Many people around the world think of Bitcoin as the first digital currency. And even though it was the first to make it, there were other attempts at cryptocurrencies before it. For example, in 1990, DigiCash created eCash based on the work of David Chaum. Chaum wrote about the concept in a paper entitled “Blind Signatures for Untraceable Payments” back in 1983.
There were other attempts too, including e-Gold, Bit Gold, and B-money, but none of them came to fruition. In 2009, Bitcoin had the success that its predecessors hadn’t, and in 2010, the first cryptocurrency transaction took place—the purchase of two pizzas plus delivery for 10,000 BTC.
With all these attempts at digital currencies and then the success of many ever since, what are the benefits of these payments over traditional ones? Let’s find out.
Lower Transaction Fees
Unless you’re on the receiving end of credit card payments through a business position, you might not even realise the costs of credit card payments. These processing fees are often hidden from the customer and absorbed through the business. But they’re there, nonetheless. The fees from transactions eat into profits—and they’ve soared in recent years. Smaller businesses with narrower profit margins feel this more.
Every time a business accepts a credit card payment, they must use a third-party merchant services provider. Examples include Square and Revolut. These companies supply the hardware and infrastructure to facilitate payments, so they charge fees. Fees are also imposed by the card issuer (e.g. the bank) and the network (e.g. Visa). To summarise, here are all the associated fees
- Interchange fee—the payment charged by the issuer (up to 0.3%)
- Card processing fees—the fees charged by the payment processor (1.5% to 3.5% usually); there may also be monthly fees or equipment lease fees, etc.
- Scheme fees—the fees paid to the network, e.g. Visa or Mastercard (0.1% to 1% typically)
As you can see, these amounts all add up. With cryptocurrencies, however, the network is decentralised, which means there are no third parties to go through. This reduces or eliminates fees. This is especially true for blockchain networks like Bitcoin and Ethereum.
For customers, lower business costs mean lower prices passed on.
Faster Transactions
Payments by credit cards and debit cards often take days to settle. This is especially true if the payments are international. Cryptocurrencies work in the same way no matter where you are in the world. There are no international banking numbers needed and no need to go through different mechanisms to fund an account. That’s why cryptocurrency transactions can settle instantly or within minutes—the actual speed will depend on the chosen cryptocurrency. Some of the fastest cryptocurrencies are Solana (SOL) and Avalanche (AVAX).
Better Security and Privacy
We often think of card payments as secure—and they are, to a point. However, when you pay by credit card, you share sensitive information. This can be stolen and used. Most of us have heard of credit card fraud, and many of us will have even experienced it at some point.
With cryptocurrencies, things are different. Cryptocurrency transactions use blockchain technology. In simple terms, this is a decentralised ledger that records all transactions, and these cannot be altered after the fact. This makes cryptocurrencies secure and transparent. Unlike card payments, there can’t be any chargebacks. Once a payment is made, it cannot be altered or reversed. The ledger is immutable, so there is no need for a central authority. If there is an error, it has to be corrected with another, separate transaction.
Not only does blockchain technology reduce fraud and chargebacks, but it also offers benefits for privacy. This is because you never have to disclose any personal banking details.
This extra anonymity is why it’s become a popular form of payment in online casinos. Many online gambling platforms accept cryptocurrencies alongside traditional fiat currencies. However, there are now also crypto-only casinos and Bitcoin casinos that pass on the benefits of faster withdrawals, lower fees, and increased privacy for players.
Cryptocurrencies are Accessible to All
Once you understand cryptocurrency on its most basic level, it is accessible to you. This is where it has advantages over traditional banking. Credit cards often require credit checks and approval. Some people simply cannot get accept for them. Crypto payments are available to anyone with an Internet connection, which benefits the “unbanked” as well as anyone in a region that has an unstable banking system.
Decentralisation Puts the User in Control
Decentralisation is one of the key benefits of using cryptocurrencies. The removal of intermediaries means users have complete control over their funds—there are no account freezes or bank restrictions, and you’ll never have high-interest fees. You’ll see this way of financing referred to as DeFi (decentralised finance) or open finance. These are the umbrella terms for all aspects of cryptocurrency and blockchain finance applications.
The Future of Crypto Payments—What to Expect
So, what can we expect from cryptocurrencies in the next few years? It’s clear that there are benefits to their use, but mainstream adoption has been quite slow so far. With time, we’ll likely see increasing adoption of cryptocurrencies by major companies, especially now the Bank of America is embracing Bitcoin. There will need to be some regulatory changes to allow this, and both businesses and individuals will need to rethink everything they know about payments if they become the mainstay method.
Crypto Payments are Here to Stay
The benefits are clear. Cryptocurrency payments have lower fees, are faster, and are more secure and accessible—and the user is in control. Although they’re quite young and the rate of adoption is low, there’s no doubt that crypto payments are here to stay. In preparation, businesses and individuals should educate themselves on cryptocurrency transactions, how to invest in reliable digital wallets, and what changes to expect. It’s highly likely that crypto payments will become an everyday reality; it’s just a matter of when.
