The Dilemma of Smart Home and the Fragmentation of Encryption Payments

Have you ever experienced a scene like this? Initially, you bought a few smart light bulbs for a simple purpose because they were hailed as the best products on the market. The app interface is cool, the lighting effects are stunning, and you feel like a tech wizard, able to adjust the lights with your phone, which is really awesome.

Then, you thought that the thermostat should also be smart, so you purchased another product with AI features. Although it requires using different applications and accounts, you believe having one more is not a problem.

Unknowingly, you have fallen into chaos.

Your smart doorbell cannot communicate with the smart speaker, the speaker cannot control the garage door, and the garage door cannot communicate with the smart home hub. You need to use four different apps to turn on the lights, adjust the temperature, and lock the doors. Each company promises you a "seamless smart home experience."

However, for some reason, the house you ultimately live in has become even more "clumsy" than before, because it has too many "applications" added.

Are some encryption payment companies repeating the same mistakes in the crypto world?

In August 2025, two important pieces of news arrived.

First, the payment giant, valued at $50 billion, announced that it will collaborate with an encryption venture capital firm to build a blockchain called Tempo, which is "high-performance and payment-centric."

A day later, the company with $67 billion in stablecoins also announced the Arc program, which is a proprietary Layer 1 blockchain designed specifically for stablecoin payments, foreign exchange, and capital markets.

Internal Analysis of Arc

Arc will be tailor-made for its stablecoin. Most blockchains require the use of native tokens to pay transaction fees, such as ETH on Ethereum or SOL on Solana. However, on Arc, users can directly pay fees with stablecoins without needing to hold more volatile tokens.

Arc has a built-in exchange rate engine. Users do not need to use external services or decentralized exchanges (DEX) to exchange currencies; Arc can natively handle exchange rates at the protocol level. When sending stablecoins, the recipient receives euro stablecoins, and the conversion is done automatically without the need for third-party services or additional fees.

In addition, there is a privacy control feature. Most public chains like ( Ethereum, Bitcoin, and Solana ) display all information: addresses, amounts, and timestamps. Certain privacy coins, on the other hand, hide everything by default. Arc offers selective privacy, allowing institutions to hide transaction amounts while keeping addresses visible, and it has built-in compliance features. It is specifically designed for enterprises that require competitive privacy without wanting to be completely anonymous.

Tempo Internal Analysis

The differentiation of Tempo lies in the abstraction of user experience. While other encryption payment solutions still have a strong "encryption flavor" when connecting wallets, signing transactions, and waiting for confirmations, Tempo's design goal is to make blockchain payments look exactly like credit card payments to users.

Being compatible with Ethereum means it can leverage existing DeFi infrastructure and developer tools, but its greatest advantage lies in its ability to integrate with the existing merchant ecosystem. Millions of businesses using the platform can easily add encryption payments without having to change their checkout process or learn new systems.

Most importantly, the company's existing banking and regulatory relationships can solve a major problem. Most encryption payment solutions struggle on the "last mile"—moving funds from the blockchain back to bank accounts. The company already has these partnerships, which is something other encryption companies need to spend years establishing.

The Source of Chaos

We are back to the fragmented smart home scenario, and the problems are starting to multiply like the notifications on various smart home apps on mobile phones.

The first thing that troubles me is: where is the demand for these specialized blockchains?

These companies have been talking about stablecoin payments and enterprise-level features, but the real active area for stablecoins is in DeFi.

People use stablecoins to purchase other encryption assets, participate in lending protocols, trade on decentralized exchanges, and interact with a broader financial application ecosystem. All of this mainly occurs on Ethereum.

It's like building the most advanced smart thermostat in the world, but it only works in houses without any other smart devices.

Of course, this thermostat may be technically superior, but you have isolated yourself from the entire ecosystem of people who actually want to use smart home features.

The second question: Why do repeated inventions?

All the features these companies talk about—faster transactions, lower fees, customizable features, enterprise branding—can be achieved through Ethereum Layer 2 solutions. This way, you can have the security of the Ethereum base layer network, access the largest DeFi ecosystem, and customize the network as needed.

Some Layer 1 blockchains have realized this. A certain blockchain, originally focused on mobile payments, was once an independent network but later announced plans to transform into an Ethereum Layer 2. After some calculations, they realized that becoming part of the Ethereum ecosystem made more sense than building their own network effects from scratch.

The more chains there are, the more bridges are needed. And the bridges are exactly where problems arise...

They are responsible for transferring assets between different blockchains; essentially, they are complex smart contracts that lock your tokens on one chain and then mint equivalent tokens on another chain. However, bridges are often targeted by hackers. We are not talking about the inconvenience of switching between different smart home applications, but rather the potential financial losses that could arise if the bridge software malfunctions.

Terrible user experience. In smart homes, the worst situation is having to open another app to turn off the lights in the hallway.

But for enterprise blockchain, users may need different wallets, different gas tokens, different interfaces, and different security settings. Most people already find it challenging to manage one encryption wallet. Imagine having to explain to them why different payments and transfers require different wallets.

