Tempo adheres to its L1 strategic choice: payment priority over tokenization.

TL;DR

Tempo is an EVM-compatible Layer 1 blockchain supported by Stripe, with its core focus on stablecoin payments rather than stock tokenization . Key reasons the team chose L1 over Ethereum's L2 include: a decentralized validator set ensuring long-term neutrality; sub-second deterministic finality (unaffected by L1 latency); native stablecoin gas fees; dedicated payment channels guaranteeing predictable fees; and providing sovereign-grade infrastructure for global partners such as Visa, Mastercard, and UBS. While Ethereum's L2 dominates the RWA tokenization space (over $102 billion in stablecoins), Tempo, addressing the unique needs of high-frequency payment scenarios, opted for an L1 architecture to achieve performance determinism and regulatory compliance.

Core Analysis

Tempo's actual positioning: Payment-first network

Launched in September 2025 by Stripe and Paradigm, Tempo is not a project focused on stock tokenization, but rather a Layer 1 blockchain optimized for stablecoin payment scenarios . Its core application scenarios include cross-border remittances, bulk payments, embedded finance, microtransactions, AI-assisted commerce, and tokenized deposits.

The lineup of design partners validates this positioning: payment and financial institutions such as Visa, Mastercard, Deutsche Bank, UBS, Shopify, Revolut, Klarna, and Payoneer, rather than traditional security tokenization platforms.

Tempo's official reason for choosing L1

1. Decentralized verification node set ensures neutrality.

Paradigm co-founder Matt Huang explicitly pointed out that the L1 architecture enables the establishment of a decentralized set of validator nodes, gaining the trust of thousands of partners and avoiding reliance on a single platform. This is particularly crucial for global financial institutions—who distrust centralized or single-sequencer-controlled systems.

In its initial phase, Tempo uses licensed verification nodes (design partners and independent nodes), but plans to transition to a completely license-free state to ensure long-term neutrality.

2. Sub-second finality vs. L2 inherited latency

Tempo achieves deterministic finality in approximately 0.5 seconds through Simplex Consensus , with a target throughput exceeding 100,000 TPS. Matt Huang emphasized that L1 can achieve true sub-second finality, while L2 is limited by the settlement latency of the Ethereum mainnet (optimistic rollups require 12 minutes + 7 days of dispute period).

Stripe CEO Patrick Collison pointed out that existing blockchain TPS is insufficient to support payment scenarios (Bitcoin is about 5 TPS, Ethereum is about 20 TPS, some L2/Solana are about 1000 TPS, while Stripe's peak TPS exceeds 10,000 TPS). The L1 architecture enables Tempo to guarantee deterministic settlement latency , rather than relying on the volatility performance of external networks.

3. Stablecoin native gas fee system

Tempo supports direct payment of gas fees using any USD-denominated TIP-20 stablecoin , without requiring the holding of the volatile native token. The built-in AMM automatically converts stablecoins into the tokens preferred by validators.

While this feature is theoretically feasible on L2, it requires complex bridging and liquidity management. L1's native design makes all major stablecoins (USDC, USDT, etc.) first-class citizens, with extremely high fee predictability (aiming for less than $0.001 per TIP-20 transfer).

4. Dedicated payment channels isolate congestion.

Tempo introduces a dedicated payments lane , reserving block space specifically for payment transactions. Even during peak NFT minting or transaction periods on the network, payment transactions can still be processed at a stable cost. This block space isolation mechanism is difficult to implement or responds slowly on L2.

5. Built-in protocol layer for regulatory compliance

Tempo embeds compliance tools at the protocol layer, including ISO 20022-compliant comment fields, protocol-level black/white lists, role-based access control (TIP-403 policy), and pause/destroy functionality. Optional privacy measures allow transaction details to remain confidential while maintaining compliance and auditability.

While L2 can also achieve these functions, the L1 architecture provides sovereign-level control , and partners do not need to rely on Ethereum governance or upgrade paths.

6. Flexibility in custom consensus and gas pricing

Matt Huang stated that while L2 theoretically enables multiple validator nodes, custom channels, and gas pricing, it is complex and slow to iterate in practice. L1 allows the Tempo team to have complete control over the consensus mechanism, finality guarantee, and economic model, without being limited by Rollup frameworks (such as OP Stack and Arbitrum Orbit).

