The Future of Encryption Payments: In-Depth Dialogue with the Head of Exchange Payment Business

Cryptocurrency exchanges are the primary platforms for buying and selling cryptocurrencies, where users can trade various cryptocurrencies such as Bitcoin and Ethereum. The core functions of exchanges include asset trading, liquidity provision, custody services, derivatives trading, and currency acceptance. They are the largest participants in the encryption ecosystem and have established a robust infrastructure based on encrypted assets, creating a complete closed loop for value exchange of encrypted assets.

Encryption payment refers to the use of cryptocurrency as a payment method, such as using Bitcoin to purchase physical goods or services. This involves multiple aspects including payment gateways, merchants accepting cryptocurrency, currency liquidity management, deposit and withdrawal acceptance, asset custody, and KYC/KYT/AML compliance. For exchanges, many of these needs have already matured.

Cryptocurrency exchanges and encryption payment systems form a symbiotic relationship: exchanges are the "entrance" for encryption payments, providing asset acquisition and liquidity support; encryption payments are the "exit" for exchanges, expanding the practical application scenarios of cryptocurrency. This "exit" of encryption payments can effectively solve the problems of user stickiness, retention, and conversion for exchanges, while also forming capabilities aimed at enterprises, extending to scenarios beyond the exchanges.

This article explores the development history of exchange payment, Gate Pay product, the future of exchange payment, and his understanding and vision of Web3 through an in-depth conversation with Feng, the head of payment business at a certain exchange.

1. Feng's Background and Journey into Web3

Feng's career began in the traditional finance sector, and later transitioned into the technology and entertainment industry through an MBA, where he was responsible for overseas business development and investment at Tencent. After leaving Tencent, he entered the Web3 industry and is currently leading a team at a certain exchange responsible for enterprise-oriented encryption payment solutions Gate Pay.

He chose to enter the Web3 industry out of a pursuit for new opportunities. During his time at Tencent, despite the company's rapid growth in performance and stock price, he felt a bottleneck in his personal career development. He believes he should look for opportunities similar to Tencent in 2008 to explore greater possibilities.

Feng first came into contact with and purchased a small amount of encryption during his study abroad in 2017. The explosion of decentralized finance ( DeFi ) in 2020-2021 attracted him to officially enter this industry. He was fortunate to be recognized by the founder of the exchange, leading the team to build the payment business from scratch.

Choosing to pay in this sector is based on several considerations:

1. The encryption payment industry is in its early stages, with a vast market space and relatively little competition. As a latecomer, one can learn from the experiences of the pioneers.

2. Payments have a strong user stickiness in the traditional Internet space, and this characteristic also applies to Web3. When the encryption market or Web3 can reach over 90% of Internet users, payments are likely to become the main application scenario, rather than DeFi or encryption trading.

3. Payment is an industry with high extensibility and reach, and almost all industries require payment services. This aligns with Feng's professional expectation to engage with various industries and large-scale user scenarios.

In terms of team building, Feng stated that they prefer to hire young talents who are passionate about Web3 and encryption payments, rather than seasoned professionals from the traditional payment industry. They are looking for partners who can ask questions and solve problems efficiently. Gate Pay may be the smallest in scale among Web3 payment teams, but it has top talents in the industry.

2. How exchanges conduct payment services

exchange payment 1.0

Early exchanges primarily targeted C-end users, providing transaction closed-loop functions based on their own ecosystem, such as merchant malls, gift card centers, etc. These services support merchant access and allow users to pay using encryption currency. The exchange also launched products such as cryptocurrency payment cards.

The essence of exchange payment 1.0 is a B2C business, aimed at meeting the real consumption needs of a large number of C-end users of the exchange, improving user retention rates, and promoting user activity and loyalty through incentive measures.

