The Symbiotic Relationship Between Crypto Assets Exchanges and Crypto Payments

Crypto Assets exchanges are platforms that provide the buying and selling of Crypto Assets, where users can trade Bitcoin, Ethereum, and other Crypto Assets. The main functions of the exchange include asset trading, liquidity provision, custody services, derivatives trading, and currency acceptance, among others. They are the largest participants in the crypto ecosystem and have built a strong infrastructure based on Crypto Assets, achieving a complete closed loop for the value exchange of Crypto Assets.

Crypto payment refers to the use of Crypto Assets as a means of payment, such as using Bitcoin to purchase physical goods or services. This involves payment gateways, merchants accepting Crypto Assets, coin liquidity management, currency acceptance, asset custody, compliance, and other functional requirements. For exchanges, most of these requirements have already matured.

Crypto Assets exchanges and encryption payment systems have formed a symbiotic relationship: exchanges serve as the "entry point" for encryption payments, providing asset acquisition and liquidity support; encryption payments are the "exit point" for exchanges, expanding the practical application scenarios of Crypto Assets. This "exit point" of encryption payments can effectively address the issues of user stickiness, retention, and conversion for exchanges in relation to end users, while also creating B-end capabilities that extend to scenarios outside of the exchanges.

How to get started with payments in the exchange?

exchange Payment 1.0

In the early development of exchanges, we could see exchanges like Binance, Crypto.com, and Gate launching transaction closed-loop functions based on their own ecosystems, such as the Gate Life merchant mall and gift card center launched by Gate, which supports merchant access and allows users to pay with Crypto Assets as well as the Crypto Payment Card launched by Gate. The core essence of exchange payment 1.0 is the B2C business, competing for users, meeting the real consumption needs of the large-scale C-end users of the exchange itself, maintaining user retention, and promoting user activity and loyalty through incentive measures.

Under the centralized exchange and internal payment closed-loop linkage, the user's Crypto Assets in the exchange are actually settled with merchants after being withdrawn in exchange currency. This relatively centralized Crypto Assets payment method can be referred to as Exchange Payment 1.0.

exchange Payment 2.0

Gate Pay is committed to creating a B-end oriented, multi-chain and multi-coin compatible cryptocurrency payment product with enterprise-level processing capabilities. The interactive interface and payment experience seen by C-end users are just the tip of the iceberg, with 90% of the capabilities lying beneath the surface, including millisecond-level acquiring/disbursement frequency, large single transaction channel capacity, high concurrency processing capability, multi-chain compatibility, consolidation and settlement capability for hundreds of crypto assets, on-chain security and KYT system, fund inflow and outflow channels, enterprise-level operational backend and reconciliation system, etc.

The integration of exchange infrastructure and the formation of B-end capabilities for exchange payments can be referred to as Payment 2.0 for exchanges. The core essence is B2B business, competing with merchants. The logic of exchange payments can be likened to the logic of spot deposit and withdrawal of coins at the exchange:

• The exchange payment will enhance the spot recharge and withdrawal capabilities to enterprise-level Payin & Payout capabilities, including millisecond-level transaction frequency, large single-transaction channel capacity, high concurrency processing, enterprise-level operation back-end, and reconciliation system.

• The compatibility with multiple coins and chains, as well as liquidity management capabilities, is also difficult for general encryption payment companies to achieve.

• By combining the exchange's multi-jurisdictional regulatory licenses, stringent compliance capabilities for KYT/KYC/AML, it can maximize asset security on the payment chain while supporting compliant channels for the deposit and withdrawal of multiple fiat currency coins.

Gate Pay reviews each on-chain transaction through a strict KYT system and collaborates with leading blockchain security companies to monitor potential problematic addresses and funds. For fiat deposits and withdrawals, services are provided to merchants only through Gate's partner banks in licensed regions, strictly adhering to the banks' KYB requirements, registering merchant enterprise information, and retaining all transaction receipts.

Gate Pay has chosen a difficult yet correct path, promoting its products with an open mindset in business. Any merchant or institution can access all the capabilities of Gate Pay's products through API or white-label products. Merchants can customize the frontend and display to reach their merchant network with their own brand. Gate Pay is willing to become the infrastructure builder and solution provider that promotes the large-scale application scenarios of Crypto Assets payments.

The greater purpose of Exchange Payment 2.0 is to serve users outside the exchange. On one hand, it leverages the various mature modules already built by the exchange to better expand B2B business; on the other hand, it can also indirectly facilitate some B2C user conversions, maximizing the advantages of both B2B and B2C.

What is the next step for exchange payment?

On-chain Payment by the Exchange

The exchange is closely monitoring the on-chain development trends. For Gate Pay, it will continue to consolidate its existing advantages while starting to lay out on-chain in the second half of this year. Since most business processes interact on-chain, Gate Pay is already very familiar with the on-chain.

PayFi Narrative

PayFi is a product form that combines payment and decentralized financial services. An attractive direction is to move traditional financial credit and interest-bearing services onto the blockchain. If the personal credit system can be transferred to a more transparent and decentralized blockchain, it could greatly activate lending services on the blockchain, while also giving rise to a series of ecological products such as blockchain personal insurance. However, this also faces huge challenges, including how blockchain anonymity and privacy can be compatible with the collection of necessary personal credit information, as well as how to ensure personal privacy, among other issues.

The Impact of Artificial Intelligence on Web3 Payments

The interaction between AI Agents and Web3 payment products will bring a lot of imaginative space. For example, AI Agents can assist users in tasks such as restaurant reservations and shopping, while Web3 payments can bridge the payment process. Blockchain-based smart contracts are more user-friendly for connecting with AI Agents compared to traditional bank accounts. In the future, AI Agents may also help users find the most suitable investment portfolios based on their personal situations and invest in various DeFi products through the smart contracts of the blockchain network.

Blockchain, Games and Equity

Blockchain essentially brings about a decentralized era of equality. Taking the current most profitable game, Honor of Kings, as an example, although it brings joy and social connections to billions of players, the profits mainly belong to the development company. Blockchain technology has the potential to change this distribution model, allowing players as content creators to receive fair compensation.

However, blockchain games have not yet reached an ideal state. There are two levels of blockchainization in gaming: the blockchainization of game assets, and the blockchainization of game content and experiences. The latter requires quantifying the value based on the game experiences created for others by players and distributing revenue accordingly, which still faces enormous challenges technically.

Web3 payment products like Gate Pay are working towards the vision of inclusivity for the general public. When we see users on the African continent, who do not qualify for bank accounts, using Crypto Assets to purchase household goods and food for their families on e-commerce sites through Gate Pay, we know that this path is the right one. The "every person, every point" connected by blockchain may seem small, but it will ultimately provide tangible benefits to the general public.