As the stable currency based on Ethereum has grown, Ethereum is increasingly becoming a legal currency payment platform. Most of Tether's $4 billion USDT has been transferred from the Omni agreement to Ethereum. In addition, several of the largest stable currencies are based on ERC-20, including PAX, USDC, etc. It also includes Dai, which is the first decentralized and unreviewable number of dollars. The stable currency is still in its infancy, but the quarterly trading volume of the stable currency may have exceeded the mobile payment service Venmo of PayPal.
It is only a matter of time before the “legal currency on the blockchain” becomes the dominant force in payment. Yes, these new products are also very clumsy, they use a slow network and there are problems with capacity expansion. However, all payment methods were the same at an early stage. What matters is the long-term potential of the product. Stabilizing coins can provide more services than other payment methods, because open networks always outperform restricted channels.
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The first is the diversity of choices. Ethereum users who want to pay through stable currency have many choices and choose to pay through a wallet of their choice. As wallet service providers continue to increase, competition keeps payment prices down (near zero) and the quality of service continues to increase. On the other hand, PayPal has only one wallet and one payment channel.
Second, the cost. Users pay $1,000 for PayPal and merchants pay $30 for transaction fees. With the same transaction through the stable currency on Ethereum, the sender of the transaction pays less than 30 cents. For all traditional gateway business models (including Stripe, Square, Adyen, etc.), this difference exists. Such fees charged by payment service providers devour a large portion of the profits of the retail industry. Stabilizing coins represent a revolutionary solution .
Traditional payment channels charge a portion of the payment amount, and stable currency also requires a fixed fee to protect the network. However, the payment of $50,000 in Ethereum is the same as the cost of $5, which is a few cents; the payment of $50,000 through PayPal, the fee may be one month's rent. One of the biggest impacts of stable currency on the payment industry will be the transition from a percentage fee based on the payment amount to a fixed fee based on the degree of network congestion.
Traditional payment providers (and their investors) should reap the rewards for their own payment channel services. But we call it a payment gateway for a reason. Gateways are restrictive and expensive for users, which is why gateways are very profitable for their owners (until they are subverted by new technology). There was a time when communication gateways (also known as telephone companies) were among the most profitable companies because they charged fees in minutes (and the number of text messages). These have become history because the Internet is coming. The percentage fee model based on the payment amount will eventually be the same, because the blockchain is coming.
The current high profit margin of the payment industry is an opportunity to stabilize the currency, and all mainstream stable currencies are basically based on Ethereum. In view of this, the author believes that investors overestimate the value of the payment provider's equity, and underestimate the value of ETH. The total market capitalization of all traditional payment providers is currently approximately $1 trillion. If Ethereum, arguably the fastest growing legal currency payment platform in the world, accounts for only 10% of the market, it will be worth $100 billion, which means that the price of ETH is about $1,000.
Indeed, traditional payment companies do more than just money transfers, some of which are great. But Ethereum can do more. By becoming a programmable platform, it can theoretically be better and cheaper. The issuance of rewards and coupons using traditional payment channels is complicated and expensive because these services require a separate system. In Ethereum, you can do this with a few lines of smart contract code. However, a more convincing reason for Ethereum as the dominant payment platform is Fluidity .
As of the time you read this article, I may have sent a $10,000 stable currency to your preferred wallet. Then, you may have taken the funds and converted them to other cryptocurrencies using a decentralized exchange, then sent it to the Compound currency market and may have already earned interest. You may have cashed out the interest and then sent it to another transaction so buy some ETH, use these ETHs to participate in the election quiz, buy insurance or buy some tokenized real estate. All processes are on the same network, all in the same wallet, and the fee for each operation is a few cents.
If you use Visa, PayPal, ACH, Transferwise, Square Cash, or any combination of them to copy the process, you may have to pay 10 times more than Ethereum, even if you wait a week, you may not be able to complete it. One tenth of the entire process. The real promise of Ethereum as a payment platform is that it can abstract payments into tiny (cheap) data transfers that users can connect to a new, native digital and super-liquid financial system. If Ethereum’s value as a payment platform is not just a fraction of the total value of the industry, what about Ethereum as a global new value agreement?