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Crypto And Blockchain In The Payments Industry
February 19, 2023
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Many people are questioning the need for crypto and blockchain in the payments industry. They argue that we already have multiple electronic payment methods that are working efficiently and cater to the digitally savvy population. However, it's important to note that a significant number of current payment systems, particularly for cross-border payments, still rely on traditional methods of transferring funds where the communication about payment is detached from the actual transaction. For instance, the SWIFT network only sends payment orders between banks using SWIFT codes, but doesn't transfer funds directly. In contrast, crypto offers a transformative approach where the message and payment are processed simultaneously in real-time.

How does crypto achieve this? By creating new payment infrastructure based on blockchain technology. This includes not only Bitcoin's blockchain but also various other distributed ledger technologies (DLTs) and protocols such as Ethereum, Ripple, Stellar, Binance Smart Chain, Solana, Avalanche, and more, all of which facilitate transactions.

However, some argue that these systems are not scalable. For instance, the Bitcoin blockchain can handle only around 5 transactions per second, while Ethereum can handle about twice that number. By comparison, Visa processes 1,500-2,000 transactions per second, rendering blockchain technology inadequate. So why not just stick with existing solutions? The challenge is that Bitcoin, Ethereum, and other blockchains aim to maintain a high level of decentralization while competing with centralized payment systems like Visa.

Layer two protocols have been proposed as a potential solution to address blockchain performance issues while preserving the core properties of the underlying blockchain. However, it's important to address the fundamental challenges before exploring such solutions.

A Layer One Blockchain

To grasp the concept of layer two, let's start with the fundamentals. Layer one, also known as the main network or 'mainnet', is the underlying infrastructure of a blockchain that establishes the basic rules of the ecosystem, validates and finalises transactions, and features decentralisation and security, which are maintained by a diverse, global network of developers and participants, including validators. Ethereum, Bitcoin, Solana, BNB Chain, Avalanche, Cardano, Algorand, Elrond, Celo, Terra, Near, Hyperledger, and numerous others are examples of layer 1 protocols.

However, maintaining a fully functional ecosystem demands significant resources, making scalability a challenge for layer one. Large blockchains like Bitcoin have struggled to process transactions during times of increased demand, making it unrealistic for applications like blockchain games to use the Bitcoin network due to lengthy transaction times. Nevertheless, such applications may still want to utilize layer one's security and decentralisation.

To address the scaling issue in layer one, several options exist, including increasing block size, modifying the consensus mechanism from Proof of Work to Proof of Stake (as with the Ethereum 2.0 update), and implementing sharding, a type of database partitioning. For example, Elrond, a layer-one network founded in 2018, employs sharding to enhance its performance and scalability, allowing it to process over 100,000 transactions per second (TPS). Celo is another layer one network that uses a phone number or email address as a public key and has over 100 million confirmed transactions. SegWit and the 2017 fork of Bitcoin, Bitcoin Cash, are other examples of increasing block size to allow for more transactions to be processed in each block.

A Layer Two Blockchain

To address the scaling issue, layer two solutions are considered the most effective option. These solutions are built on top of main chains and are known as off-chain solutions or separate blockchains that help reduce bottlenecks with scaling and data. Layer two protocols create a secondary framework that manages transactions and decreases the burden on the main network, allowing for greater transaction inclusion and throughput.

On Ethereum, layer two solutions such as Arbitrum, Optimism, Loopring, zkSync, Polygon, Plasma, and others are available. For instance, Polygon aims to address Ethereum's scalability problems by processing transactions on a separate Ethereum-compatible blockchain and returning them to the main blockchain after processing. This method reduces the network load on Ethereum, speeds up transactions, and lowers transaction costs to less than a cent. Polygon enables users to interact with any decentralised application (DApp) without having to worry about network congestion.

The most well-known layer two protocol for Bitcoin is the Lightning Network.

Bitcoins Layer Two: The Lightning Network

The Lightning network is a Layer two solution that enhances the scalability of Bitcoin transactions, enabling them to be processed quickly and cost-effectively. Instead of relying on a central authority, the network consists of user-generated channels that allow payments to be sent back and forth in a trustless manner. For example, if I want to pay another user for watching their video, I can create a Lightning channel to pay for each minute of the video I watch. As time passes, payments can be periodically made from my wallet to theirs, and when I'm done watching, we can close the channel to settle the net amount on the Bitcoin blockchain.

Since these transactions only involve two parties and do not require network-wide broadcasting, they can be completed almost instantly. Moreover, transaction fees are kept low or even eliminated, as there is no need to incentivize miners to process the transactions.

 

Lightning Network Real World Usage

While the Lightning network has the potential to disrupt established players, its adoption is currently limited, albeit growing. Arcane Research estimated that Lightning facilitated between USD 20-30 million in monthly payments in Q1 2022, representing a 4x increase from the previous year. However, this is a far cry from the USD 866 billion processed by Visa each month.

