Podcast Transcripts | Coinbase Wallet Integrates Third-Party Payments: Sending and Receiving Cryptocurrency via LINE and Messenger
#579
GM,
First, let's announce some good news: Blocktrend Podcast now features Chinese transcripts! This is for readers who may not be accustomed to listening to podcasts and have missed out on numerous discussions over the past few years. Whether it's a preference for textual content or the outsourcing of podcast-listening tasks to AI, everyone now has the freedom to use the text-based podcast.
You just need to open the Blocktrend Substack website, click on the latest podcast episode (e.g., Episode 229), and you'll find a "Transcript" tab below the heart icon. Click to expand and view the full transcript of that episode. In addition to the preview, clicking on different paragraphs will automatically jump to the corresponding audio section. Super convenient! Although the transcripts are generated by a machine, the accuracy is quite good. The quality will continue to improve in the future, and we hope you'll enjoy it.
Additionally, I need to correct the information about RetroPGF from last week's article. The rules for RetroPGF3 have been adjusted, and now you need to get 17 votes or more to qualify for the OP airdrop. Since the publication of last week's article, Blocktrend has received 15 votes, moving up 100 places. The dead horse is about to be resurrected! Regardless of the outcome, Blocktrend will continue to participate in future RetroPGF events, allowing Chinese media and communities to be seen internationally. Now, let's get to the main topic.
BTC broke through $40,000 this week. Some think that with prices doubling over the past year, people might not realize they are in a bull market. However, my indicator for bull or bear markets is the level of discussion around Web3. If people believe we entered a new bull market after FTX's closure, the price trend may make sense, but it overlooks market sentiment. Only this week have I felt the renewed attention to cryptocurrencies, indicating we might be entering a new bull market.
Among various aspects, I am most optimistic about the innovation of cryptocurrencies in the payment sector. This article introduces a new feature just launched by the Coinbase wallet, which I call "On-chain Third-Party Payments." I recommend trying it out after reading the article!
Three Major Challenges
Cryptocurrency payments are still not prevalent in 2023, and there are at least three major challenges that need to be overcome:
Psychological Barriers
Use Cases
Fee Issues
The majority of people are not using cryptocurrencies not because they don't know how but because they don't feel it's relevant to them. However, cryptocurrencies are becoming increasingly integrated into daily life.
Recently, I received an invitation from the Kaohsiung City Government to enter the world of cryptocurrencies together with municipal employees. In the past, when government agencies invited me, it was mostly to share blockchain as a "futuristic technology." However, this time the situation is quite different. By the end of this year, cryptocurrencies and NFTs will be included in the asset declaration scope for public servants. Many government employees have only heard about cryptocurrencies from the news or even consider them as tools for money laundering. That's why the Kaohsiung City Government invited me to introduce this to everyone.
Initially, I found it a bit strange. If people generally don't know about it, doesn't it mean the regulations don't concern them? However, looking at it from a different perspective, I thought about taking advantage of this opportunity to airdrop cryptocurrencies and NFTs at the Kaohsiung City Government, indirectly forcing a lucky draw 🤣. This way, everyone attending the presentation that day would have to start paying attention to this new regulation.
Interestingly, the more the government regulates cryptocurrencies, the more attention it attracts. As more people gain practical experience, it helps eliminate societal psychological barriers towards cryptocurrencies. However, eliminating biases is only the first step. Even though my parents have a positive attitude towards cryptocurrencies and even "evangelize" within their social circles, the lack of practical use cases limits the impact.
The situations they encounter are more challenging. The Kaohsiung City Government has arranged for a group of people to sit in a meeting room and listen to a presentation for two hours. However, the patience of the elderly in the park may last only 10 seconds, and even downloading a wallet would be time-consuming. The good news is that this week, Coinbase Wallet has introduced a new feature that is very suitable for people without a wallet.
On-chain Third-Party Payments
According to Coinbase:
Coinbase Wallet has introduced a brand new feature that makes transferring funds easier, cheaper, and faster. Users can now share cryptocurrency transfer links on any instant messaging platform, such as WhatsApp, iMessage, Telegram, or even via email. If you want to send money to family or friends in other countries, there's no need to worry about complex bank account details, expensive wire transfer fees, and waiting for several working days for the funds to arrive. Simply use the transfer link within the Coinbase Wallet and send it through your preferred instant messaging app. Not only is there no need for transaction fees, but the funds also arrive instantly.
