The Future of Commerce: Why Cryptocurrencies Can Replace Traditional Payment Processing

Published in

Purse Blog

8 min readAug 24, 2018

What is the future of commerce? Will it include Bitcoin or other cryptocurrencies? Despite the current market status, we think so. Here’s why.

The Illusion

Traditional Transaction Systems are SO GREAT… I really love:

waiting extra long for my paycheck to come in every month when I have to pay rent
allowing banks to control me and the way I invest
high international fees when I send my overseas cousin a birthday present
mega-long processing times
complications of sending and receiving money

Oh wait… traditional transaction systems kind’ve suck. How could we forget?

But, somehow, in the distance, we can see a beacon of hope… a potential solution, soaring through the sky.

Oh wait- that’s just a Bitcoin.

Ever thought that Bitcoin and cryptocurrencies could be the solution for the weaknesses of cash currency? We have!

After reading this article, you will learn about:

The problems with traditional transaction systems
The answer to the problem: Bitcoin and cryptocurrencies
The challenges of Bitcoin
The future of cryptocurrencies

So what’s the problem with traditional transactions?

Today, a bulk of the world’s money is moved around through various Electronic Funds Transfer systems, or EFT’s. They all require a clearing house to process the payments, which significantly slows down the payment process.

The ACH (Automated Clearing House) is the largest of these ETF’s. It clears and settles over $38 trillion annually including card payments, payroll, insurance, bills, and remittances.

Managed by the Federal Reserve Bank, ACH evolved from clearing physical checks, and it still utilizes mainframes from the 80's.

Even modern-day tech services are using this outdated transaction method..

Despite EFT technology being significantly outdated, a lot of modern day digital payment structure relies on this technology: Paypal, Venmo, Alipay, and Square all use ACH to clear their payments.

Credit card processing is also another common way to exchange money between two parties. But that too relies on old technology, and has a rather ridiculous cycle.

For example, let’s consider the following scenario:

You go to an online appliance store and decide to buy a $100 blender.

This is what happens when you use a credit card to make your transaction:

You use a Visa credit card to make your $100.00 blender purchase.
The online appliance store (merchant) will pay a 2% merchant fee and a $0.25 transaction fee, so the appliance store only gets $97.75.
Your bank will also take $1.80, and sends Visa $98.20.
Visa charges 11 cents, and sends that to the merchant.
The bank takes 33 cents and sends $97.75 back to the merchant.

Mapped out, it looks like this:

The transaction funds pass through so many intermediaries here, which severely impacts how long it will take for the merchant to get his money... this process also siphons a percentage of the original value of the item. The result is unreasonable for the shopper and unfair to the merchant.

Why could Bitcoin be the future of commerce?

Bitcoin uses a network called a blockchain, which can process payments significantly faster than the old electronic payment networks.

The blockchain can be thought of as a series of interconnected ropes

Rather than having to get processed through a clearing house, the blockchain can easily get third party verification, due to its open-sourced nature.

After being verified, the transaction is logged on a public ledger, which can be accessed by anyone.

Instead of trusting institutions, participants trust the network. Instead of a 500 page operating manual, blockchain technology is open source (meaning it’s design is public and not owned by anyone).

That means you can near instantly send and receive money for, very often, a fraction of the cost it would have taken to use the other guys.

And it doesn’t matter if sending money next door or halfway across the world.

The most popular currency, Bitcoin, is the poster child of blockchain technology’s success. With it, payments usually clear up in 10 minutes, and up to two hours at latest if you are transferring a large volume.

Here is a chart comparison of using Automated Clearing Houses and Bitcoin.

