permissionless, decentralized issuance or trustless. However, blockchain performance has potential bottlenecks.
The blockchain trilemma for payments:
Blockchains often impose trade-offs that prevent them from achieving all three aspects:
Decentralization: Create a trustless blockchain system with no central point of failure.
Scalable: The system’s ability to process transactions per second.
Secure: A system’s ability to defend against attacks, bugs, and other malicious attacks.
Blockchain infrastructure and performance
Transaction latency and finality, along with a smart and convenient user experience, are extremely important for payment systems. However, the current system allows a limited throughput of up to 5k tps (best case) while Visa can handle his 24k tps.
This created Layer 2 and other scaling techniques that separate computation and scalability functions, where transactions are batched and final settlement is made at Layer 1.
Bitcoin’s Lightning Network is specifically designed to meet the requirements as a payment infrastructure that users can use to pay for everyday activities such as buying coffee or paying for groceries. However, the mainstream adoption of cryptocurrencies for payments is a pressing issue.
The BNB chain is EVM compatible and allows a block gas cap of 120M. So, the amount of gas that can be burned in a block of EVM chain is 30M. The BNB chain is the most optimized EVM chain that serves as the foundation for payments. The cost of gas is relatively high compared to other chains, but in order to provide a better user experience, BNB chain deploys zk-rollup, zkBNB and sidechain infrastructure for application-specific blockchains. I’m here. This greatly reduces gas costs and improves overall performance.
BNB chain payment ecosystem
One of the most repeated criticisms of cryptocurrencies is that it is impossible to use cryptocurrencies as a means of payment beyond the closed world of blockchain. BNB has several players refuting that statement.
Okse wallet users can use digital debit cards issued by Visa to make cryptocurrency payments in hundreds of countries and businesses. Everything is permissionless and done through smart contracts. Users simply send funds from their wallet to a debit card agreement, authorize it, buy groceries and pay. Projects like PIP are also focused on her native web3 users. Also, with social her platform payments, for example rewarding her creators for favorite content or allowing payments to web3 ids to send payments directly to friends using only their BNB username can do. Streaming projects like Zebec streamline the payment of services and payroll for crypto-native companies, enabling a company presence fully powered by digital assets.
Payments is still a nascent category of cryptocurrency, and it is not yet clearly defined what it will look like in a few years, or what projects will drive mass adoption. We believe that will play an important role in the adoption of cryptocurrencies and therefore support all related projects that are building in this direction.
This editorial originally appeared in the Crypto Payments and Web 3.0 Report for Banks, Merchants and PSPs. The first edition of our report aims to provide a go-to payment resource of crypto terms and concepts for those interested in understanding the basics of crypto payments and their long-term implications. In addition, we will share practical examples of crypto-enabled e-commerce and banking services and showcase the latest developments in the regulatory environment. It also reveals which of the most innovative companies in the space are building crypto rails.
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