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Blockchain And Payment Systems: A Shared Future Awaits?

07 February 2019 17:16, UTC
Blockchain And Payment Systems: A Shared Future Awaits?
By Aleksandre B

Cryptocurrencies and blockchain technology arrived on time. Our world is rapidly shrinking, and the distance is not a problem anymore in most cases. People from all over the globe are able to communicate regardless of borders. Local markets are opening up, goods and services from around the world penetrate them. Consumers need some payment instruments that could serve the global market at the appropriate level: with sufficient speed, at an adequate price, while being reliable and safe.

Blockchain based payment systems — who needs it?

Payment systems

In the current state, traditional payment systems hardly cope with their work: the speed of operations is low; transaction cost depends on many parameters and is generally high. The widespread transition from cash to cashless payments leads to an avalanche-like expansion of payment system industry. Increasing complexity, reduced security, control and support of channel performance, network nodes and data centers require some serious resources.

Consumers

It does not matter how many borders a blockchain-driven transfer or payment crosses. This will not affect either the speed or the cost of the transaction.The data that the parties send via payment blockchain systems are not at risk of disclosure, since during the transfer they do not fall into the hands of intermediaries.

Blockchain and cryptocurrency payments can be used by people who do not have accounts in the traditional banking system. Internet access and a simple smartphone is usually enough.

Business

Sellers can offer their goods and trade them with consumers from every corner of the globe — without bank accounts, without waiting for a cross-border transfer, without high transaction fees.

The introduction of settlement systems in cryptocurrency or blockchain application is easy and does not require significant investments for any type of commercial enterprise: points of sale, online stores, retailers.

Central banks, governments and state regulators

The backbone institutions of financial systems are also interested in technology that will simplify and make their work more reliable. A close but cautious interest in blockchain and cryptocurrency is currently shown by government agencies and financial regulators.

If everyone is interested, why hasn’t blockchain won yet?

So, everyone has a demand for blockchains and cryptocurrencies: consumers, government agencies, businesses. However, the blockchain and cryptocurrency are still far away from the ubiquity.

There are several reasons:

  • The world of blockchain and cryptocurrency is still very young, the technology has not stood the test of time yet and was not tested in global market conditions.
  • There are problems with system scaling and with the speed of transactions, and both market leaders, Bitcoin and Ethereum, are clear example of this.
  • Consumer distrust. Widespread adoption will not happen as long as the system does not get the fuel to run, which is liquidity in sufficient quantities. But ordinary consumers are not in a hurry to invest money in the crypto world. Indeed, for most people, cryptocurrencies and blockchains are something mysterious, incomprehensible, perhaps dangerous and not related to everyday life.
  • Restrictions of state regulators. The infusion of sufficient funds into the cryptocurrency market and blockchain is impossible without the permission of state authorities who control the economy. The fight against criminal capital and the prevention of uncontrolled financial flows are two good reasons to block the adoption of non-fiat currencies.
  • Doubts of big business, financial and commercial structures. While the benefits of new technologies are obvious, government restrictions, an uncertain future in terms of legislative regulation, unpredictable and large-scale fluctuations in cryptocurrency rates force businessmen to be cautious.
  • The banking system does not want to share a piece of cake. New technologies have led to the emergence of new players who are already opposing themselves to traditional financial institutions openly. Eventually, they will have to share.

Payment systems on blockchain

Storm on the cryptocurrency market and existing difficulties with legislative regulation do not stop entrepreneurs and enthusiasts: lots of various payment systems, processors, services and applications, offering services of receiving payments and organization of transfers, have already appeared.

Some projects are just getting ready to seize the market and collect large sums from investors who believe in the success of their business model; others are successfully working with the transfers of ordinary users for a long time; the third promote their products in the interbank market; the fourth specialize in organizing services for sellers and buyers. Let’s take a closer look at some of them.

Ripple — a successful bank integrator

For this company, the situation on the market is quite successful. It is promoting its own protocol of interaction between banks and their own cryptocurrency that is circulating in the transaction exchange system.

Chris LARSEN, the head of Ripple, still appears in the Forbes lists as one of the richest people in the world; the company makes new contracts with different banks and payment systems. Ripple is focused on a specific, but profitable industry, where impressive funds are circulating, and successful cases of technology implementation leave no doubt — the company is firmly on its feet and does not intend to lose its leadership.

Stellar — a company that grew out of Ripple

The head of Stellar, Jed MCCALEB was one of the founders of Ripple, but he left when the differences with other founders have reached a peak. The reasons for the breakup — Ripple’s monopoly on all the technology, complete control over the system with the ability to make changes to the project’s code at its sole discretion, the distribution of a large number of previously issued tokens among the company's owners.

