When Bitcoin debuted in 2008, the only people that seemed to pay it any kind of attention were geeks, coders, and cryptography enthusiasts. In the original Satoshi Nakamato’s paper titled Bitcoin: A Peer-to-Peer Electronic Cash System, Bitcoin was described as “a purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.” Over the last 10 years, Bitcoin has opened the proverbial Pandora’s Box on the benefits that cryptocurrencies offer over fiat currencies.
Unfortunately, cryptocurrency is yet to gain mass-market adoption as a means of payments even though that it can fix some of the biggest problems of fiat currencies such as chargebacks, mediation cost, impractically for micro transactions, and outright fraud. The transactional use of cryptocurrency in powering payments is inevitable; this piece provides insight into the current possibilities for leveraging cryptocurrency for payments.
The current state of cryptocurrency payments
Cryptocurrency evangelists, merchants, users, and governments appear to be at dissonance on how best to push the mass-market transactional use of cryptocurrencies. Of course, there are a handful of cryptocurrency projects such as Ripple being built as an enterprise-grade blockchain-powered cross border payments infrastructure. TOSBlock’s (T.OS) is another interesting blockchain projects trying to activate the transactional value of cryptocurrencies. T.OS is using a twin-coin approach of two different coins built on two different blockchains.
The first coin is TOSC, built on a public blockchain, accessible & tradeable on an exchange like every other, and its value rises and fall in relation to the general dynamics of the cryptocurrency markets. TOSC is inherently faster than other major cryptocurrencies because it has a mean blocktime of 1 minute and processes 70 transactions per second while Bitcoin has a mean blocktime of 10 minutes and it processes only 7 transactions per second. TOSC is fast, but it is still subject to volatility.
The second coin is TOSP is built on a private blockchain, it can’t be mined, it is not tradable on exchanges, and you can only acquire it by swapping your TOSC for TOSP in your wallet. TOSP is exponentially faster with a mean block time of 4 seconds while processing 1000 transactions per second. The usefulness of TOSP in payments is however hinged on the fact that the cryptocurrency is immune from the volatility of the general cryptocurrency markets and it is pegged to the local currency of holders on a 1:1 basis. In fact, 1 TOSP will be worth $1 in the US while the same 1TOSP will be worth €1 irrespective of the exchange rates of USD to Euro in the global forex markets.
Some other players trying to facilitate the use of cryptocurrency in payments include Utrust that wants allows buyers to buy stuff with any cryptocurrency which is then immediately converted into fiat for the seller. PumaPay is also trying to leverage blockchain technology to reinvent everyday payments by integrating crypto in existing billing systems. CoinPayment is another platform that allows merchants to accept as much as 880 altcoins through an integrated gateway while paying only 0.50% in fees.
Big brands wary of accepting cryptocurrency payments
Last month, there was a news story that Samsung has signed a partnership deal with a relatively unknown Lithuanian blockchain startup called CopPay. The story had it that using CopPay will enable Samsung’s customers in the Baltic region use cryptocurrency to make in-store purchases. Many cryptocurrency enthusiasts saw the news as proof of the start of the mass-market adoption of cryptocurrencies. However, Samsung was quick to deny the rumors about the supposed collaboration. In fact, Samsung emphatically maintained that it wasn’t in any partnership with the startup.
Earlier this month, another news surfaced that Starbucks is gearing up to start accepting Bitcoin as payment for cappuccino and other food items in its stores. The real story was that the Intercontinental Exchange (ICE) announced that it was creating a “global platform and ecosystem for digital assets” called Bakkt – corporations such as Starbucks, BCG, and Microsoft were some of the high-profile clients that would use the platform.
However, crypto media went ahead to create news reports suggesting that you can buy lattes with Bitcoin. One of such headlines read “New Starbucks partnership with Microsoft allows customers to pay for Frappuccinos with bitcoin.”
Nevertheless, Samsung didn’t waste time in denying the reports noting that they were nothing more than misleading news stories. A Starbucks spokeperson revealed that “customers will not be able to pay for Frappuccinos with bitcoin.” The coffee chain however notes that it will continues to engage regulators, customers, and stakeholders in the cryptocurrency industry as the space continues to evolve.