Article Translator: Block unicorn

For most of financial history, the challenge has been in the transfer of funds. The difficulty lies in how to pay from point A to point B, which requires passing through a series of banks, each taking a cut in commissions. Sometimes, this even involves cross-border fund transfers.

Over the past decade, cryptocurrencies and stablecoins have promised to minimize these frictions through crypto applications and wallets. However, if these funds cannot be utilized within the broader economic system, these fast, low-cost transfers are meaningless. Dollars trapped in a crypto wallet are worth less than their actual value. For this reason, cryptocurrencies are now playing a role as a more comprehensive infrastructure for transferring existing traditional assets.

The integration of old and new financial systems has given rise to a new intermediate layer, where value accumulates. In today’s article, I will explore who is capturing value in this new layer.

The Necessity of Web 2.5

For more than a decade, the cryptocurrency industry has been striving to persuade people to download wallets, bridge assets across different blockchains, and store funds in new applications. But people won’t abandon systems they are familiar with and have used for decades just to try something new. No provider wants to receive payments via blockchain only to watch the money sit in their wallet while waiting for a way to convert it back to their bank account for everyday spending. Transferring funds from a wallet to a bank account incurs fees and, in most cases, requires compliance checks.

The problem has never been the ability of cryptocurrencies to transfer funds in seconds; it has always been their architecture requiring people to abandon the systems they already use, such as bank accounts, credit cards, and payroll systems, in favor of a completely new system. Access points, exit points, and bridging solutions are friction points to be hidden rather than flaunted. People will eagerly adopt new technologies that enable faster, cheaper transfers of their existing funds into their current accounts.

The ideal infrastructure sees cryptocurrencies as efficient, invisible enablers and as the underlying vehicles of traditional finance. We refer to this optimal state as "Web 2.5." Though the term may sound a bit awkward, the underlying concept is to leverage the strengths of both. We retain the essence of traditional finance, such as regulation, licensing, verification, and user interfaces and experiences that people already trust and use. We then combine this with the low-cost, programmable, always-online settlement capabilities that cryptocurrencies offer. The two do not need to replace each other. Banks remain banks, while cryptocurrencies invigorate the previously slow and outdated infrastructure of fund transfers.

But if cryptocurrencies become an invisible underpinning while traditional finance remains a familiar surface, where exactly does value accumulate in the new world of Web 2.5?

This layer that connects the two financial systems has historically been worth more than most of the institutions it connects. Last year, Visa’s operating profit (for the fiscal year ending September 2025) reached $24 billion, with transaction fees on its network accounting for less than one percent per transaction. Nevertheless, its operating profit margin remains at an impressive 60%. The Depository Trust and Clearing Corporation (DTCC), which is currently building its own on-chain settlement system, processed securities transactions worth $47 trillion in 2025, earning $2.9 billion from it.

Intermediate Layer

Both sides are now building a conversion layer that enables banks to retain their infrastructure while converting ISO 20022 instructions into on-chain settlements.

On June 23, Chainlink announced the launch of the Pangea project, formed with a consortium of over 50 banks in Europe and Korea (with total assets of about $10 trillion), aimed at testing real-time settlements for foreign exchange transactions.

The goal is to transition the foreign exchange settlement infrastructure from the traditional T+2 cycle to a real-time T+0 model.

Chainlink's runtime environment (CRE) serves as the orchestration layer, connecting blockchains and other external payment systems without the need for manual routing or bridging. It converts each conventional instruction into on-chain atomic swaps and returns the result for bank systems to read.

Chainlink is a relatively new technology. However, DTCC, which has a 50-year history and is based in the U.S. market center, chose the same Chainlink runtime to support its collateral applications on-chain.

In terms of traditional institutions, SWIFT is a prime example. According to early predictions about cryptocurrencies, SWIFT was the institution that blockchain was supposed to replace. Many predicted stablecoins would bypass this information transmission monopoly. Eight years ago, this global messaging network for banks claimed that blockchain "was not ready for mainstream applications". Nonetheless, SWIFT is currently collaborating with over 40 banks to build a blockchain-based shared ledger.

This is not a replacement for the SWIFT network, but rather an orchestration layer built on top of it. The flow of funds on-chain has never been a threat. For SWIFT, the concern is being excluded from the layer where decisions about how funds flow on-chain are made. As long as it can be part of it and have a say in the decision-making process, it can remain in the game. Hence, it is constructing this layer itself.

Even sovereign nations are rushing into this domain to capture value. The Bank for International Settlements (BIS) has convened seven central banks and over forty private institutions to jointly launch the "Agorá Project," aimed at testing atomic settlements using tokenized central bank reserves.

