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Altcoins are coming for bitcoin (BTC). Many of them – ethereum (ETH), cardano (ADA), EOS, XRP – were initially conceived more as utility tokens for blockchain platforms than as means of payment.
But increasingly, many of them are turning to payments, while an expanding range of third parties are building payment services around them.
According to the payment industry, this change is happening for a variety of reasons. From the emergence of Facebook Balancing the growth of stablecoins and the higher scale offered by some blockchains, altcoins have targeted a growing interest in crypto payments, also demonstrating their ability to meet that growing demand.
Other payment options
In November, Cardano announced the launch of a new crypto payment system, AdaPay. Aimed at merchants, AdaPay allows users to accept payments in ADA with “near instant” settlement in 35 fiat currencies.
Such payment movements have been a recurring theme among altcoins over the past year.
For example, XRP was initially aimed at financial institutions looking for real-time gross settlement systems, but is now expanding to payments more generally.
In February, it announced an agreement with the money transfer service Intermex provide remittance services between the United States and Mexico. And in October, its developer initiative, Xpring, announced a partnership with the leading crypto payment processor BitPay, whereby BitPay would begin allowing merchants to accept XRP as payment.
While altcoins aren’t launching new payment systems on their own, many are increasingly signing agreements through which they will be accepted by services.
In September, BitPay announced that it would start accepting payments in ETH, for example. Likewise, payment gateways GoCoin announced in May that it would accept ETH and EOS, as well as BTC.
Then there are the numerous examples of third-party companies launching payment services around the existing crypto ecosystem. In November, digital payment service provider Wirex announced the launch of its Wirex Visa Travelcard, which would allow users to spend ETH, XRP and other currencies overseas.
It is not a surprise
But why is this movement happening? Per Sean Mackay, transaction manager at the payment processor CoinPayments, the emergence of Libra and governments’ interest in blockchain-based payments has prompted private companies to be more involved.
“Recent discussions on Libra have sparked discussions about government-controlled digital currencies, showing that the trend is moving away from cash and towards digital currency,” he says. Cryptonews.com. “Based on this trend, it should come as no surprise that more startups and companies are focusing their efforts on the digital payments space.”
Quite simply, the speed and efficiency offered by crypto-based payments is motivating a greater demand for such payments, so businesses and crypto projects have increasingly moved to meet the growing needs.
“Blockchain payments offer a better customer experience than traditional or legacy payment methods,” explains Bill Zielke, CMO of BitPay. “While these benefits aren’t a surprise, the pace of adoption that occurs is.”
Zielke points out that leading brands such as APMEX, AT&T is Dish Networks are accepting cryptocurrency payments via BitPay (and other cryptocurrency payment services), in order to “attract new users and sales at lower costs than traditional payment methods.”
‘Encourage growth’ and stablecoins
It’s still in its infancy, but most payment service providers report that there has been very encouraging growth in the adoption of altcoin payments.
“Over the past year, we have added around 10 new currencies for the convenience of our users, and some of them have been hugely successful, such as XRP,” says Veronika Mishura, CoinGate Marketing Manager.
“While it was not originally created as a payment currency, it has proven it can function successfully as such.”
As a December CoinGate blog pointed out, XRP experienced 174% usage growth between February 2019 and the end of the year. Similar increases are seen elsewhere.
“BitPay has only recently started accepting ETH, XRP, USDC, GUSD and PAX,” says Zielke. “We see great promise in providing our customers with choice, and while the data is new, we are seeing encouraging growth and we expect the growth to continue.”
Interestingly, other payment service providers are reporting considerable growth in the area of stablecoin usage. “Tether payments have increased since the beginning of 2019,” says Mackay.
According to data from CoinPayments, Tether accounted for only 5% of the payment volume in January and February. Between October and December it accounted for 32%.
Who will win?
According to Mackay, stablecoins are a variety of cryptocurrencies that are superior to BTC in terms of utility as a payment token.
“Tether and other stablecoins are the best cryptocurrencies for daily payments as they don’t have a volatile exchange rate and allow merchants more flexibility and time to decide whether to store or convert.”
However, stablecoins are not considered cryptocurrencies, while BTC is superior in terms of decentralization.
That said, most payment gateways are pretty neutral when it comes to predicting whether bitcoin will be a dominant payment method or whether it will be overtaken by altcoins.
“In our opinion, bitcoin and altcoin can easily coexist as a payment method,” says Mishura. “However, it is again up to users to decide what is best for them.”
But according to Mackay, a prediction of which cryptocurrencies will become dominant can be made indirectly, without naming names.
“Moving forward a few years if and when prices start to stabilize, cryptocurrencies that are highly liquid and have a quick confirmation time will be considered better payout coins as consumers won’t have to wait for transactions to be confirmed and traders will be able to make them clear their coins with ease. “
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