PlatON SVP Cipher: 2023’s most anticipated track, Focus on Web3 payments

During the Hong Kong Web3 Festival 2023, the payment sub-forum was packed to capacity, indicating that Web3 payments have become one of the most highly anticipated tracks of the year.

Looking back at the history of Web3 wallets and payments, it has been 11 years since the first Web3 wallet emerged. Since then, the number of Web3 payments has been steadily increasing. The user base utilizing Web3 payments is also growing, but compared to the mobile payment market, Web3 wallets and payments still hold immense untapped potential.

We can see that the payment track holds immense potential for both extensive development and the opportunity for widespread adoption, while also offering the potential for significant profitability. On the other hand, within this track, there are numerous projects, and it begs the question of whether we are now witnessing a qualitative transformation following the quantitative changes. Cipher, the SVP of PlatON, provided his answer during the Twitter Space event with the theme “2023’s most anticipated track: Focus on Web3 payments.”

1.What do you consider to be the notable advantages of Web3 payments? What are the pain points in the industry regarding Web3 payments?

Cipher：For example, if I initiate a remittance to China using the Wise app, after factoring in the fees, the exchange rate is approximately 7.04. However, the actual exchange rate today is 7.12. This means that the fees account for around 1.3%. Even though Wise is already one of the cheapest remittance companies globally, if this were to occur in Web3, the exchange rate loss would be around 0.5%. The advantage is significant in comparison. It’s important to note that this is not yet Web3 payment. Payment is not merely a transfer of funds but rather a process where information flows and fund flows match to complete the exchange of money and goods. The key challenge for the future is how to incorporate such significantly advantageous tools into payment scenarios.

2.What are the current use cases for Web3 payment tools?

Cipher：Currently, in the Web3 space, I have come across some interesting projects, and we are also exploring some exciting initiatives. For example, I have seen projects working on streaming payments, subscription payments based on smart contracts, and escrow payments based on guarantee contracts. These are all needs that have been validated in Web2 scenarios. I believe that an increasing number of payment scenarios are transitioning from Web2 to integrating with Web3, and we are actively exploring such possibilities as well.

For instance, we are utilizing homomorphic encryption algorithms to create contracts for prepaid cards and vouchers issuance and redemption. This model can also be applied to encapsulate the popular Alipay and WeChat Pay’s QR code payment methods. Additionally, we are exploring integration with SGQR, enabling Web3 wallets to be compatible with the SGQR standard for Web3 payment adoption in Web2 scenarios. I believe that these initiatives will become more practical and increasingly intertwined with our daily lives.

Recently, I noticed that CIRCLE has obtained the MPI license in Singapore, and I believe the application of stablecoins in real-life scenarios will accelerate.

3.Which market does Web3 payment currently lean more towards, B2B or B2C? How can Web2 users be converted to truly integrate Web3 into their daily lives?

Cipher：Digital currencies indeed have widespread demand in both the B2B and B2C sectors. However, if we define Web3 payments as payments based on on-chain scenarios, currently, more attention is being focused on the C2C (consumer-to-consumer) sector. However, payment services are inherently a two-sided business, involving both the buyer and the seller. The B2C (business-to-consumer) sector is a crucial and high-frequency scenario, so it is important to pay attention to both the B2B and B2C aspects.

A interesting observation is that, in my 18 years of experience in the payment industry, both in China and overseas, I have rarely come across a company that has successfully operated in both the B2B and B2C sectors simultaneously. Therefore, I believe that carefully selecting the target market between B2B and B2C is crucial for project success.

The key to transitioning Web2 users to Web3 and integrating Web3 payments into everyday life lies in providing opportunities. Can the payment methods of Web3 be compatible with the majority of Web2 scenarios? One characteristic of Web2 scenarios is centralization, while Web3 payments emphasize decentralization. To make decentralized services reliably and conveniently connect with decentralized endpoints, it is crucial to lower the barriers for the receiving side and expand the acceptance of decentralization. Establishing an open payment network will be of great importance. The dependency and positive feedback of payments on network effects are evident.

4.Currently, there is controversy surrounding compliance and regulatory issues related to Web3 payment tools, which also creates conflicts of interest with regulatory authorities. How can Web3 payment tools achieve compliant clearing and settlement?

