Several promising concepts have emerged with the daily advancement in FinTech. Among them are cryptocurrencies, a new financial asset category that provides businesses with payment options. The growth of these technologies has given rise to the concept of cryptocurrency payment processing.
The Definition
A crypto payment processor simplifies online transactions with digital currencies across diverse industries. By using specific algorithms to perform mathematical operations, this payment gateway enables the handling of fiat and digital activities. This technology guarantees efficient transaction processing by connecting buyers’ and sellers’ terminals.
The benefits of cryptocurrency payment processing:
The usage of cryptocurrency payment processing is increasing in different industries due to its numerous benefits. It provides an advanced way of managing payments within the country and overseas. The main advantages of using this method are:
1. Security
Advanced encryption techniques are employed by payment processors that allow cryptocurrency transactions to safeguard sensitive payment information. Using blockchain and addresses further strengthens this security by creating a decentralised system that reduces the risk of data theft.
2. Efficiency
An ideal payment gateway for cryptocurrencies should be versatile and efficient, accommodating various assets and currencies. It is crucial to ensure seamless integration with third-party systems through API integration to enhance system efficiency.
3. Worldwide Accessibility
Payment options facilitate domestic and international transactions, offering alternatives for cross-border transactions while accommodating several cryptocurrencies and fiat currencies.
4. Decreased Expenses
Cryptocurrency payment gateways use blockchain networks to significantly decrease transaction fees compared to traditional payment systems. This reduces transaction fees and maintenance costs for merchant accounts.
5. Simple to Implement and Use
Despite their complex underlying structure, using payment gateways is an uncomplicated process, as many of their functions are automated. Some companies that provide white-label cryptocurrency payment processing services enable easy B2B transactions.
Technical Aspects of The Payment Processing
The assessment of the technological aspects involved in processing cryptocurrency payments demonstrates the process’s efficiency and complexity. Whenever two parties engage in a cryptocurrency transaction, the payment system sends a request that includes payment parameters such as the currency type and the amount.
The system generates a unique digital address to ensure security and prevent fraud. A payment gateway acts as an intermediary, verifying additional parameters like the blockchain network, the source address, and the initial transaction data.
After that, the sender’s private key is used to sign the transaction digitally, ensuring its authenticity and preventing any alterations or duplicates.
Transactions waiting for confirmation are temporarily stored in a mempool. Due to the system’s decentralised configuration, the mempool size and transaction time are unique to each node.
Hashing guarantees the integrity of the transaction by converting the transaction data into a unique hash of fixed length, making it impossible to reverse-engineer the original data.
A multi-level verification process is carried out to authenticate the transaction based on the guidelines of the blockchain network chosen, including the number of confirmations needed for validation. These steps ensure secure and verifiable transactions within cryptocurrency payment processing.
Verdict
Due to the high fees associated with traditional payment systems, businesses are discovering that cryptocurrency payment processing is a significant innovation.
Accepting crypto payments is one of the numerous benefits of this technology. The utilisation of digital assets offers fresh opportunities for the development and expansion of modern organisations.
