Greetings. Uh, so as mentioned, I'll talk a little bit about payments, specifically on-chain payments, and what it takes for them to succeed and compete with traditional money rails. Why are on-chain payments interesting? Do you know what the goal is here? So the first big part is big part is to make them available without permission, globally.
We have pretty good, uh, services in the West, but, uh, you know, they're unevenly distributed. The fact that you have instant settlements means you don't deal with delays, you don't deal with reconciliation between different, uh, ledgers. You can have a single shared registry, and that allows things to move faster, uh, and combine them. And then, of course, the programmability that comes with open rails, which people can build on top of, put pieces together. And it's really about making money as open as the internet.
And that's why we are here. This is the goal. And how do we achieve it? Because the bar for payments is actually quite high, you know? We like to complain about things, but credit cards are pretty good.
They always work. Uh, it's simple. It's fast. And also, you know, these smart rails are appearing in different countries that allow instant transfers between people. So when we talk about payment levels, this is what we're talking about.
We're talking about UX, where it's extremely simple. I can just touch. I don't need to think about it . It's not difficult. That's fast, isn't it?
I think the wait for payment is a few seconds at most. I...It's a synchronous experience where I want to see if it worked or not. And it really should work every time. And that means several things.
This means that the reliability, you know, the services are going down. Uh the services are going down. Uh , it just has to work every time. But also the fact that I can go to any store. I don't need to worry about what bank this seller uses.
I can go abroad and just keep using my credit card. So, you really just want it to work every time and not have to think about it . So, what stage are we at? I think on- I think on- chain rails are talked about a lot , and they've really come a long way, haven't they long way, haven't they ? We have fast and low-cost blockchains.
We have global stablecoins, such as a mix of regulated, profitable, non- profitable, non- US dollar, there is a lot of competition there. And even on the ramps, you know, it's much improved. So are we ready for on-chain we ready for on-chain payments? Almost. And I think what I'm going to talk to you about is that interoperability is one of the biggest barriers to implementation because there's not just one chain.
Uh, there isn't just one stablecoin. So even within the same USD currency, you have a number of different, uh, well-known stablecoins. Uh, you know, like it or not, a lot of people use Tron USDT, and it's a reality Tron USDT, and it's a reality that if you're a US business US business that wants to pay someone, they might want to get paid in USDT on Tron. You know, this is just the beginning, but we're starting to see other, uh, types of foreign currencies starting to be implemented. It's logical, you know, people would want to get paid in their local currency.
They will not want to use stablecoins in the form of US dollars. People have cryptocurrency, they want to pay with it. But even within a single stablecoin, USDC exists on about 50 different blockchains. And even if you think that's fine, there are a few major blockchains, and those are the only ones that will matter. Different companies will choose different ones.
We have payment blockchains emerging online that will attempt to create payment functions, but there are still a number of applications across different blockchains, each with something special. And then you have geographic regions like Tron and, you know, Binance Smart Chain. I think Celo is quite popular in different places. So, one way or another, we won't be in a world where there's one blockchain and one stablecoin, it's a simple regime. You know simple regime.
You know , you can make payments online on the basis, and, you know, transfer to someone if they want the exact same currency. But the complex reality of the world is that there will be many different chains and many currencies. And once you introduce exchange, things get complicated. So, you know, what we saw earlier about how to make it simple how to make it simple , fast, and make it work every time, becomes much more complicated once you introduce exchange. And we really, I think, need a whole new level of liquidity, you know, for payments.
So, you know, bridges are n't really for payments. They are often slow, they are often expensive. They may not cover all paths. Usually you move between one currency. And bridges should be slow.
You know, as we saw recently, you don't need that kind of baseline that allows an asset to move between chains, you don't want to take any risk here. You don't want to act too quickly because that could have very bad consequences. And similarly, you know, traditional decentralized exchanges (DEX) and economically active platforms (AMM) are more built around trading. So even something like slippage is something we might be used to, but it won't work in a payment scenario where you need an exact amount. And you know, most DEX aggregators, for example, don't support things like exact results.
