Blockchain in Payments
Working principles, network types, consensus mechanisms, DeFi protocols, stablecoins, and CBDCs — a technical guide to blockchain technology and its integration with modern payment infrastructure.
Blockchain Types
Blockchains differ across four axes: who can participate (permission model), how they agree on state (consensus), how they scale (architecture layers), and how they account for value (UTXO vs account). Each choice involves trade-offs in security, privacy, and throughput.
Permission Model
Public Blockchain
Anyone can join as a node, submit transactions, and participate in consensus (with required stake or hash power). No identity required — access is pseudonymous.
Best for: censorship-resistant payments, open DeFi, global stablecoin rails.
Consortium Blockchain
A fixed set of known organisations operate nodes and govern the network. Transactions may be public or restricted to members. Governance is off-chain by the founding consortium.
Best for: interbank settlement, trade finance, wCBDC, supply-chain finance.
Private Blockchain
A single organisation controls all nodes. Functions as an auditable, append-only distributed database within the firm. No token economics needed — consensus is by internal policy.
Best for: internal audit trails, regulatory reporting, intraday treasury settlement.
Layer Architecture
Protocols built on top of Layer 2: payment apps, DeFi front-ends, wallets, identity, and compliance services. No consensus of their own — they inherit security from below.
Off-chain execution inheriting Layer 1 security. Two main types: Payment channels (Lightning — bilateral, near-zero-fee, instant) and Rollups (Optimistic: 7-day challenge; ZK: validity proof, instant finality).
The root of trust: consensus, block production, native token issuance, and settlement. All L2 proofs and channel settlements are ultimately written here. Security budget = validator rewards + fees.
The peer-to-peer transport: TCP/IP, devP2P (Ethereum), Bitcoin P2P protocol, libP2P (IPFS/Filecoin). Responsible for block/transaction propagation, peer discovery, and DoS resistance.
Full Comparison — Production Payment Chains
| Chain | Type | Consensus | TPS (L1) | Finality | Smart Contracts | Primary Payment Use |
|---|---|---|---|---|---|---|
| Bitcoin | Public PoW | PoW SHA-256 | 7 | ~60 min | Limited (Tapscript) | Store of value, Lightning |
| Ethereum | Public PoS | Gasper PoS | 15–30 | ~12.8 min | Full EVM | DeFi, USDC, tokens |
| Solana | Public PoS | PoS + PoH | 65,000 | ~400 ms | eBPF (Rust) | Solana Pay, DeFi |
| XRPL | Public BFT | Fed. consensus | 1,500 | 3–5 s | Hooks (limited) | Cross-border FX |
| Stellar | Public BFT | SCP | 1,000 | 3–5 s | Soroban (Rust) | Remittance, CBDC |
| Avalanche | Public PoS | Snowman PoS | 4,500 | < 2 s | EVM + Subnets | USDC, DeFi, wCBDC |
| Polygon (PoS) | Sidechain | PoS | 7,000 | ~2 s | EVM | Low-cost DeFi, NFT |
| Arbitrum | L2 Rollup | Optimistic | ~40,000 | 7 days (challenge) | EVM | DeFi scaling |
| zkSync Era | L2 ZK Rollup | ZK-SNARK | ~100,000 | Minutes (proof gen) | EVM | Payments, DeFi |
| H. Fabric | Permissioned | Raft / PBFT | 3,000 | Immediate | Chaincode (Go/JS) | Interbank, wCBDC |
Scaling Approach Trade-offs
Payment Channels
Two-party off-chain state. Open channel on-chain (lock funds), exchange signed state updates off-chain, close to settle. Lightning routes payments across multiple channels via HTLCs.
Optimistic Rollup
Executes txs off-chain, posts compressed data to L1. Assumes validity unless challenged within 7 days. Lower proving cost, full EVM support.
ZK Rollup
Executes off-chain, generates a zero-knowledge validity proof posted to L1. Proof guarantees correctness — no challenge period. Fast withdrawal after proof verification.
Sidechain
Independent chain with own consensus, connected to mainnet via a two-way peg (bridge). Can have different trade-offs (faster, cheaper). Security independent of mainnet.