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Encryption payment channel: The financial revolution of Blockchain in 2025
Encryption Payment Channel: The Superconductor of Future Payments
In 2025, blockchain has built a financial payment ecosystem that runs parallel to the traditional financial system. The encryption payment channels carry a volume of $200 billion in stablecoins, and a trading volume of $5.62 trillion in stablecoins by 2024, approaching Mastercard's annual transaction volume. According to statistics, the annual trading volume of stablecoins reached $15.6 trillion in 2024, approximately 119% and 200% of the transaction volumes of Visa and Mastercard, respectively.
The widespread adoption of encryption payment has become an undeniable fact, especially with the case of Stripe acquiring stablecoin service provider Bridge for $1.1 billion. Encryption payment channels form the foundation of a parallel financial system, offering faster settlement times, lower fees, and seamless cross-border operational capabilities. This idea has matured after ten years of development, and now hundreds of companies are working to bring it to reality. In the next decade, encryption channels will become the core of financial innovation, driving global economic growth.
There are still many issues that need to be addressed, such as:
This article comprehensively analyzes how blockchain-based encryption payment channels can bring utility to traditional payments from the perspective of traditional payment methods, and provides multiple real-world application scenarios and future forecasts.
1. Existing Payment Channels
To understand the importance of encryption channels, it is first necessary to understand the key concepts of existing payment channels and their complex market structures and system architectures.
1.1 Card Organization Network
Although the network structure of credit card organizations is complex, the main participants in credit card transactions have remained unchanged for the past 70 years. Credit card payments mainly involve four participants:
The issuing bank provides credit or debit cards to customers and authorizes transactions. The acquirer collects payments on behalf of the merchant and ensures that funds reach the merchant's account.
The credit card organization network provides channels and rules for credit card payments, connecting acquiring institutions with issuing banks, offering clearing functions, establishing participation rules, and determining transaction fees. ISO 8583 is the main international standard that defines how credit card payment information is exchanged among network participants.
Credit card organization networks are divided into two types: "open-loop" and "closed-loop". Open-loop networks like Visa and Mastercard involve multiple parties, including issuing banks, acquiring banks, and the credit card organization network itself. Closed-loop networks like American Express handle all aspects of the transaction process by a single company.
The economics of payment is very complex, with multiple layers of fees in the network. The interchange fee is a part of the payment fee charged by the issuing bank. The card scheme fee is determined by the card organization network and is used to compensate for network connection services. Additionally, there is a settlement fee that must be paid to the acquiring institution.
1.2 Automatic Clearing House ( ACH )
ACH is one of the largest payment networks in the United States, owned by the banks that use it. There are mainly two types of ACH transactions: credits and debits. The process involves multiple participants: the company or individual initiating the payment ( originator ), their bank ( ODFI ), the receiving bank ( RDFI ), and the ACH operator.
The ACH system is working hard to meet modern demands. "Same-Day ACH" was launched in 2015, but it still relies on batch processing rather than real-time transfers and has limitations. For example, the single transaction limit is $25,000, and it is not suitable for international payments.
1.3 wire transfer
Wire transfers are at the core of high-value payment processing, with the two main systems in the United States being Fedwire and CHIPS. These systems handle time-sensitive, guaranteed payments that require immediate settlement, such as securities transactions, significant commercial transactions, and real estate purchases.
Fedwire is a real-time gross settlement system ( RTGS ) that allows participating financial institutions to send and receive same-day funds transfers. CHIPS is a private sector alternative that uses a netting system for settlement.
SWIFT is a global information network for financial institutions that enables banks and securities firms around the world to exchange secure structured information, many of which initiate payment transactions across various networks.
2. Real-World Use Cases
Encryption payment channels are most effective in situations where the use of traditional US dollars is restricted but demand is strong, such as in countries with economic instability, high inflation, currency controls, or underdeveloped banking systems. They also have the greatest advantage in the context of globalized payments, as blockchain networks are not limited by national borders.
2.1 Merchant Acquiring
Merchant acquiring is divided into two use cases: front-end integration and back-end integration. The front-end method allows merchants to accept encryption directly as a payment method from customers. The back-end method provides merchants with faster settlement times and funding access channels.
2.2 debit card
Linking debit cards directly to non-custodial smart contract wallets has established a strong bridge between blockchain space and the real world. In emerging markets, these cards are becoming the primary consumer tool, increasingly replacing traditional banks.
2.3 Remittance
Encryption payments can provide a faster and cheaper way for overseas remittances. Major channels include from the United States to Latin America, the United States to India, and the United States to the Philippines. Non-custodial embedded wallets offer users a Web2-level user experience.
2.4 B2B payment
Cross-border B2B payments are one of the most promising applications of encryption payments. Payments through the correspondent banking system can take weeks to settle, while encryption payments can significantly shorten this time. Main use cases include:
2.5 payslip
Freelancers and contractors, especially in emerging markets, are among the most promising early adopters. Encryption payments allow more funds to ultimately end up in their pockets rather than flowing to intermediaries.
2.6 Currency Acceptance for Deposits and Withdrawals
The currency settlement for deposits and withdrawals is a bundled service (, which is the most critical part of the payment process ). Building currency settlement for deposits and withdrawals typically includes obtaining the necessary licenses, ensuring that local bank partners or PSPs can access local payment channels, and connecting with market makers or OTC desks to obtain liquidity.
3. Compliance Regulatory License
Obtaining regulatory approval is a necessary step to expand the application of encryption payments. Startups can choose to collaborate with licensed entities or obtain licenses independently. Global licensing coverage is extremely challenging, as each region has its own unique currency transfer regulations.
4. Challenges
The main challenges include:
V. Future Outlook
20 predictions for the state of the industry in the next 5 years:
6. Conclusion
Encryption channels are the superconductors of payment, forming the foundation of a parallel financial system. In the next decade, encryption channels will become the core of financial innovation, driving global economic growth.