But is the real value simply the bridges built between two financial giants and/or banking behemoths?

The Value of Bridges

The translation layer that merely facilitates dialogue between the two sides may be more valuable than the players themselves.

Visa and Mastercard started as routing networks between banks and merchants. Even today, they do not hold deposits, issue any cards, or take on any risk. Yet, Visa’s market value exceeds that of all banks in the world except JPMorgan.

The value derived from operating translation layers goes far beyond money. Those that determine the flow of funds also hold the power to decide when to close these channels.

The SWIFT system was born in 1973 as merely a means for banks to send standardized messages to one another. Fifty years later, it wields significant power in implementing sanctions against countries. Over the past decade, the SWIFT system has played a pivotal role in economic warfare, such as the sanctions imposed due to Russia’s war in Ukraine. It even imposed EU sanctions on Iranian banks to curb the country’s nuclear program and relaxed sanctions after progress was made on the nuclear agreement.

Chainlink is currently partnering with Project Pangea to pilot addressable liquidity pools for real-time settlement of foreign exchange transactions.

Cross-border payments total between $150 trillion and $190 trillion yearly, and it is expected to exceed $250 trillion by 2030. If Chainlink, along with its consortium of 50 banks, captures even 1% of this market share, it signifies a total addressable market (TAM) of over $1.5 trillion. Even charging a fee of just 0.1%, Chainlink could earn $1.5 billion by building a bridge between traditional finance and on-chain settlements.

However, there's an important point to note. Both SWIFT and Visa have become dominant standards in their respective fields, eventually necessitating the adoption of the entire system. Each field tends to have only one winner, which solidifies its position over decades.

Currently, we have four different models—protocols, market utilities, banking cooperatives, and central bank clubs—all vying for the same singular translation layer to connect the financial worlds of Web 2.0 and Web 3.0.

Licensing and Float

The economic mechanisms driving the value of this layer have long existed. With advancements in fund flow technology, transaction processing itself has gradually become a commodity. As the costs of fund flows decrease, the obtainable value primarily centers on two aspects. The first is authorization, which is the power of those determining whether a transaction is feasible and under what conditions. The second is floating yield, which refers to the interest generated while funds are idle and waiting to be transferred.

We previously explored how payments operate between AI agents (see here and here). Today, the same logic applies to settlements between banks.

This is what makes the coordinating layer in the middle worth contesting. It creates a bilateral network effect. The more banks that connect on one side, the more attractive it becomes for the settlement institutions on the other side, and vice versa. Each additional institution increases the costs for existing institutions to exit. While banks and blockchains compete with each other, the institutions coordinating the conversion layer can serve all banks and blockchains and charge fees for it.

Stripe employs a similar strategy in the credit card payment realm. It enables businesses of all sizes to effortlessly accept and manage online payments through a developer-friendly, easy-to-use API, thereby hiding the complexities of payment processors, acquirers, and payment networks. Subsequently, it charges fees to all users to eliminate transaction frictions while concealing them in the background.

For this reason, connecting layers have become popular targets for acquisition. Once someone builds this connective layer, others would rather acquire it directly than rebuild from scratch. Five years ago, Visa agreed to acquire Plaid for $5.3 billion, which exemplifies this. Although this deal ultimately fell through due to an antitrust lawsuit from the Department of Justice, the intention behind it was crystal clear. Visa aimed to acquire the market share of the connective layer operated by Plaid, which connects thousands of fintech applications to bank accounts.

The New World of Web 2.5

The world of Web 2.5 is more promising than the fully decentralized, utopian vision of Web 3.0, as it does not require capital to flee existing participants in search of services offered by cryptocurrencies. Instead, it utilizes cryptocurrency as a more efficient underlying infrastructure to transfer funds and assets within the existing ecosystem.

Although bank-end projects such as Pangea, DTCC’s AppChain, and Agorá are still in pre-production phases, we are optimistic about the development direction of participants like Chainlink. For a long time, there has been ongoing internal debate in the cryptocurrency field about how to build better crypto applications to entice users to abandon traditional payment methods. Developers have also debated which blockchain has the lowest gas fees and which tokens are best suited for storing funds. Web 2.5 makes these debates redundant by removing all terminology and hiding the infrastructure in the background.

The internet we use is essentially the transmission of information data packets through a global network of computers. This may be nice knowledge, but if you just want to go online, there’s nothing to boast about. No one cares whether the technology supporting these lightning-fast, low-cost transactions is cryptocurrency or something else.

Blockchain is gradually becoming commodified, transforming into an interchangeable, intangible, and low-margin component of transactions. Its value is now reflected in the business models of fund circulation, granting people a certain degree of say in the way funds flow, and whether they flow at all.

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