Initially, few merchants accepted Lightning payments when the network was first implemented. However, as it became easier to use, more merchants began gradually accepting these payments. At present, over 640 online and physical stores support Lightning payments with the help of tech providers like BTCPay Server and OpenNode. When El Salvador recognized Bitcoin as legal tender, major companies such as McDonald's and Starbucks quickly integrated Lightning payments.

Companies such as NCR Corporation and other point-of-sale providers have expressed interest in becoming interoperable with the Lightning network. Square, a leading point-of-sale software and equipment provider for small and medium-sized businesses, and its parent company Block are among the most pro-Bitcoin firms. Their Cash App already supports Lightning payments, and they have multiple Bitcoin-focused development units.

Bridges

The Web3 ecosystem has evolved into an interconnected network of layer one blockchains and layer two scaling solutions, each with unique strengths and weaknesses. However, as the number of blockchain protocols increases, the need for bridges to move assets across chains also grows.

Without bridges, blockchains operate in isolation and are unable to communicate with each other due to their incompatible rules, governance mechanisms, native assets, and data. Two-way communication and trust between blockchains require something in the middle, a bridge.

Blockchain bridges enable users to move assets, lower transaction fees, and explore blockchain ecosystems. They also enhance scalability and interoperability, allowing for the exchange of tokens, assets, and data across different blockchains, whether between layer one and layer two protocols or various sidechains.

There are two types of bridges: trusted and trustless. Trusted bridges rely on a central entity or system and have trust assumptions concerning the custody of funds and security. In contrast, trustless bridges operate using smart contracts and algorithms, allowing users to remain in control of their funds. Many bridging solutions adopt models between these two extremes with varying degrees of trustlessness.

However, cross-chain bridges are vulnerable to attacks because they often feature a central storage point of funds that back the bridged assets on the receiving blockchain. Effective bridge design remains an unresolved technical challenge, with varying models presenting novel attack vectors that may be exploited by bad actors.

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You want to build real-world assets onchain.

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🎬Proof the Deep State Planned This War for Years🎬
Nation First outlines how the Israeli attack on Iran was planned by the Deep State and the Military Industrial Complex over 15 years ago.

Prepare to have your mind blown

~Namasté 🙏 Crypto Michael ⚡ The Dinarian

Dear friend,

What just happened in Iran wasn’t a surprise attack. It wasn’t a last-minute decision. It wasn’t even Israel acting alone.

It was a war plan written years ago — by men in suits, sitting in think tanks in Washington and New York. And yesterday, that plan was finally put into action.

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Israel launched a massive, unexpected strike on Iran. They hit nuclear facilities. They killed military generals. They struck deep inside Iranian territory — and now the whole region is on edge, ready to explode into full-blown war.

The media is acting shocked. But I’m not. You shouldn’t be either.

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Because we have the documents. They told us this was coming. Years ago.

Exhibit A: The Brookings Institution.

The Brooking Institution is a fancy name for what’s basically a war-planning factory dressed up as a research centre. Back in 2009, Brookings published a report called Which Path to Persia?

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“The United States would encourage — and perhaps even assist — the Israelis in conducting the strikes… in the expectation that both international criticism and Iranian retaliation would be deflected away from the United States and onto Israel.”

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Pray for a President who still wants peace.

And pray that we wake up before it’s too late.

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Until next time, God bless you, your family and nation.

Take care,

George Christensen

Source:

George Christensen is a former Australian politician, a Christian, freedom lover, conservative, blogger, podcaster, journalist and theologian. He has been feted by the Epoch Times as a “champion of human rights” and his writings have been praised by Infowars’ Alex Jones as “excellent and informative”.

George believes Nation First will be an essential part of the ongoing fight for freedom:

The time is now for every proud patriot to step to the fore and fight for our freedom, sovereignty and way of life. Information is a key tool in any battle and the Nation First newsletter will be a valuable tool in the battle for the future of the West.

— George Christensen.

Find more about George at his www.georgechristensen.com.au website.

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The Possible Impact Of USDC On The XRP Ledger And RLUSD
Key Points
  • It seems likely that USDC on the XRP Ledger (XRPL) boosts liquidity, benefiting XRP, though some see it as competition for RLUSD.
  • Research suggests both stablecoins can coexist, enhancing the XRPL ecosystem.
  • The evidence leans toward increased network activity being good for XRP, despite potential competition.

The recent launch of USDC on the XRP Ledger has sparked discussions about its impact on the ecosystem, particularly in relation to RLUSD, Ripple's own stablecoin. This response explores whether this development is more about competition for RLUSD or if it enhances liquidity on the XRPL, ultimately benefiting XRP.
 