But the most confusing thing is that the network effect does not exist at all.

The value of a payment network grows exponentially with the increase in users and applications. Ethereum has the most developers, the most applications, and the highest liquidity. By mid-2025, Ethereum's TVL( total locked value) will be $96 billion, accounting for about 60-65% of all DeFi activity. A high-performance alternative has a TVL of $11 billion. Other mainstream chains such as Binance Smart Chain( $3.5 billion), Tron( $6.78 billion), and Arbitrum( $3.39 billion) share the remaining portion.

These enterprises choose to break away from existing network effects to establish an isolated network, naively hoping that users will automatically come to them.

Would you choose to open a perfect store on a deserted island? Of course, countries like the UAE have built cities like Dubai, and people indeed went there. But that's because there were physical constraints, and they had to do so.

Finally, there is a competitive issue that no one wants to face directly. Are these companies genuinely looking to build better infrastructure, or do they simply not want to share territory with their competitors?

Recalling the chaotic scenes of smart homes, every company has a reasonable technical choice. But the real driving force is often that they do not want to rely on others' platforms or pay fees to competitors.

Perhaps this is what is really happening. Some companies do not want to pay transaction fees for Ethereum, while others do not want to build on infrastructure they cannot control. This is fair. But we should face this honestly. It is not about innovation or user experience, but about control and economic interests.

The king doesn't seem to be worried.

Ethereum seems to remain unperturbed by this and does not feel troubled. The network continues to process over a million transactions daily, accounting for the majority of DeFi activity, and has received significant institutional capital inflows through its ETFs. On a certain day in August, the net inflow of Ethereum ETFs reached $1 billion, which is more than the total inflow of Bitcoin ETFs in the previous week.

The Ethereum community's reaction to these enterprise chains is also quite interesting. Some see it as a form of recognition. After all, Arc and Tempo are both building EVM-compatible chains, which essentially adopt Ethereum's development standards.

But there is a subtle threat here. Every stablecoin transaction that occurs on Arc instead of Ethereum is a fee income that Ethereum validators cannot obtain. Every merchant payment processed on Tempo instead of Ethereum Layer 2 is an activity that does not contribute to the Ethereum network effect.

A certain high-performance network may feel this competition more acutely. This network has positioned itself as a high-performance alternative to Ethereum, particularly in terms of payments and consumer applications. When major payment companies choose to build their own chains instead of adopting this network, it undermines its long-promoted argument that "everything can be packed into a high-speed computer."

The Graveyard of Enterprise Blockchain

History has not been kind to companies attempting to build their own blockchains. As mentioned earlier, a certain blockchain also made the same move in 2023.

Do you remember the digital currency project of a certain tech giant? This ambitious plan aimed at creating a global digital currency eventually turned into another project and fell apart under regulatory pressure, being sold off. Don't forget, if there were a clear law defining how stablecoin issuers should operate in today's regulatory environment, that project might have really succeeded.

The blockchain attempts of a certain major bank may be the most relevant cautionary tale. The bank spent years building a digital dollar, a private blockchain network, and other blockchain projects. Despite having almost unlimited resources, regulatory relationships, and a large existing customer base, these projects never achieved meaningful adoption outside of the bank's own business. Its digital dollar processed billions of dollars in transactions, but primarily only transferred funds between the bank's own institutional clients.

Even attempts by major payment companies have not been so inspiring. A certain payment giant launched its own stablecoin in 2023, becoming the first major U.S. fintech company to enter the stablecoin space. However, the company did not build custom infrastructure but chose to issue on existing networks like Ethereum. What was the result?

The market capitalization of this stablecoin is only $1.102 billion, which is insignificant compared to the $67 billion of a major stablecoin, and is mainly limited to the company's own ecosystem.

This raises a question: if a company with significant influence and payment expertise cannot make a substantial impact relying solely on a stablecoin, what makes other companies believe that building an entire blockchain would do better?

This model suggests that establishing a successful blockchain requires more than just technical capabilities and financial resources. You also need network effects, developer enthusiasm, and organic adoption, all of which are notoriously difficult to create from scratch, even with the endorsement of large companies.

Will this situation be different?

We have reason to believe that these companies may succeed where others have failed.

First, the clarity of regulation has significantly improved. The relevant legislation passed in the United States has created a clear framework for stablecoin issuers, eliminating much of the uncertainty that plagued early attempts at blockchain by businesses. When new projects are launched, they operate not in a legal gray area, but as publicly listed companies under established rules.

Secondly, these companies have something that certain large banks lack: a huge existing user base, and these users are not primarily from the encryption-native community. One company processes over $1 trillion in transactions annually for millions of merchants worldwide and has been systematically building its encryption infrastructure—acquiring stablecoin infrastructure for $1.1 billion and acquiring cryptocurrency wallet technology to create an end-to-end payment stack. Another company's stablecoin has been integrated into hundreds of applications.