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Oct 23, 2021

Are you considering making the switch to a blockchain-based payment system?

Like it or not, cryptocurrency is practically everywhere these days and no longer just for day traders and nerds. In fact, many ecommerce businesses are integrating cryptocurrency into their platforms in some form, or using it to accept payment from their customers. But, should you?

Blockchain is the technology that allows real-world payment transactions to be tamper-proofed. It functions as an open or shared ledger using distributed computer algorithms, allowing transactions to be processed without the need for third-party verification. This technology's introduction is somewhat ironic. Its initial function, when it was revealed to the public in 2008, was to enable electronic cash transfers between users without the need to go through banks, which caused a lot of drama between institutions at the time. Most institutions now support bitcoin, and the technology behind it is used to improve the bank's financial and operational services after eight years.

We'll look at the history of blockchain, as well as what a blockchain payment system is and how it works, in this blog.

To comprehend what a blockchain payment system is, we must first examine the blockchain's overall history. In his essay "Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Group," cryptographer David Chaum first introduced the concept of a blockchain-like protocol in 1982. Stuart Haber and W. Scott Stornetta provided a more detailed explanation in 1991. They needed a system that couldn't be tampered with or changed when it came to document timestamps. Later in 1992, Stornetta, Haber, and Dave Bayer added Merkle tries to their original idea, which improved their previous work by allowing multiple certificate documents to be stored in a single block.

Satoshi Nakamoto created the first computerized version of the blockchain in 2008, and he improved on it by using a hashcash-like method to put a timestamp on blocks without the need for a third party. He also devised a method of regulating the rate at which blocks are added to the chain. Satoshi's design served as a key component in the development of the first cryptocurrency, bitcoin. The bitcoin blockchain file size, which included all information and records of mining, transactions, and exchanging, reached 20GB in 2014.

After a few months, the file size increased to 30GB, and then to around 50GB and 100GB in January 2016 and January 2017, respectively. The size had grown to around 200GB by the beginning of 2020.

In Nakamoto's whitepaper, the words block and chain were used separately at first, but later in 2016, they were combined into a single word, blockchain. According to the application of the theory of diffusion of innovations to Accenture, this technology has a 13.5 percent adoption rate in monetary services in 2016. This means that blockchain technology has reached the early adopter stage, prompting industry trade groups to form the global blockchain forum, a chamber of digital commerce initiative launched in 2016.

What is a blockchain payment system?

You should understand how payment systems work before switching to a bitcoin payment processor. A payment system is a system that transfers monetary value from one point to another in order to settle and process a financial transaction. People, instruments, rules, organizations, institutions, standards, procedures, and technology all contribute to the ability to exchange money. A person may, for example, attempt to make a payment or initiate a transaction, and the payment system facilitates this.

So, what is a blockchain payment system and how does it work?

A blockchain payment system is a promising technology that enables individuals to make and process cryptocurrency transactions. The block gain payment system provides underbanked people with access to monetary value in the form of cryptocurrencies, and then the services provide a way for them to send these values to others using smart contracts to ensure their safety and speed. Numerous businesses provide blockchain payment system services, as well as the ability to convert transactions into any currency.

How does it work?

The most well-known blockchain payment system operates and processes mostly bitcoin transactions. Some of them are only for small businesses that want to collect and process bitcoin transactions. However, by using the blockchain technology that bitcoin uses to transfer other unconventional cryptocurrencies, other blockchain payment systems can be used on a larger scale. This allows them to avoid the traditional banking system, lowering costs and speeding up payment. The system exchanges the payer's cash for bitcoin, which is then exchanged for the receiver's traditional currency. As a result, payment times can range from one to three days.

Should you switch to a blockchain payment system?

The traditional financial system is currently very difficult, and this difficulty is resulting in risks. By eliminating the layers of intermediaries that clog the traditional payment system, a blockchain payment system built on a decentralized financial system can make payments much easier. It is one of the tools we have to combat risks in the current payment system, and by sending and receiving money in a variety of ways, we may encounter the possibility of having a plethora of financial products.

By lowering borders or boundaries and triggering payment competitions among organizations, blockchain technology could open up the financial system to people who are currently excluded in some way. Payment regulators would then restructure the financial system by determining the most efficient ways to implement policies while maintaining high standards. Systematic risk can be significantly reduced, but regulators and users are left in the dark. Researchers discovered that increasing the transparency of a payment system increases trust and lowers the cost as well as the intermediary chain for its users.

If you'd like to learn more about the technologies behind these blockchain-based payment systems, visit COINQVEST.COM and see how simple and painless cryptocurrency payment systems can be for your company.

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Martin Dominic Banguis Head of Marketing