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Web1 to Web3: The evolution of online payments

Published on May 05, 2023
Updated on Apr 25, 2024

Online payments have come a long way since the early days of Web1 when credit card transactions were the primary method of payment and security concerns were rampant. But with the emergence of Web2 payment platforms like Square and Stripe, online transactions became more streamlined and secure, offering easy checkout, fraud protection, and real-time transaction processing.

And now, with the rise of Web3, we're entering a new era of payment technology that promises to take online payments to the next level. Web3 payment platforms are characterized by their decentralized and peer-to-peer nature, with protocols like Bitcoin and Ethereum allowing users to send and receive payments directly without intermediaries.

But Web3 is more than just Bitcoin and Ethereum. New protocols and projects are constantly emerging, offering innovative ways to make online payments faster, more secure, and more accessible than ever.

How Web3 rewrites payments

Web1 origins: The early days of online credit cards

Web1 payment platforms were primarily focused on credit card transactions, which limited the options for online payments. The early days of online transactions were also marked by consumer suspicion and concerns about slow and insecure payment processing. As a result, there was much room for improvement in the Web1 payment landscape, particularly around security and the availability of alternative payment options.

  • CyberCash: Founded in 1994, CyberCash was one of the first companies to provide an electronic payment system for online transactions.

  • PayPal: The company was founded in 1998 and ended up winning over Web1 customers as a trusted platform to make online transactions, with customer protection too. PayPal offered an easy-to-use interface and evolved in Web2. Now, the company is moving into Web3 with crypto functionality.

  • WorldPay: WorldPay was the first electronic payment system in Europe. It opened its first online shop in 1994, and in 1997, WorldPay processed multiple online transactions in different currencies. The service was popular among e-commerce platforms that wanted to cater to a global audience.

Web2 transition: The arrival of closed, secure payment systems

The online payment landscape significantly improved with the rise of Web2 payment platforms like Stripe and Square. These services streamlined the payment process, offering easy checkout and a range of security features, including fraud protection and real-time transaction processing.

Additionally, Web2 payment platforms introduced new options for online transactions beyond credit card payments, such as bank transfers and e-wallets, which expanded access to online payments for consumers and businesses. With these advancements, Web2 payment platforms laid the foundation for the continued evolution of payment technology into the decentralized and blockchain-based Web3 era.

  • Stripe: Founded in 2010, Stripe provides a payment processing platform that allows businesses to accept payments online, including credit cards, Apple Pay, and Google Pay. It is also continuing to evolve with crypto and encouraging future-focused businesses to onboard with the platform.

  • Square: Founded in 2009, Square provides mobile payment processing solutions including hardware and software, enabling businesses to accept credit card payments using a smartphone or tablet. The service creates a seamless and easy transaction journey for both the seller and the buyer. Square's parent company is Block Inc, founded by Jack Dorsey, Twitter's co-founder and former CEO.

  • WePay: Founded in 2008, WePay provides payment processing services for online marketplaces and crowdfunding platforms, allowing users to make and receive payments from other users within the platform. WePay's parent company is JP Morgan Chase, and while Stripe and Square are crypto-friendly Web2 companies, JPMorgan's CEO Bill Clerico has mentioned that WePay isn't receiving enough requests for Crypto implementation.

The Web3 future: Open, peer-to-peer transactions

Web3 represents a shift towards more decentralized and peer-to-peer payment platforms. Unlike Web1 and Web2 payment systems, which rely on centralized intermediaries to process transactions, Web3 platforms like Bitcoin and Ethereum allow users to send and receive payments directly between themselves. While Web3 is still in its early stages, we already see a range of new protocols and projects that are based on a decentralized ethos emerge. As the Web3 ecosystem grows, we expect to see an increasingly diverse range of decentralized payment options become available.

  • OKX Wallet: Users can access our multichain wallet via mobile or web, offering a universal wallet experience. We support more than 30 different chains, thousands of dApps and more than 3000 tokens, which our users can easily access, send and convert into other tokens. The user's private keys belong to them and only them. Because our wallet is a non-custodial wallet, they own their crypto assets. We also provide an intuitive dashboard with an overview of digital assets, portfolio performance and transaction history. The OKX wallet is the gateway to the Web3 ecosystem.

  • CashApp: CashApp was founded in 2013 and although it's not solely dedicated to web3, a lot of GenZ users have adopted it as a P2P payment app. With CashApp CEO Jack Dorsey being a huge Bitcoin advocate, and with Bitcoin being the only crypto you can use on CashApp, the platform is contributing to BTC adoption.

  • Utrust: Founded in 2017, Utrust is a cryptocurrency payment platform that aims to bridge the gap between traditional payment methods and cryptocurrencies, providing a user-friendly payment experience with built-in buyer protection and dispute resolution. Similar to BitPay (Founded in 2011), it's helping onboard merchants to the Web3 space. At the same time, Utrust hadn't had the same impact PayPal did when it disrupted traditional payment systems. Utrust, being crypto native, could quickly evolve into a PayPal competitor.

Decentralization at its best

Web3's impact on payments and other financial solutions might just be the perfect representation of the power of decentralization: sensitive personal data stored securely and anonymously without the involvement of an intermediary. With major players in the payments and commerce space already moving to incorporate Web3 technology into their operations, wider adoption could move quickly.

Get into Web3 today

Feeling inspired? OKX is your portal into Web3. Jump in today.

NOTHING IN THIS ARTICLE IS A SOLICITATION TO BUY OR SELL DIGITAL ASSETS. OKX DOES NOT ENDORSE ANY PARTICULAR DIGITAL ASSET OR STRATEGY. DIGITAL ASSETS HOLDINGS INVOLVE A HIGH DEGREE OF RISK, CAN FLUCTUATE GREATLY ON ANY GIVEN DAY, AND MAY EVEN BECOME WORTHLESS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING OR HOLDING DIGITAL CURRENCIES IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. OKX DOES NOT PROVIDE LEGAL, TAX, INVESTMENT, OR OTHER ADVICE. PLEASE CONSULT YOUR LEGAL/TAX/INVESTMENT PROFESSIONAL FOR QUESTIONS ABOUT YOUR SPECIFIC CIRCUMSTANCES.

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