As blockchain technology continues to evolve and the crypto asset market rapidly develops, market participants have been seeking to attract more capital into the crypto asset market. Additionally, users, aside from using traditional centralized exchanges, also hope to directly complete fiat-to-cryptocurrency exchanges on-chain. However, existing coin purchase pathways typically involve off-chain payments, cumbersome identity verification, and complex cross-chain operations, still facing certain limitations in user experience, transaction efficiency, and compliance risks. To address this pain point, Chainlink, MasterCard, ZeroHash, Swapper Finance, Shift4 Payments, XSwap, and Uniswap have collaboratively built a closed-loop solution from fiat payment to on-chain asset delivery, aiming to create a more secure, transparent, and convenient on-chain native coin purchase pathway.

Roles and Responsibilities

In this new on-chain coin purchase mechanism, each participant has clearly defined roles, undertaking different but highly complementary responsibilities, jointly constructing a technical and compliance closed-loop from fiat payment to on-chain asset delivery, ensuring the efficiency, security, and compliance of the fiat-to-cryptocurrency conversion process:

1. MasterCard: As a global leading payment network provider, Mastercard offers a fiat payment gateway that supports credit and debit card payments. In addition to processing fiat currency acquisitions, its extensive user base and mature payment system enable users of traditional financial channels to participate directly in the digital asset market through familiar scenarios.

2. Shift4 Payments: As a global leading payment processor, Shift4 is mainly responsible for providing users with card payment processing in this collaboration. Through its mature payment network, Shift4 supports card payment methods for multiple fiat currencies (such as USD, EUR, etc.) and ensures that the payment process complies with regulatory requirements, providing users with a stable and compliant entry point.

3. ZeroHash: As a regulated digital asset clearing institution, ZeroHash undertakes the exchange and settlement work from fiat to crypto assets. It converts fiat funds received by Shift4 into an equivalent amount of cryptocurrency and executes necessary regulatory compliance measures, such as KYC (Know Your Customer) and AML (Anti-Money Laundering) reviews to ensure the compliance of the asset conversion process.

4. Chainlink: As a decentralized oracle network, Chainlink provides real-time exchange rate data between fiat and cryptocurrencies. By aggregating multiple reliable price sources, Chainlink ensures price transparency and data accuracy during the exchange process, avoiding malicious manipulation or price distortion.

5. Swapper Finance: As a cross-chain liquidity protocol, Swapper Finance is responsible for bridging the crypto assets provided by ZeroHash across different blockchains. For example, if a user needs assets from non-Ethereum chains like Bitcoin or Solana, Swapper Finance can efficiently transfer and map the assets through its cross-chain technology.

6. XSwap: XSwap is a decentralized trading platform that undertakes the functions of liquidity provision and trade matching. In this collaboration, XSwap provides a trading market for newly introduced crypto assets, enabling users to immediately engage in exchanges, provide liquidity, or participate in other DeFi activities.

7. Uniswap: As a top-tier decentralized trading platform, Uniswap undertakes the ultimate task of ensuring asset liquidity. Through its deep liquidity pools, Uniswap ensures that users' crypto assets can be traded seamlessly on a global scale, providing a reliable trading market for the entire ecosystem.

On-Chain Native Coin Purchase Closed-Loop Model

From the user's perspective, the entire on-chain native coin purchasing process can be divided into the following steps:

Users pay fiat through Shift4 → ZeroHash executes asset exchange and on-chain injection → Chainlink provides exchange rate pricing → Swapper Finance conducts cross-chain transfer → XSwap matches initial liquidity → Uniswap completes market access and free trading → The exchanged cryptocurrency is paid to the user's wallet.

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1. Fiat Payment: Users first make payments using a MasterCard credit or debit card through the front-end interface of the Swapper platform. This process is quite simple; users only need to input the card number and other information to initiate the payment. MasterCard and Shift4 Payments play roles here, responsible for receiving and processing users' fiat payments, ensuring the compliance of the payment process with relevant laws and payment network regulations.

2. Payment Information Transmission and Processing: When users submit payment information, the Swapper platform's front end transmits this information to Shift4 Payments for processing. Shift4 conducts necessary payment verification and cooperates with ZeroHash to execute customer identity identification (KYC) and other anti-money laundering compliance processes to ensure transaction legality and compliance. ZeroHash will also provide necessary support for subsequent cryptocurrency exchanges and asset clearing.

3. On-Chain Exchange Rate Data: At this stage, Chainlink provides critical real-time exchange rate data. As a decentralized oracle, Chainlink ensures the accuracy and transparency of exchange prices by acquiring multi-party market data, preventing manipulation by a single market. In this process, users can ensure that the fiat currency they pay can be converted into cryptocurrency at a reasonable price.

4. Asset Exchange and Clearing: After payment confirmation, ZeroHash will convert fiat currency into cryptocurrency and execute the corresponding clearing operations. ZeroHash is a regulated entity that ensures all transactions comply with legal requirements while ensuring there are no errors in the conversion process from fiat to cryptocurrency.

5. Transaction Execution and Asset Delivery: Finally, the tokens chosen by users will be exchanged through decentralized exchanges (DEX) to ensure asset liquidity. Here, decentralized exchanges like Uniswap provide the necessary liquidity pools, allowing users to complete transactions quickly, ultimately delivering the target tokens to the user's wallet.

Through this complete closed-loop process, users not only experience a convenient fiat-to-cryptocurrency exchange process but also ensure the security and compliance of the transaction. The entire process is based on decentralization and smart contracts, allowing users to quickly, transparently, and cost-effectively complete the purchase of cross-chain crypto assets.