Impact on Liquidity and XRP

The introduction of USDC, a major stablecoin with a $61 billion market cap, likely increases liquidity on the XRPL by attracting more users, developers, and institutions. This boost can enhance DeFi applications and enterprise payments, potentially driving demand for XRP, the native token used for transaction fees. While some may view it as competition for RLUSD, the overall effect seems positive for the XRPL's growth.
 

Competition vs. Coexistence with RLUSD

USDC and RLUSD cater to different needs: USDC appeals to those valuing regulatory compliance, while RLUSD, backed by Ripple, may attract users preferring ecosystem integration. Research suggests both can coexist, increasing options and fostering innovation, rather than purely competing.
 

Detailed Analysis of USDC on XRPL and Its Implications

The integration of USDC on the XRP Ledger (XRPL), announced on June 12, 2025, by Circle, has significant implications for the ecosystem, particularly in relation to RLUSD, Ripple's stablecoin launched in 2024. This section provides a comprehensive analysis, exploring whether this development is more about competition for RLUSD or if it enhances liquidity on the XRPL, ultimately benefiting XRP.
 

Understanding RLUSD and Its Role

RLUSD, Ripple's stablecoin, received approval from the New York Department of Financial Services (NYDFS) in 2024 and is designed to be fully backed by cash and cash equivalents, ensuring stability. It is available on both the Ethereum and XRP Ledger blockchains, aiming to enhance liquidity, reduce volatility, and serve cross-border payments. With a current market cap of $413 million, RLUSD is smaller than USDC's $61 billion but has regulatory credibility, particularly appealing to institutions.
 

Impact of USDC on the XRPL

The launch of USDC on the XRPL is a significant development, given its status as the second-largest stablecoin by market cap.
 
Key impacts include:
  • Liquidity Boost: USDC's integration can attract more users, developers, and institutions, increasing overall liquidity. This is crucial for DeFi applications, as Circle's announcement emphasizes its use in liquidity provisioning for token pairs and FX flows.
  • Increased Utility: USDC enhances the XRPL's utility for enterprise payments, financial infrastructure, and DeFi, potentially making it more attractive for global money movement and transparent settlements.
  • Regulatory and Institutional Appeal: As a regulated stablecoin issued by Circle, USDC can bring institutional users to the XRPL, aligning with Ripple's goals for regulated financial activities.
  • Network Growth: Supporting a widely recognized stablecoin like USDC on 22 blockchains, including the XRPL, increases the network's visibility and adoption, potentially driving more activity.

Competition vs. Complementarity with RLUSD

While USDC's launch could be seen as competition for RLUSD, the evidence suggests a more nuanced relationship:
  • Competition: Both are stablecoins on the XRPL, and USDC's larger market presence ($61 billion vs. RLUSD's $413 million) might attract users and developers away from RLUSD. However, competition can drive innovation, such as lower fees or better services, benefiting the ecosystem
  • Complementarity: Different stablecoins cater to different needs. USDC appeals to users valuing regulatory compliance and widespread adoption across multiple blockchains, while RLUSD, backed by Ripple, may attract those preferring ecosystem integration and regulatory approval from NYDFS. The XRPL can benefit from having multiple options, increasing liquidity and fostering a diverse ecosystem.
  • Coexistence Benefits: Research suggests that having multiple stablecoins enhances liquidity and provides users with more choices, potentially leading to higher network activity. For example, institutions might use USDC for global payments and RLUSD for specific XRPL-integrated applications, creating a symbiotic relationships.

Impact on XRP

The introduction of USDC, alongside RLUSD, is likely beneficial for XRP, the native token of the XRPL, for several reasons:
  • Increased Liquidity and Activity: Higher liquidity on the XRPL, driven by both stablecoins, can increase transaction volumes. XRP is used for transaction fees, with some fees burned, potentially reducing supply over time and increasing demand.
  • DeFi and Enterprise Use Cases: Both USDC and RLUSD enhance DeFi and enterprise applications, such as liquidity pools and cross-border payments, which can drive demand for XRP as a settlement token.
  • Network Growth: A more liquid and active XRPL is more attractive to developers and users, potentially leading to long-term growth for XRP, as increased utility can drive its value.
Expert analyses, such as those from u.today and ledgerinsights.com, suggest the launch is a "massive boost" for liquidity and adoption, with RLUSD also playing a significant role.
 

Comparative Analysis: USDC vs. RLUSD

To further illustrate, consider the following table comparing key attributes:
 
Given the evidence, it is more accurate to view the introduction of USDC on the XRPL as beneficial for liquidity, which is ultimately good for XRP, rather than solely as competition for RLUSD. The XRPL benefits from increased options, with both stablecoins enhancing liquidity, utility, and network growth. While some competition exists, the overall impact is positive, fostering a robust ecosystem that can drive demand for XRP. This conclusion aligns with expert analyses and community discussions, acknowledging the complexity of the stablecoin market within the XRPL.
 

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