Cipher：Embracing regulation and technological innovation is crucial. Regardless of the current attitude towards regulation, even if it is strongly supportive, there will always be regulatory risks and controversies. Digital currencies themselves have a relatively short history, and their decentralized nature makes them more difficult to be bound by traditional regulatory frameworks. However, it is important to understand that the purpose of regulation is not to regulate for the sake of regulation but to protect vulnerable users. If a payment product or service has the potential to harm users, it will inevitably conflict with regulations. Even if certain regulations currently show support, they may shift towards restrictions in the future.

We need to comply with the regulatory policies of different countries and conduct business within the requirements of policy norms. In areas where there are no explicit licenses or regulatory policies, we can refer to regulations on fiat currencies to establish norms for digital currencies in on-chain transactions. For example, we can consider how customers are onboarded, whether payment and receipt methods comply with FATF’s information-sharing requirements, and whether there are fraud risks associated with on-chain transaction addresses. Although the information systems for conducting business have undergone changes, the types, identification, and restriction requirements for business risk points remain similar.

5.How does Web3 payment ensure the security of user funds? What are the technologies and solutions involved? Are there any foreseeable risks compared to traditional Web2 financial tools?

Cipher：“Ensuring the security of user funds” is a broad topic. Generally speaking, for retail payment scenarios, there are two main categories: fund storage security and payment authentication security.

PlatON is one of the earliest public chains to introduce the MPC (Multi-Party Computation) sharded wallet, and it has made continuous investments in cryptography. Therefore, PlatON has accumulated experience in the field of MPC-based wallets. Currently, we also utilize the KMS (Key Management Service) + MPC solution in our on-chain business platform for institutional clients. Recently, we have also participated in the open-source project of Secure Lattice’s MPC algorithm. In the future, we will collaborate closely to promote the application of MPC in both institutional and individual client scenarios to ensure the security of customer assets.

In the field of account abstraction, we will be launching a contract wallet framework in July. This framework will be prioritized for deployment on PlatON and will provide institutional clients with a new choice of account management. Subsequently, we will gradually expand its adoption to individual wallet users.

Security in payment authorization is an important aspect that deserves more attention, even though it may not receive as much focus as wallet asset security. Many incidents of coin theft, for example, stem from the misuse of transaction authorization and users’ lack of understanding of transaction signing mechanisms. In traditional finance, such matters are managed by centralized service providers, where the responsibility is clearly defined. Centralized institutions have an obligation to provide secure authorization mechanisms to their customers.

However, in the realm of Web3, the landscape has changed with regards to asset control. Centralized institutions no longer have full control over assets, which means wallet providers now have the responsibility to offer prompts regarding the business risks involved in payment authorization.

In the field of payment authentication, PlatON is also exploring means other than signature transactions, such as using homomorphic methods to generate one-time payment vouchers to achieve scenarios similar to coupons and QR codes that are scanned by the payer. Through some new authentication methods, we try to reduce the risk of wallet direct signature transactions.

In the Web2 system, because they are all centralized accounting, the risk is mainly concentrated in the centralized institutions, and there is already a set of mature security system, such as the ISO27001 standard, different countries also have specific requirements for BCP for financial institutions, and there are different specifications for customer privacy information, if it is card transactions, there are also PCI, EMVCO standards, different card organizations have also developed different chargeback (refund) logic for denial transactions, these are to reduce the account and payment risk of Web2. These standards are not yet available in Web3 payment security standards, I think the wallets, public chains, acquirers and other companies that do Web3 payment should work with security companies to establish a set of security standards, and follow this standard to constrain the best practices for key storage, transaction parsing reminders, expanding authorized transactions, payment target risk prompts and other known risk types. You can even do some certification for Web3 payment, just like the current contract code audit.

6.For PlatON, what are the core competencies or key success factors?

Cipher：PlatON is a public chain, so the core competitiveness is to provide relatively simple and easy-to-use payment infrastructure, on the one hand, it can provide native payment integration for other ecosystems based on PlatON, such as Web3 games deployed on PlatON, a few lines of code can access account recharge and payment purchase process. This not only reduces the difficulty of project access, but also provides an embedded experience.

On the other hand, it serves the traditional payment scenarios to access Web3 payment scenarios, reducing the payment cost of traditional scenarios and enriching the user account assets. Our main target customers are licensed financial institutions and payment institutions, through the chain contract adaptation of the business, through the previous mentioned MPC, account abstraction and other technologies, through external security service providers, such as MPC wallet security Lu, KYT 0xscope, Chaineyes, security Slow Fog and so on, to establish a new payment network on Web3 where users can safely and low-cost complete payment. This will be our core competitiveness and also the key to whether we can succeed.