So there are a few things you need. First, as I mentioned, broad asset support. So it's not just the support for every asset, but the fact that there are 50 versions of USDC. So how can you guarantee that someone who buys that someone who buys any of these currencies and wants any variation on the other side will actually be able to service it? So, a traditional decentralized exchange (DEX) replicates liquidity on each chain.
So there is an ETH-USDC pool on each individual chain. And this fragments liquidity. Also, most decentralized exchanges work with pairs. So, you know, to create an AMM pool, you need to invest both currencies. So, if you need USDC and USDT, and USDC and DAI, you create pools and shard USDC.
So to solve the problem of supporting so many assets that are coming online, you really need to think about new models and solve some of these capital productivity problems capital productivity problems . You also need to figure out how to instantly switch between chains. So, as I mentioned earlier, this does not mean that you need to reduce the number of validators and increase the message rate . I think it comes down to adding a layer on top of the underlying slow, secure layer, where there are things like liquidity pools, or solvers that are willing to take on some finality risk and work faster than the final level of the origin chain, to provide this payment experience on top of the underlying slow layer. And finally, just think about how you can achieve high success?
So high success? So , you know, another example is a new kind of liquidity primitive, which is professional AMMs. So, you have market makers who can offer extremely competitive prices. Great for trading, but if there's any, you know, tension in the market, they're mercenaries. They can immediately remove liquidity.
And again , this can lead to payment failures. So, how can you develop liquidity that is always available? Uh, maybe the spread is a little wider, but in return you get that it always works. So, I really think there needs to be a rethink of liquidity on the network for payment use cases and full support for broad assets. Oops.
But, hmm, but liquidity alone is not enough, is it? So we need better liquidity, but to really get to that level of payments, we also need to build that orchestration layer on top. So, think about how you can route between different sources of liquidity. Sometimes it makes sense to send something through the official, uh, Circle CC CCTP route. Think about how to execute transactions and make sure they arrive every time .
Things like choosing the optimal gas and working with single numbers single numbers . This is probably not something users are going to have to deal with on their own. So how can you do this at scale and make it work on every blockchain and with all the nuances in between, on all the different virtual machines? Even the user interface for making payments, you know, most of us are used to connecting a wallet, but it's a pretty strange experience. Payments don't work like that, you know, when you go into a store, you don't connect your bank account and let the store see your total balance and they decide how to withdraw money.
So, there's a real rethinking of what the UX is going to be like, and I don't know if anyone has used that kind of wallet connectivity on a mobile device, but it's not the most reliable thing. So most reliable thing. So , really, it's worth thinking about things like deposit addresses, where you can give someone an address and they just have to transfer the funds, and how can you make that deposit address work on work on any blockchain and in any currency, and all these nuances, like, it's a ZK blockchain, so the address will be different. We need to solve these components to make it work like a miracle and to make it work every time. I think another interesting component is around pricing guarantees, where people expect stablecoins to be worth a dollar.
But they don't cost a dollar. You know, just recently USDT was trading 10 basis points lower than USDC. And it's just like these are different assets with different assumptions of trust, and they're traded in the market. But the user doesn't care. So how do we solve this?
I think we will see this as long-term users getting a personalized experience interacting with stablecoins. But under the hood, they will float in a certain market, and it is the apps that will subsidize this from above and find ways to abstract it from their users. And so they need to have ways to sponsor it in the same way that a credit card actually costs money, but when you use it in a store, it seems free to you, but the merchant subsidizes it because it increases conversion. And so I think you'll see things like this where stablecoins can allow merchants and apps to maybe make money off- balance sheet, and that allows them to subsidize floating rates between those currencies. So it's a combination of how to make liquidity as efficient as possible and always available, and then layering it on something special, you know, the final stage of how you put it all together .
So, I think, in summary, we're close. Many of the building blocks are already in place. Such as chain rails, stable coin rails, entry and exit ramps. But, I think the bottom line today is that interaction and exchange are some of the most important elements if we really want to get there and have the ability for online payments that will compete and compare to traditional money rails. And we are making progress on that as well.
So, surprise, that's exactly what we're working on. So, if you want to make online payments a reality, contact us. We are currently actively addressing issues of exchange and interaction and thinking a lot about these problems. Thank you.
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