Large retailers and small businesses alike have started accepting cryptocurrencies and tokens as payment for their products and services. These companies and their customers utilize crypto payment gateways - services that allow merchants to accept cryptocurrency as a payment option - to simplify the process of using cryptocurrency to pay for everyday items on most e-commerce platforms, on any website, in a mobile app, or even offline.
At its most basic level, a crypto payment simply transfers cryptocurrency from one crypto wallet to another. To do this manually, users need the recipient’s public wallet address. They copy and paste the receiving address into their own wallets and send the funds. It may seem simple, but this process can be cumbersome and intimidating to crypto newcomers. It is common for users, both new and old, to make irreversible mistakes such as sending the wrong crypto to a certain address or selecting the wrong blockchain network. These mistakes often lead to significant losses as the transfers are generally irreversible.
To make payment processes more foolproof, cryptocurrency service providers have created more intuitive crypto payment methods. These gateways turn the complicated token transfer process into one that can be done in just a few seconds with just a few clicks. The exact steps differ depending on the payment processor, but they typically rely on mobile devices, QR codes, and digital wallets.
Another crypto payments option is to use a crypto-linked credit or debit card. To use a crypto card, users store coins and tokens with their card provider. When they purchase something, the cryptocurrency exchange sells the crypto for the required fiat and sends this to the payee. You can use crypto cards in more places than crypto payment gateways as both Visa and Mastercard offer crypto card options through different financial service providers.
There are many advantages of crypto payments for both consumers and retailers. Cryptocurrencies are accepted in the vast majority of countries around the world, therefore, there are few geographical restrictions when sending cross-border payments. Crypto payments are near instantaneous and typically far cheaper than traditional credit card or bank account transfer methods. Finally, crypto payment gateways have become very intuitive and easy to use.
While there are many benefits of using cryptocurrency payments, there are still some drawbacks to overcome. Cryptocurrency prices experience high volatility and the price of an asset you use to purchase an item can change between the time a purchase is made and the time until the payment transfer is actually settled. Users may also have to undergo stringent know your customer (KYC) and anti-money laundering (AML) processes before being allowed to use payment platforms. Finally, the cryptocurrency industry is still in its infancy and crypto payments are not yet widely accepted.
The crypto and blockchain industry is still fledgling, but as it grows, so will the ability of people to use cryptocurrency and tokens to buy and sell everyday items - both on and offline.
Crypto payment solutions were one of the first use cases of blockchain, but now let us shift focus to a newer blockchain and smart contract sector - decentralized finance or DeFi - continue to the next lesson!