It’s been 2 weeks since the big announcement from Stripe that they were purchasing Bridge for $1.1B, the largest acquisition in the history of the crypto industry. A lot of digital ink has been spilled attempting to explain the rationale and importance of this deal. A lot of the best analysis that I found was actually shared via threads on Twitter. I’ve linked below a few of the best I’ve come across.
The one thing that has become increasingly apparent to me is that the stablecoin payment stack is still in flux. We now have a range of payment companies, API providers, orchestration platforms, etc. who are all trying to play in this space and establish themselves as critical components sitting between an end-user initiating a payment and the onchain transaction that needs to occur to move value from A to B. If you find the maze of products and platforms confusing, you’re not alone. I am in the weeds of crypto payments 24/7, and I find it all makes my head spin. My sense is that the head spinning is because we haven’t quite come up with the new operating model for stablecoin payments. That’s not a bad thing, just the present reality of where we are in the evolution of this technology.
To make this more concrete, when you look at the credit card operating model. There are generally two approaches: the 4 party model and the 3 party model. In the 4 party model (i.e., Visa and MasterCard), you typically have different banks acting as the issuer of the card and the acquirer of the merchant. With 3 parties (i.e., the AmEx model), the issuing and acquiring are done by the same financial institution. This simplifies the flow and allows for one entity to capture more of the transaction fee.
If I could fast-forward a bit and peer into the future, I would imagine that we are going to land on an operating model that is somewhat analogous to the card operating model above. I am not saying we will end up in a world with as many middle players extracting value, but we will have a framework to more easily explain how stablecoins are moved from A to B. As with card payments, there are various “jobs to be done.” For stablecoin payments, these jobs include moving funds from fiat into stablecoins, orchestrating the movement of stablecoins via one chain or cross-chain, and then settling the funds either in stablecoins or moving back to fiat. It seems simple, but in that basic flow, you may have several components and companies coordinating the movement of value. This post from Drew Rogers has a nice illustration that reflects some of these components.
So, does this all mean the concept of decentralized payments is a myth? I don’t think so. First, the term “decentralized” has always been hard to define, and ultimately, there are degrees of decentralization. Blockchains do provide me with the ability to send money from A to B with no intermediaries involved, just sign a transaction; however, what works for P2P transfers likely does not work at scale for payment tooling that serves B2C and B2B. You can still use a decentralized value transfer network (i.e., a blockchain like Ethereum), but you may interact with centralized entities on either end of that transaction.
Second, these so-called “centralized” entities (i.e., Stripe, Coinbase Commerce, Loop Crypto, Binance Pay, Request Finance, etc.) provide value in the process offering simple interfaces and in abstracting away the onchain complexity. These parties are also going to be critical in enabling movements between fiat and crypto. Until we arrive at a truly onchain world, which I think is still years away, that conversion process between fiat and crypto will be critical for the adoption of onchain payments.
In the end, my hope and belief is that I’ll be writing a follow-up piece in a year or two talking about a typical 2 or 3 party model for stablecoin payments.
Best Twitter threads on Bridge acquisition
Jeff Cangialosi 
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