1. Payment Compliance: Shift4 and ZeroHash must adhere to the payment licensing regulations of various jurisdictions, especially when handling fiat currencies such as USD and EUR. They should execute payment compliance frameworks according to regional requirements, such as FinCEN, MSB registration requirements, or PSD2 compliance requirements.

2. Identity Verification and Anti-Money Laundering: Users must complete the KYC process during the payment phase, and ZeroHash can leverage its regulatory license to connect with KYC service providers and conduct AML reviews. This mechanism completes verification off-chain and marks the results on-chain, balancing privacy protection and compliance disclosure.

3. Tax Compliance and Information Disclosure: In jurisdictions such as the United States and the European Union, digital asset transactions may involve capital gains tax. ZeroHash and Swapper should cooperate to generate transaction reports for user or tax authority verification. Meanwhile, the exchange rate data provided by Chainlink can serve as a standard source for assessing the tax base.

4. Cross-Chain and Asset Security: When Swapper Finance conducts cross-chain asset transfers, it must implement strict audit, signature mechanisms, and risk control models to prevent contract vulnerabilities and asset losses. Additionally, it should connect with insurance protocols or on-chain collateral mechanisms to enhance user confidence.

5. Data Transparency and User Protection: In addition to Chainlink providing data support as an oracle, XSwap, Uniswap, and others adopt on-chain public mechanisms, allowing users to verify transaction records, pricing information, and asset flows through block explorers, minimizing information asymmetry.

Industry Significance and Outlook

Behind this collaboration is a cross-industry partnership involving multiple industry giants, with the ultimate goal of achieving interconnectivity between traditional payment systems and decentralized financial ecosystems. The on-chain coin purchasing channel provided by Chainlink and Mastercard not only represents a technological breakthrough but also signifies an innovation in business models. This closed-loop system not only improves transaction efficiency but also brings profound impacts to the entire industry.

1. Integration of Traditional Finance and Blockchain Ecosystem

This collaboration represents a deep integration of traditional financial systems and blockchain technology, especially at the intersection of digital payments and crypto assets. The extensive user base and mature payment system of Mastercard enable the rapid expansion of crypto assets to traditional users. This cross-industry collaboration provides a convenient entry point for traditional financial users, allowing them to purchase digital assets through credit cards without relying on traditional exchanges or wallets, giving more people the opportunity to enter the crypto market.

2. User Experience Optimization

This on-chain native coin purchase closed-loop process allows users to avoid complex cryptocurrency wallet operations or cumbersome processes of centralized exchanges during payment. By integrating with existing financial infrastructure, users can complete payments using familiar credit or debit cards, thus enjoying the fast and low-cost asset transfer experience offered by blockchain technology.

3. Technology and Compliance Go Hand in Hand

In the process of cross-border payments and fiat currency exchange, ZeroHash provides users with compliant clearing and custody services through a regulatory framework, ensuring that this process meets regulatory requirements and that crypto assets are not hindered by regulatory issues during the exchange.

This is particularly important for traditional financial users, as they often have concerns about the compliance and transparency of the crypto market. The involvement of ZeroHash not only provides compliance assurance for this cooperation but also offers a suitable and controlled framework for regulatory agencies around the world. This framework can help financial institutions guide more traditional users into the crypto asset market while complying with the laws of various countries.

4. User Privacy Protection and Data Transparency

Privacy protection and data transparency are two crucial aspects of financial transactions. Although traditional financial systems have strict regulations regarding privacy protection, in cryptocurrency transactions, user data transparency and privacy rights often exist in a balanced state.

As a representative of decentralized platforms, XSwap's collaboration with decentralized exchanges like Uniswap brings its strong market liquidity and trading depth into the on-chain coin purchase process. Unlike traditional centralized exchanges, decentralized exchanges do not rely on central entities but execute trades automatically through smart contracts, significantly enhancing the transparency, security, and censorship resistance of transactions.

As a decentralized oracle platform, Chainlink avoids the manipulation risks that a single data source may bring through its decentralized data transmission network, ensuring the fairness of exchange rate and transaction data, and providing regulatory agencies with effective data tracking and auditing capabilities.

5. Cross-Chain Liquidity Innovation

The integration of XSwap and Uniswap ensures that after users complete fiat payments, they can instantly trade crypto assets through decentralized markets. During periods of significant market price fluctuations, decentralized trading platforms can also help users obtain more competitive prices and smoother trading experiences through optimized algorithms and liquidity pools. As the decentralized finance (DeFi) ecosystem continues to mature, these platforms are constantly optimizing trading mechanisms to enhance the overall user experience and fund security.

6. Market Competitiveness and Industry Outlook

Currently, multiple blockchain projects and payment platforms around the world are attempting to build similar closed-loop ecosystems, and the collaboration between Chainlink and Mastercard will exert strong competitive pressure on them. With its robust compliance assurance and innovative technical support, this model not only provides users with a convenient asset purchasing channel but also lays the foundation for the mainstreaming of the entire digital currency market. As the global regulatory framework for cryptocurrencies continues to improve, the promotion of this model will be smoother and have broad application prospects.

The collaboration between Chainlink and Mastercard provides new ideas for entering the crypto market with fiat currency, creating a complete closed loop from fiat payment to on-chain asset usage for future DeFi applications. Meanwhile, by integrating emerging mechanisms such as decentralized identity verification (DID) and on-chain reputation systems, users' experience and trust throughout the process will continue to improve. This collaboration also presents enormous opportunities for emerging markets, where the limitations of traditional financial systems are particularly evident, such as high cross-border payment fees, insufficient banking services, and financial exclusion issues. By introducing decentralized financial systems, users in these regions can more easily access the crypto market and enjoy low-cost, efficient payment and asset trading services.

Original Author: Huang Wenjing