...
By Annabelle Huang
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
Stablecoins, the digital dollars that move on blockchain rails, can move money instantly across borders at a fraction of the cost of traditional payment systems. It’s easy to see why they’re being talked about as a revolution for payments and international transactions.
But stablecoins have much greater potential than simply replacing credit cards or the SWIFT system. They enable a completely new type of economic activity: continuous machine-to-machine payments.
The number of machines connected to the internet already exceeds the number of people on the planet. Soon, thanks to AI, machines will begin transacting online alongside humans. Cars, appliances, sensors, industrial robots and countless other devices will become autonomous economic actors. In fact, they could quickly overtake humans in terms of transaction volume. We could soon see the birth of a completely different commerce ecosystem.
Read More on Essays
Yet this future depends on extremely efficient payments infrastructure. For it to pass, we need blockchains that are far faster and more efficient than what exist today.
...
Incoming Revolution in Payments
Stablecoins promise something that traditional payment networks cannot deliver: near-instant settlement at extremely low cost.
For businesses, this new technology makes a world of difference. As things stand, credit-card fees alone typically consume around 3 percent of every transaction. For many merchants, these fees represent the second-largest operating expense after labor. Replacing even a portion of those costs with stablecoin-based payments could dramatically improve margins.
Faster settlement also greatly improves cash flow. Businesses often wait days for card payments to clear. Instant settlement allows funds to arrive immediately, improving working capital for restaurants and retailers, and reducing reliance on credit lines.
But these improvements are only the beginning. The real breakthrough comes when payments are no longer initiated by people at all.
Stablecoins enable machines to transact with each other continuously, automatically and in tiny increments. All of a sudden, devices can exchange micro-payments in the background as services are delivered, without having to wait for invoices and approvals.
This opens the door to an entirely new category of economic activity built around high-frequency, low-value transactions that humans would never bother to manage.
Imagine an electric vehicle paying by the minute for parking, or for charging. Or a home solar panel system automatically selling excess power to a neighbor down the street. Or a delivery drone paying for airspace access in real time as it travels across a city.
None of these transactions are large, but they are constant. As more machines come online, the number of automated micro-payments will likely grow into the trillions per day.
Machine-to-Machine Payments Will Disrupt Entire Industries
Once machines can transact autonomously, the structure of many industries begins to change.
Energy markets, for example, could shift toward real-time pricing and micro-payments. Electric vehicles, home batteries and solar panels could buy and sell electricity continuously rather than waiting for monthly utility bills. Local energy markets would become far more dynamic, with devices responding instantly to supply and demand.
Telecommunications and cloud computing may also move away from fixed subscriptions. Instead of paying a flat monthly fee, devices could pay per second or per unit of usage. A server might pay another server for computing power only when it is needed, dramatically reducing inefficiencies.
Media and entertainment could adopt similar models. Publications might charge a few cents for reading a single article or watching a short video. Payments would happen automatically, eliminating the friction that currently makes microtransactions impractical.
Retail and supply chains would also evolve. Smart shelves could monitor inventory levels and automatically reorder stock when supplies run low, paying suppliers instantly. And insurance could become usage-based, with cars or industrial machines paying for coverage by the mile or by the minute.
Obviously, traditional financial intermediaries would face the most pressure, because credit-card networks and payment processors were designed for relatively low transaction frequency and significant human involvement. Banks will have to adapt quickly to a world that sees trillions of automated micro-transactions.
In short, any industry built around batching payments, charging fixed monthly fees, or requiring human approval for transactions could face profound disruption.
Infrastructure Challenge
For machine-to-machine payments to truly take off, devices will require sub-second settlement, predictable execution timing and the ability to process enormous numbers of transactions simultaneously. A machine making real-time decisions cannot tolerate unpredictable delays or congestion. If a payment system slows down or fails during peak demand, entire networks of automated services could stall.
Unfortunately, many existing blockchains struggle precisely under those conditions. While they may perform well under ideal circumstances, congestion often leads to slower confirmations and higher transaction fees. For a consumer transferring large amounts of money occasionally, that may be acceptable. For a machine executing thousands of micro-transactions per day, it is not. If transaction costs spike unpredictably during periods of heavy usage, the economics of micro-payments collapse.
Efficiency must therefore become the primary focus for teams developing payment-oriented blockchains. Extremely high throughput, low latency, predictable execution and consistently super low fees should be seen as prerequisites for enabling the machine economy.
Machine-to-machine payments could eventually become the largest use case for blockchain technology, supporting an entirely new layer of automated economic activity. But the companies and developers who capture this enormous opportunity will not be the ones building the most complicated systems. They will be the ones building the fastest, most reliable and most efficient payment infrastructure. Slow blockchains won’t make the cut.
Annabelle Huang is the co-founder and chief executive officer of Altius Labs, a blockchain infrastructure company (backed by Founders Fund and Pantera) that focuses on solving execution performance bottlenecks.
View 0 Comments
Submit Correction
View Editorial & AI Guidelines