Cryptoprocessing is the processing of payments in cryptocurrency. The first crypto processor from BitPay appeared in 2011. Today, there are dozens of cryptocurrency processors that allow buyers to pay for goods and services with crypto.
Cryptocurrency payment gateway: how it works
In fact, cryptocurrency payment processing is a service that allows merchants to accept payments in crypto from buyers. This is an intermediary that performs the following main functions:
- registration of data of payers;
- accepting payments from customers;
- sending transaction data to the blockchain and registering confirmation from the nodes;
- converting the received crypt into fiat (at the request of the merchant);
- transfer of payments to the merchant;
- providing confirmation about the success of the payment.
How to pay with cryptocurrencies
Today, cryptoprocessing is already a fairly common tool, most in-demand among online stores, gambling companies, and ticket and tour services.
If you need to pay for a product or service with cryptocurrency, you will be prompted to follow the link to the payment page (the link is generated by the crypto-processing service). As a rule, the transaction must be completed within a limited period of time (for example, 15 minutes). Such restrictions are associated with the high volatility of cryptocurrencies.
On gambling platforms, payment is a little different. Here you need to replenish the wallet in your account, so there is no such hard temporary fixation. On average, the transaction time is from a few seconds to an hour. When using a QR code, it’s even easier – you just need to scan this code.
Types of crypto processors
There are two types of cryptocurrency payment processing.
- Crypto is fiat. With this payment processing model, the merchant receives fiat money in their bank account as a result of the conversion. In this payment processing model, when a customer makes a purchase using cryptocurrency, the transaction undergoes a seamless conversion process. As a result, the merchant receives the equivalent value in fiat money, which is deposited directly into their bank account. This integration of crypto and fiat currencies offers merchants the advantage of accepting digital payments while still enjoying the familiarity and stability of traditional monetary systems. Additionally, it provides customers with the convenience of using their preferred cryptocurrency while enabling merchants to effortlessly manage their finances in a familiar currency.
- Crypto is crypto. Unlike the previous payment processing model mentioned, this particular approach assumes that the seller receives cryptocurrency directly. Moreover, no matter how many types of coins he accepts, he can receive payment in any one crypto asset. This innovative payment model empowers both merchants and customers in the realm of digital transactions. By embracing cryptocurrencies, merchants can tap into a global market and cater to a wider range of customers who prefer using specific crypto assets for their purchases. The ability to accept multiple cryptocurrencies also offers customers the freedom to make payments using their preferred digital currencies, enhancing convenience and fostering greater inclusivity in the crypto ecosystem.
Regardless of which model is used, crypto-fiat or crypto-crypto, cryptoprocessing is responsible for the conversion, exchange rate risks, and the flow of money to the seller’s crypto wallet.
Why does businesses need crypto processing
Receiving payment for goods and services in cryptocurrency is a promising direction. Firstly, the seller can offer its consumers more payment options, and secondly, it can attract new customers who, for various reasons, prefer to pay with crypto.
Other benefits include the following:
1. Safety
Cryptocurrency transactions are securely protected, and data about them is stored in the blockchain and cannot be changed. When a cryptocurrency transaction occurs, it is securely protected through encryption, making it virtually impossible for unauthorized parties to intercept or manipulate the data. One of the key security features of cryptocurrencies is the immutability of the blockchain. Each transaction is recorded as a block and linked to the previous block, forming an unalterable chain. Once a block is added to the blockchain, it becomes a permanent part of the ledger and cannot be modified retroactively. This ensures that the transaction history remains transparent, verifiable, and resistant to any unauthorized changes.
2. Commissions
Cryptocurrency transactions are much cheaper. The use of cryptocurrencies often eliminates the need for intermediaries such as banks or payment processors, reducing associated transaction fees. In traditional financial systems, transactions often incur various fees, including processing fees, currency conversion fees, and cross-border transaction fees. These fees can accumulate, especially for international transactions or those involving multiple currencies. In contrast, cryptocurrency transactions typically have lower or even negligible transaction fees, regardless of the transaction size or geographic location.
3. Geography
Crypto can easily be used around the world. Typical bank cards or electronic wallets are not always as successful for making payments from one to another country.
4. Reliability
There are many reasons for the rejection of the traditional processing of a transaction, while it is impossible to block a cryptocurrency payment. In traditional financial systems, transactions can face rejection for various reasons, such as insufficient funds, technical glitches, or compliance issues. These rejections can cause delays, inconvenience, and frustration for both buyers and sellers. Conversely, with cryptocurrencies, once a transaction is initiated and broadcasted to the network, it becomes nearly impossible to block or reverse.
The decentralized nature of cryptocurrencies, powered by blockchain technology, ensures that transactions are processed in a distributed and consensus-based manner. When a transaction is submitted, it undergoes a verification process by network participants known as miners, who validate its authenticity and add it to a block on the blockchain. Once a transaction is confirmed and added to the blockchain, it becomes a permanent and immutable record, providing a high level of reliability and security.
5. Efficiency
Withdrawal of funds from an electronic wallet in some cases may take up to a week. Cryptocurrency withdrawal is much faster.
That is, accepting payments in crypto is promising, profitable, and convenient. But a natural question may arise: why does a business need cryptoprocessing? After all, in order to receive payment in the crypt, it is enough to have a cryptocurrency wallet.
If you choose whether to develop your own cryptoprocessor or use the services of an existing service, then the first option can be safely called an unjustified waste of time, effort, and money. It is much more profitable and easier to integrate a ready-made solution from a third-party organization, which will be responsible for the smooth operation of the service, adding new coins, user support, etc.