Let's put aside cryptocurrencies for a moment. Taking bank transfers as an example, if I want to transfer 1,000 yuan to you via a bank, I would need your bank account details first. Otherwise, how would I know where to send the money? Cryptocurrencies work in a similar way. While almost everyone in Taiwan has a bank account, cryptocurrency wallets are not as widespread. Creating a wallet is a matter of security and typically not as simple as a few clicks by the roadside. Without a wallet, there's no address, and thus, no way to make payments in cryptocurrencies.
However, Coinbase Wallet's new feature addresses this issue. It allows individuals to leave the recipient address blank when transferring cryptocurrency and instead obtain a special web link. By sharing this link via instant messaging apps, the transfer is considered complete. If the recipient has a Coinbase Wallet, clicking the link enables them to receive the cryptocurrency. In case the recipient doesn't have a wallet, they have up to 2 weeks to complete the wallet creation process and receive the payment. If no one claims the funds within 2 weeks, the entire amount is refunded 100% to the original payer's wallet.
Imagining a scenario of elderly people chatting in the park, it's easy to envision a future where my parents, discussing cryptocurrencies with friends, could simply open the Coinbase Wallet, create a payment link, and send it via LINE private message. Even if it's just the equivalent of 10 TWD in cryptocurrency, upon receiving the message, their friends might, out of curiosity, create a wallet and experience it for themselves. If their friends forget to claim the money, my parents would get their funds back after two weeks.
This significantly lowers the barrier to entry for cryptocurrencies! If the elderly are willing, they can share in the same way in the future. I encourage everyone to give it a try.
Although Coinbase did not explicitly explain how this mechanism works in their blog post, we can reverse-engineer it from the on-chain transaction records. When a user creates a payment link through this feature, the cryptocurrency is automatically transferred to a third-party smart contract. The code comments in this smart contract make it clear:
"This is the implementation of the Linkdrop P2P escrow contract. Linkdrop P2P supports a new type of token transfer, similar to a pre-signed blank check with a predefined amount. The funding sender doesn't have to fill in the recipient's address. They can directly deposit the tokens into the smart contract while creating a claim link. The token recipient can use the claim link to receive tokens from the escrow contract. If no one claims before the expiration date, the tokens will be returned to the sender 100%."
In essence, this is an on-chain third-party payment. The difference is that the intermediary responsible for escrowing the funds is not Alipay or Shopee but a smart contract on the blockchain. Applying it to an online auction scenario makes it more compelling.
If I were to purchase a restaurant voucher from an online friend, I could use Coinbase Wallet's new feature to deposit the equivalent amount in cryptocurrency into a third-party payment. The friend would see, from the on-chain record, that I indeed deposited $30 worth of USDC into the smart contract. After they send the voucher, I can send them the claim link, and they can instantly receive the cryptocurrency from the escrow contract into their personal wallet. This is a payment innovation using smart contracts and Ethereum Layer 2 networks!
Innovation and Risks
This new feature currently only supports Base chain ETH, USDC, and Polygon chain MATIC and USDC within the Coinbase Wallet. For those interested in testing it out, you can withdraw MATIC on the MAX exchange through Polygon, and the entire process is completely fee-free!
Creating third-party payment functionality with smart contracts is not a news. It's likely that people envisioned similar scenarios when Ethereum went live in 2015. However, back then, there were too few people aware of cryptocurrencies, and no one took such functionality seriously. As more people became familiar with cryptocurrencies, Ethereum's transaction fees also increased. If users had to pay hefty fees for every smart contract operation, it was unlikely anyone would use it.
Now that cryptocurrencies are more prevalent, and transaction fees are low enough, the envisioned functionalities from the past have finally become a reality. Currently, the on-chain transaction fees for this new feature will be fully subsidized by Coinbase. Even if there's only a small amount in the wallet, there's no need to worry about being unable to send the funds.
This is the result of the Ethereum infrastructure built over the past few years, including Layer 2 networks. If people use the Base chain1 or the Polygon chain created by Coinbase in the future, the subsidy amount Coinbase is providing now may be recouped in other forms. It's not an unprofitable business.
However, this new feature is sure to bring about some new risks. For example, if the messaging app is not secure and is hacked, intercepting payment links could allow hackers to claim the funds directly. Smart contracts only recognize the URL and not the individual, making this potentially more severe than a leaked conversation record.
Secondly, I believe everyone has experienced sending the wrong message. While Coinbase Wallet's new feature realizes the ideal of making transfers as simple as sending a message, without corresponding remedies, sending the wrong payment would be as simple as sending the wrong message.
I recommend creating a new wallet and testing with small amounts with friends and family. In the past, many people were not familiar with wallet addresses starting with 0x. This new feature allows everyone to bypass these complicated setup processes. You can now send and receive cryptocurrencies using familiar instant messaging apps, but the question is, are the devices and messaging apps you are using secure?
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