In this centralized, internal payment closed-loop model, users settle with merchants after cashing out their encrypted assets on the exchange through currency acceptance. This relatively centralized method of encryption payment can be referred to as the exchange's Payment 1.0.

exchange payment 2.0

Gate Pay was positioned from the very beginning as an encryption payment product with multi-chain, multi-currency, and enterprise-level processing capabilities aimed at B-end users. The interactive interface and payment experience seen by users are just a small part of the product, with 90% of the capabilities operating behind the scenes, including:

• Millisecond level order receiving/sending frequency
• The channel capacity for large single transaction volume
• High concurrency processing capability
• Multi-chain compatible
• The aggregation and settlement capabilities of hundreds of types of encryption coins
• On-chain security and KYT system
• Fund Transfer Channel
• Enterprise-level operation backend and reconciliation system

This integration of exchange infrastructure and the formation of B-end capabilities for external use can be referred to as Payment 2.0 of the exchange, with the core being 2B business, mainly competing for merchant resources.

Analogous to the exchange payment logic of the exchange spot deposit and withdrawal:

• Strengthen the spot recharge and withdrawal capabilities into enterprise-level Payin & Payout capabilities
• Compatible with multiple currencies and chains, equipped with powerful liquidity management capabilities.
• By combining the exchange's multi-regional regulatory licenses and strict compliance security system, the safety of assets is maximally protected.
• Supports compliant deposit and withdrawal channels for multiple fiat currencies

Gate Pay conducts strict KYT system audits on every on-chain transaction and collaborates with top blockchain security companies to monitor potential problem addresses and funds. In terms of fiat currency deposits and withdrawals, it serves merchants only through partner banks in licensed areas, strictly adhering to KYB requirements.

Gate Pay adopts an open attitude to promote its products, allowing any merchants and institutions to access all functionalities through API or white-label products. Merchants can customize the front-end display to reach their customer network with their own brand. Gate Pay is committed to becoming a builder and solution provider of encryption payment infrastructure.

The significance of the exchange开展支付业务.

The greater purpose of Exchange Payment 2.0 is to serve external users of the exchange. On one hand, it can utilize the various mature modules of the exchange to better expand 2B business; on the other hand, it can also indirectly achieve some conversion of 2C users, maximizing the advantages of both 2B and 2C.

The B-end capability of exchange payment 2.0 makes it a potential competitor to many encryption payment fintech companies, but more often it is about collaboration and mutual benefit to expand the market size together. Gate Pay's white-label payment product built on the powerful engine of the exchange is a great direction for collaboration.

For Web3 payment startups, the key lies in leveraging their unique customer channel resources to build differentiated payment products and scenarios.

3. Future Development of Exchange Payments

On-chain payment trend

With the development of blockchain technology, payment services are gradually migrating to on-chain. Many well-known exchanges and blockchain projects are actively laying out on-chain payment services. Gate Pay is also closely monitoring this trend and plans to start laying out on-chain business in the second half of the year.

Exploration of the PayFi Concept

PayFi is an emerging concept that combines payment with decentralized financial services. One potential direction for development is to move traditional financial credit and interest-earning services onto the chain, such as blockchain-based personal credit systems and lending services. This could give rise to a range of new ecological products, but it also faces challenges such as privacy protection.

The combination of AI and Web3 payments

Artificial intelligence, especially AI Agents, may profoundly impact the development of Web3 payments. For example, AI Agents can assist users in automatically completing daily tasks such as booking and shopping, while Web3 payments can seamlessly connect with the payment needs of these intelligent agents. In the future, AI may also help users formulate and execute personalized investment strategies, directly participating in DeFi products through smart contracts.

4. Blockchain, Games and Equality

Feng believes that blockchain technology brings a decentralized era of equality. He takes the gaming industry as an example, pointing out that the current Game as a Service ( GaaS ) model, while allowing players to participate in content creation, still does not distribute profits fairly enough. Blockchain technology has the potential to solve this problem, but current GameFi projects are still far from achieving this vision.

He envisioned two levels of blockchainization for the gaming sector:

1. The blockchainization of game assets
2. The blockchainization of game content and experience, quantifying its value based on the game experience created by players and distributing the profits.

Finally, Feng quoted a line from Gandalf in "The Lord of the Rings" to summarize the vision of Web3 payments: "I have found that it is the everyday actions of ordinary people that keep the darkness at bay." He believes that "every person, every bit" connected by blockchain represents these small things, which, although they may sometimes evolve into emotional outbursts of various meme coins, will ultimately benefit the public in a tangible way.

Gate Pay is committed to realizing this vision. When seeing an African user without a bank account purchasing daily necessities for their family on an e-commerce site using encryption through Gate Pay, Feng believes he is on the right path.