Following the catastrophic events surrounding cryptocurrencies over the past few months, industry watchers are wondering – does crypto have a future?
dr Yan Zhang, CEO of native Web3 payments aggregator Pelago/Airswift said that it does and that it all boils down to the original premise of blockchain-based assets: payments.
Zhang told PYMNTS in an interview that “achieving decentralization of the payment process” will help make it a “more carefree” experience for the general public, a majority of whom, among others, may still be feeling the public fallout from the collapse of FTX is affected by industry implosions.
“We need a decentralized protocol to prevent fraud because when human nature is subjected to temptation, it cannot control itself,” Zhang said. “But if you measure everything through computer code, you can eliminate the effects of that pulse.”
As reported by PYMNTS, crypto crime last year hit an all-time high of $20.6 billion beyond man-made errors — a number that represents a “lower bound.”
Is it too late for the digital asset industry?
The collapse of FTX, Zhang said, really gave the crypto industry a major warning that centralized exchanges can be incredibly risky and come with the potential for mismanagement.
“In payment situations, consumers don’t care too much, they just pay the merchant; but for merchants the risk is huge,” he said, noting that accepting crypto as a means of payment is still a challenge for regular merchants and that adding an extra risk beyond that is not a very attractive proposition.
Zhang said the solution is a decentralized payment aggregator that allows merchants to withdraw funds from an aggregated, decentralized liquidity pool. That’s why he’s building one with his company.
While most crypto payment gateways are centralized and users face the same risks as a platform like FTX, Zhang said that major technological advances have pushed decentralization to the forefront of the payments domain.
In a traditional, centralized crypto payment process, he said, “If this payment company goes down, all the money is gone. Payment companies have large transaction volumes but very low profit margins, so if the money is gone, so is the company.”
PYMNTS’ own research in the report “Shopping With Cryptocurrency: Tech-Driven Consumers Drive Market Acceptance” found that 33% of the most tech-savvy consumers buy cryptocurrencies specifically to use them to shop at merchants, underscoring that observers may be growing Despite everything, there is still interest in the market to accept and use crypto as a payment method.
Hopes centered on decentralization
“Rather than using a centralized enterprise wallet, we use a liquidity pool to handle the transaction process,” Zhang said. “It removes the risk because the money is already there and the basic concept is that the gas transaction fee is sort of offset by the liquidity pool return.”
The customer pays, the merchant can withdraw, and liquidity providers get their returns from transaction fees, he said. Merchant transaction records remain fully encrypted.
“Privacy protection is the #1 requirement for this new protocol,” he said.
He added that the name of this liquidity pool token is “Pelago,” Italian for “ocean,” noting that it was launched with account reconciliation involving key traders and industry partners in what he called “a great ocean.” is done via smart contract.
Still, Zhang said his experience working with crypto and securely managing billions of dollars in transaction volumes has highlighted the importance of a positive user experience. After all, merchants will not want to accept crypto as a payment method if it proves painful for them.
“People can’t wait 30 seconds to confirm a payment,” he said, using paying a restaurant bill as an example and noting that the maximum is really about “two seconds.”
What is he most looking forward to?
“We are stepping in to address the challenges of traditional and legacy payment processes with this new decentralized protocol,” Zhang said. “We want to bring a really good product to market to increase consumer and industry confidence. We hope this will be a bright product in the decentralized finance space and bring many positive impacts to the industry.”
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