Stellar quickly got rid of Ripple’s legacy and began to develop in its own direction: in addition to the payment organizing protocol, this platform became the basis for carrying out ICO by other projects, competing with Ethereum. The fund that manages the Stellar system is open and publishes data enabling the control over its expenses, the resource allocation and future plans.

With the assistance of IBM the platform creates a blockchain technology payment system that will rival traditional payment systems.

BitPay — the old American payment processor

This company was founded in 2011 in Atlanta, USA. Nowadays, BitPay is one of the leaders in the field. BitPay conducted several campaigns to attract investments that were noticed by investors and made it possible to raise tens of millions of dollars for business development.

The company provides payment services via two cryptocurrencies: Bitcoin and Bitcoin Cash. BitPay customers are individuals and companies. For the former, a debit prepaid VISA card and a BitPay cryptocurrency wallet are provided. For the latter, there is an email billing service, an online payment organization and an application for integrating cryptocurrency payments into POS terminals of retail stores.

BitPay commission is 1% of the transaction and does not depend on the size of the accumulated amount of payments or any other conditions. The client gets the opportunity to keep his funds on the company's deposit in cryptocurrency or immediately convert them into fiat currency and transfer them to the bank account. Another BitPay’s service that is attractive for sellers is the integration with existing marketplaces and trading platforms. The choice is wide: you’ve got sore ready-made solutions, and there is also a possibility of independent integration of payments based on the BitPay API.

CoinGate — payment gateway for Bitcoin and altcoins

CoinGate was founded in 2014 and developed as a service designed to make the use of cryptocurrencies in everyday life simple. The company offers a range of services for both individuals and enterprises.

You can buy and sell bitcoins or buy altcoins with CoinGate in various ways: by signing up to the service, within your wallet, via bank transfer, with your credit card or through the Skrill payment system.

The company offers several ways of receiving cryptocurrencies for merchants: they can turn a smartphone into a POS terminal by installing an application for iOs or Android; install a plug-in or module in the e-commerce system that is used in sales. Another way is a "Pay Bitcoins" button, which can be placed on the website; additional fine-tuning for the needs of the business can be performed when using the company’s API.

Commissions of CoinGate are 3% per transaction when trading cryptocurrency and 1% per transaction for the sellers. Special conditions are offered for the enterprises.

PayBear — payments in cryptocurrencies and... the bear

Founded in early 2017, the company provides businesses with the opportunity to sell their goods and services for cryptocurrencies. Technically, the basis of PayBear blockchain based payment solutions is the Ethereum platform and its decentralized applications based on smart contracts.

The PayBear client has several plug-ins for popular e-commerce systems: Magento, OpenCart, PrestaShop, WooCommerce and PayBear API for payment service self-integration. In the near future, the company plans to introduce another plug-in for the Shopify system.

PayBear customers can make payments in seven types of cryptocurrencies, including Bitcoin, Ethereum and LiteCoin. The addition of eleven extra cryptocurrencies is on the way.

PayBear's commission is charged during the transaction between the buyer and the seller and ranges from 1 to 20 Gwei, depending on the chosen confirmation rate. Payment from the buyer goes directly to the seller’s wallet. At the moment, PayBear does not provide the conversion of crypto into fiat money, but there is a point in the 2019 roadmap of the project that promises the appearance of this function.

Coinbase Commerce for sellers

Coinbase is a digital currency exchange based in the United States, and Coinbase Commerce is one of its business lines. The clients, owners of commercial enterprises, are provided with a payment system integration service that accepts various cryptocurrencies as payment for services and goods.

A merchant who decides to become a Coinbase Commerce customer must create a separate account on the exchange system. It is the newly created wallet that will receive payments from buyers. The system does not charge a transaction fee for buyers in cryptocurrency, and the seller’s account is isolated from the regular exchange account.

Coinbase Commerce offers plug-ins and modules to integrate its blockchain and payment systems with the most popular e-commerce platforms.

What’s happening now and what’s next?

Many honored companies and projects offering blockchain technology in payment systems are left outside this review, such as CoinPayments, GoByte, CoinsBank, MenaPay. It is just impossible to cover all the worthy options in one article.

The cryptocurrency market is getting used to life after a prolonged fall. The views of observers, analysts and traders are directed towards the US Securities Commission. Will it allow or not? Will the institutional investors come with their bags of money? Will the new ups and downs begin? Will it be possible to make money on trading again?

In the current situation, entrepreneurs who are, on the one hand, developing their payment systems, and on the other hand, equip their stores with modules for receiving cryptocurrency, may seem insignificant and inconspicuous. After all, blockchain and payment systems — what are the benefits and costs of all of this, is it worthy at all? But, perhaps, it is they who do the most important and promising work: they attract new participants to the cryptocurrency world. Then maybe ordinary consumers will succeed more than large financial institutions in boosting some power to the sluggish market, making it more natural and appropriate?

Image courtesy: DCEBrief



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