One macchiato, please — Wait, do you accept cryptocurrencies?
Today, digital wallets not only bring in the unbanked — those without bank accounts or credit cards — into the mobile payment ecosystem. They also accept cryptocurrencies. After all, coin marketcap lists over 1,500 cryptocurrencies, both coins and tokens, today.
The question though, is, how far away are we in Southeast Asia from being able to buy our priceless espresso drinks with our cryptocurrencies? What comes between you and your macchiato tall?
If you think we are still lightyears away from using cryptocurrencies, take in these facts: The Arizona state Senate has passed a bill that will allow taxes to be paid in cryptocurrencies. In Japan, crypto exchanges are required to be registered by the government. In Chile, the first bitcoin exchange launched in 2015 was funded by the government. In South Korea, locals can buy bitcoins in 7-Eleven stores. Cryptocurrencies have the potential to be an alternative to existing forms of payment such as credit cards that are saddled with high fees and low approval rates. They can move from your digital wallet to another person without using intermediaries such as a bank or a credit agency.
In their current form, however, cryptocurrencies are not yet practical to use in common payments contexts. Price volatility aside, here’s why:
Large transaction fees still exist. Bitcoin, for instance, charges fees for its mining operations that verify transactions on its blockchain.
These fees could be higher than what credit cards charge and fluctuate over time.
Bureaucracy. Only a few establishments support cryptocurrencies. Figuring out which establishments support cryptocurrencies as a medium of payment is in itself a barrier to its use.
Low speed. The speed per transactions in Bitcoin or Ethereum’s networks is significantly slower than that of current payment providers Visa or Paypal. For Bitcoin, it could take up to an hour of waiting before a transaction is verified by enough computers and entered into a block. This is because of the artificial limit of 1MB of data allowed per block that core developers placed into the code.
Irreversible transactions. Bitcoin’s immutability is an added security of its system. However, as a medium of exchange, its lack of an “undo button” can be a headache to a consumer. In contrast, credit cards, bank account transactions have options to be reversed where needed.
Blockchains such as that of Bitcoin and Ethereum do not rely on one central server to process transactions or store funds. These are also the permission-less types. The cryptocurrencies work on the idea that every node — or the connection point in the blockchain’s distributed relay network — has a record of every transaction and validates everything themselves to make sure there is no double spending.
“We at Traxion.tech are also aware that for a cryptocurrency to be effective as a payment option, it must integrate well with consumers and businesses’ existing financial arrangements. It should be able to offer buyer and merchant protection mechanisms,” said CEO Ann Cuisia-Lindayag, CEO.
Credit: Originally published at business.mb.com.ph on March 15, 2018.
Traxion.Tech is building solutions that will help businesses transition to a crypto-ready economy. It is using Hyperledger Fabric, a permissioned-type blockchain.
For more information, visit its website or its other stories under the Traxion.Tech publication in Medium.
