The Dilemma and Future of Encryption Payments: The Rise of a New Settlement System

The current payment sector is at a turning point. Although existing products have made significant progress in design and experience, there is still a long way to go to establish a complete Web3 payment framework. This "unfinished" state has instead become one of the focal points of recent market discussions.

As the latest form of encryption payment, U Card is essentially a transitional mechanism. It is neither a traditional Web2 recharge card nor the final form of a new generation of on-chain wallets or payment channels, but rather a product of the current compromise between on-chain payments and off-chain demands.

The U Card bridges the gap between Web2 and Web3 by binding on-chain accounts and stablecoin balances, and providing compliant off-chain consumption interfaces. This model has quickly garnered attention, partly because users' expectations for the everyday application of on-chain assets have never waned, and partly because stablecoins are attempting to expand from traditional areas of advantage into retail and local payments.

However, the operation of U Card heavily relies on the permission of the traditional financial system, making it difficult to sustain in the long term. Strictly speaking, it is not a stable profit-making business model, but rather a service form that depends on external permissions. The project party needs to complete the Settlement through multiple layers of financial intermediaries, and itself is merely the executor at the end of the chain.

The greater challenge lies in the high operational costs of the U card. The project team neither has the stable fee income of an exchange nor holds the bargaining power like a first-level card issuer, yet they have to bear the pressure of user service.

To change this situation, there are two options: first, join the existing account system and become an ecological node connected to the encryption industry; second, wait for the improvement of the US stablecoin legislation to bypass the current complex settlement system and seize the new opportunities brought by the US dollar stablecoin.

For wallets and exchanges, the U Card is more of an auxiliary function to enhance user stickiness. However, for Web3 startup teams lacking traffic and experience in financial infrastructure, it is extremely difficult to establish a sustainable U Card project relying on subsidies and scale.

Encryption Payment: Underground Money Houses or On-chain "New" Banks?

The core challenge of encryption payments lies in the settlement system of traditional finance. However, there are divergences in the market regarding the definition of encryption payments. Is it a complete imitation of everyday QR code payments, or is it carving out a niche in anonymous networks? For the latter, the meaning of payment is not in the transfer, but in the accumulation. In this context, the essence of payment is not settlement, but circulation.

Taking some underground money houses as an example, they have built a digital ecology based on relationships, trust, and asset circulation. The core of this model is trust, and the flow of funds and delayed Settlement both rely on trust. It requires referrals from acquaintances to join, and there exists an invisible joint liability mechanism among everyone.

Under this mechanism, payment is no longer a one-to-one relationship, but rather a one-to-many-to-one form that continuously circulates within the value network. Once funds flow in, it signifies entry, not just for payment, but also to gain trust. When non-payment funds continuously flow in, it creates a fund accumulation, forming a slow Settlement but high-frequency social payment network.

In fact, this "digital bank" style closed ecological structure has been running on the blockchain for many years, addressing some of the issues related to the gray circulation of funds, but it has failed to push encryption payments into mainstream applications. On the contrary, what truly possesses global potential and is gradually approaching users is the on-chain settlement system built around USD stablecoins and relying on compliant networks.

This on-chain "digital bank" model already exists. Whether it is gray market arbitrage organizations in certain regions or international settlements conducted by some countries through USDT, digital assets have mature means to bypass traditional financial systems and achieve free capital circulation.

However, this model is not designed for ordinary users; it addresses how to enable a minority to make untraceable payments, rather than how to allow more people to use cryptocurrency for payments. Its starting point is to circumvent, rather than to interface; it serves scenarios that do not want to be covered by regulation, rather than user groups that need legal protection.

From a systematic perspective, a truly scalable payment system requires that funds can freely "enter and exit", rather than "coming in but not going out". This "backyard circulation" model is not infrastructure, but rather a mechanism for ecological self-reinforcement. It strengthens the use cases of funds within a closed system, but does not constitute the foundational logic of "payment" as a global service.

What truly drives Web3 payment from the periphery to the mainstream is the support of the U.S. policy level for stablecoin payment networks. Under the promotion of related legislation, stablecoins have been assigned the policy positioning of "strategic payment infrastructure" for the first time. Multiple fintech companies are rapidly advancing the application expansion of USD stablecoins in international settlements, merchant acquiring, and platform settlements.

These are not the circulation and sedimentation in the virtual economy, but rather the flow of funds between real goods and services, which are legally protected and compliant with audits. In contrast, the "scan to pay" feature of token payments and wallets in certain ecosystems still belongs to local functions within a closed system before truly entering corporate financial reporting systems, multinational e-commerce platforms, and credit networks, rather than being a global payment standard.

From a macro perspective, as the global monetary status of the US dollar faces challenges, the United States is attempting to construct a new dual-track currency system of "dollar + dollar stablecoin". Stablecoins are no longer a marginal financial innovation but a strategic tool actively deployed by the US in international financial competition.

The future of the encryption industry will not coexist with the gray industry. The approval of Bitcoin ETFs has ushered the encryption industry into a new cycle, which is a future of comprehensive integration and mutual embedding with traditional finance. Whether it's large financial institutions launching their own digital currencies or payment giants integrating encryption payments, it indicates that traditional finance is accelerating its entry into the on-chain world, where their standards are compliance, transparency, and regulatory oversight.

The true future of Web3 payments is built on a network based on USD stablecoins and compliant settlement channels. It can embrace the decentralized openness while leveraging the credit foundation of the existing fiat currency system. It allows funds to flow freely in and out, emphasizes identity abstraction without evading regulation, and integrates user intentions without straying from legal boundaries. In this system, funds can not only enter the Web3 world but also leave freely; it serves not only the financial activities on the chain but also embeds itself in the global exchange of goods and services.