Ethereum L2's dominance in RWA tokenization

L2 tokenization trend data (as of December 2025)

Market size : Ethereum L2 network holds over $102 billion in stablecoins , and the total market value of RWA reached $370.73 billion (data as of December 9, 2025), with stablecoins accounting for $300.4 billion and project tokens accounting for $19.9 billion.

Key Cases :

• BlackRock BUIDL : The US Treasury Tokenization Fund is deployed on Ethereum L2, enabling second-level settlement and cost reduction.
• Deutsche Bank : ZKsync-based permissioned rollup supports security tokenization operations.
• Sony Soneium : Based on the Optimism L2 network, it processes millions of transactions daily (financial and gaming asset tokenization).
• Own Network : Ethereum L2 supports instant trading of stocks, gold, and bonds; 500,000 users; monthly trading volume of $370 million.
• Société Générale and JPMorgan : Issuance of EUR/USD stablecoins and deposit tokens with integrated KYC/AML on Base (L2)

Advantages of L2 over L1

L2 restrictions relative to L1

Comparative Analysis: Payment Scenarios vs. Tokenization Scenarios

Why is L2 leading the way in security tokenization?

1. Security First : Security tokenization emphasizes inheriting Ethereum's decentralized security features, rather than pursuing ultimate performance.
2. Ecosystem Liquidity : L2 directly connects to the Ethereum DeFi ecosystem, allowing tokenized assets to seamlessly interact with on-chain liquidity (Own Network's monthly trading volume of $370 million validates this advantage).
3. Regulatory signals : The SEC and EU's clear legal status of Ethereum reduces institutional compliance risks.
4. Costs are controllable : After EIP-4844, L2 fees already meet the needs of institutions for bulk tokenization (at the level of US cents).

Why does Tempo insist on using L1 for payments?

1. Performance determinism : High-frequency payments require sub-second deterministic finality and predictable micro-costs ; L2's L1 dependency introduces uncontrollable latency.
2. Sovereignty requirements : Global payment networks such as Visa and Mastercard need neutral infrastructure that is not affected by Ethereum governance.
3. Scenario differences : Payment transaction volume (Stripe peak 10,000+ TPS) far exceeds that of security tokenization, requiring dedicated optimization rather than general-purpose extensions.
4. Independent ecosystem : Payment compliance (ISO 20022, dedicated channels) and DeFi interoperability requirements differ, so there is no need for strong reliance on the Ethereum ecosystem.

Community discussion and controversy

Supporting L1 viewpoints

• Value of Independence : Decentralized validator nodes operate from day one, avoiding the risk of single-sequencers and providing long-term neutrality guarantees for institutions.
• Performance Guarantee : Low-latency settlement and stablecoin interoperability are better suited for high-frequency payments than L2 constraints.
• Differentiated positioning : The payment-first network complements, rather than competes with, general-purpose Ethernet L2.

Critique of L1

Analysts such as Alon Muroch questioned that all the features listed by Tempo (payment channels, stablecoin gas) could technically be fully implemented using Ethereum L2 , and that the choice of L1 might be more due to valuation and market positioning considerations than the necessity of product technology.

Critics point out:

• Missing out on the Ethereum ecosystem : Abandoning native composability and shared liquidity with Ethereum DeFi
• Initial Centralization : The permission verification node phase weakens the credibility of neutrality claims.
• L2 Migration Expectations : Some observers predict that Tempo may eventually migrate to an L2 architecture.

in conclusion

Tempo's choice of the L1 architecture is not aimed at the stock tokenization market (where Ethereum's L2 architecture already dominates), but rather at a differentiated strategy for high-frequency stablecoin payment scenarios . For global payment networks that require sub-second deterministic endgame, predictable micro-fees, ISO 20022 compliance, and neutral sovereign infrastructure, the L1 architecture offers advantages in technological certainty and governance independence.

Ethereum L2's success in RWA tokenization (a $370.7 billion market) demonstrates its advantages in security legacy, ecosystem liquidity, and regulatory clarity, but these advantages are less valuable for payment scenarios than for tokenization scenarios. Tempo's partner lineup (Visa, Mastercard, UBS) suggests that for traditional payment giants, performance certainty and sovereign control are more critical than ecosystem interoperability .

Ultimately, this isn't a debate about the merits of L1 versus L2, but rather a difference in scenario suitability : security tokenization prioritizes the security and ecosystem benefits of Ethereum's L2, while high-frequency payment scenarios benefit from the performance guarantees and neutrality commitments of dedicated L1. Whether Tempo can deliver on its technological promises and establish a truly decentralized verification network will determine the long-term rationality of its L1 choice.