To convince you further, here are:

The Top Ten Reasons Bitcoin Can Replace Cash Currency and Become the Future of Commerce

Bitcoin is decentralized and digital— there is greater control of funds, which translates into financial independence, a great positive in the future of commerce.
Online shopping becomes easier. Why? Bitcoin is already located on the Blockchain technology loop and connected to an online e-wallet.
Bitcoin has a global acceptance rate. With time and adaption, it can become more stable than local currency. Bitcoin is currently serving as an alternative currency for nations experiencing inflation. Check out Venezuela’s story.
There is no real way of tracking cash currency. Since digital currency is backed up by the Blockchain proof of work, there is a public record that can keep track of every Bitcoin transaction, increasing the rate of security.
Bitcoin is seen as a preferable way to invest. There’s no international conversion process, and it’s considered on-par with the Gold Standard. No restrictions imposed by governments.
Bitcoin is peer-to-peer and open, yet secure. P2P exchanges are conducted using a public/private key-pair cryptography.
Fraudulent duplication of Bitcoin is impossible, a leg up from traditional currency.
Bitcoin is a great way of maintaining records for tax purposes: Once transferred, a bitcoins’ ownership also gets transferred. This means that two people cannot be transacting on the same value.
Bitcoin is transnational — meaning that there are no boundaries to this international currency.
And instead of taking holidays like banks, the blockchain never sleeps. 🤷‍️

Bitcoin Challenges

Bitcoin is a drastic improvement over credit card processing and ACH, but this future of commerce still has some early-stage problems.

Bitcoin’s fees can be considered too steep and often falls victim to wild fee fluctuations.

For example, back in December 2017, the median fee for a Bitcoin transaction was $34. Someone who was sending $40 could expect around a $15 dollar fee, nearly half the value!

Why was there a fee spike?

Instead of operating on a fixed fee structure based on how much is being transacted, Bitcoin transaction fees are dependent on the volume being traded globally. And the miner takes a profit.

Back in December 2017, the height of Bitcoin’s recent popularity, Bitcoin was traded too many times, resulting in massive fee spikes.

The Jaunary 2018 fee spike happened during the largest bull market any cryptocurrency has ever encountered. Bitcoin was at its peak, but it was also preparing for its dip.

Gaming and distributor companies, like Valve, just started accepting Bitcoin payments, but they had to remove that payment option because the fees were too high.

For a while, the future of commerce/Bitcoin looked grim. There was a lot of concern about fees eventually cannibalizing transfers.

But circumstances improved… tremendously.

The median fee has since reverted back down to reasonable numbers thanks to improvements made to the technology.

However, the radical fee spike had some minds worried. Can Bitcoin really replace the old ACH technology if fee spikes keep happening? Realistically, could crypto become the future of commerce?

The Future of Commerce: Other Cryptocurrencies too?

Using a similar Blockchain structure to Bitcoin, other networks & coins could revolutionize the movement of money.

One such cryptocurrency that has peaked a lot of interest is Ethereum.

Proponents argue that Ethereum is significantly faster and cheaper than Bitcoin.

Ethereum is able to process payments within seconds, and only a few minutes at max, for a tiny fraction of the cost of Bitcoin.

Other coins such as Litecoin, Ripple, and Bitcoin Cash could also be serious contenders too. They are all fast and currently below 50 cents for large transactions.

The Crypto Community

If anyone has any question about Bitcoin or it’s community strength, simply check out Reddit.

Since the nature of cryptocurrency is so decentralized and peer to peer, it doesn’t surprise that Reddit it a large hub for cryptocurrency conversation.

/r/Bitcoin/- nearly 1M members
/r/Bitcoincash/ — about 34K members
/r/ethereum/ — About 350k members
/r/btc/ — 220K members. Bitcoin Cash conversations
/r/cryptocurrency — 700k members, general crypto discussion

Don’t get me started about Twitter…

The Bitcoin/cryptocurrency community seems determined to fix any problems to ensure the future of Bitcoin is the future of commerce and the solution to the global economy.

Still, tokens like Ether also have a lot of potential as a currency, especially for niche groups where it is more likely to be accepted.

The fee fluctuation might have been a major setback for Bitcoin back in 2017, but the great thing about Bitcoin is the community behind it.

But really, any of the cryptocurrencies listed will be a vast improvement than ACH and credit processing.

Today you learned about:

The problems with ACH and EFT’s
Why cryptocurrency could be the answer
The challenges of Bitcoin
Alternative Coins & Networks
The strong cryptocurrency community

Interested in building the digital currency movement into the future of commerce? Use Bitcoin, Bitcoin Cash, Ethereum, and MORE on Purse.io to get discounts on everything you need from Amazon.