How often do you think about what happens "under the coffers" every time you make a payment with your debit card or your cryptocurrency investments? You could ask yourself which of the two methods of transferring value is more complex when all you see is that your payment has been successful. These two following graphs, published on by Crypto researcher Kevin Rooke, provide an approximate picture of the comparison between paper and cryptocurrency payments in terms of simplicity and intermediaries.
Graph left: over $ 8,000,000,000 in e- commercial payments are based on this process each year.
– Kevin Rooke (@kerooke) 11 September 2018
Here's a tip: Every time you make a payment with your credit or debit card debt, the payment processing network charges the seller an average of about 3% of the monetary value of the transaction for the convenience of taking the plastic, and this is already on top of the interest rate you are already paying on your credit card . Credit card companies are basically "double-dive" because they can get away with it, even when most people prefer to swipe a card instead of messing up money.
When you pay with cryptocurrency, it is you who pay the transaction fee. In the days when Bitcoin does not deal with the congestion bad enough to significantly increase transaction fees, one of Crypto's main selling points is that sending cryptocurrency payments can be much cheaper than using of Western Union, an expensive and slow payment processing service for global transactions.
Number of intermediaries a problem
The graph showing what should happen for a credit card payment has several steps due to the number of intermediaries involved in the processing of a centralized card payment. There is an aggregator of payments, the seller's bank, the credit card network and the customer's bank. It is a lot of entities with fingers in the cake and everyone will want to be paid to act as intermediaries in every single transaction. Then, they work together to charge sellers a percentage of each transaction.
This second chart describing the route taken by cryptocurrency payments indicates the relative simplicity from portfolio to portfolio. It's much simpler because blockchain-based transactions do not have to go through all the steps to be confirmed.
The graph seems to be missing a step. Payments have yet to be processed, validated and confirmed, but it is impressive, to say the least. With card payment networks, this requires four intermediaries. With cryptocurrencies, this requires only access to processing power and to nodes that store transaction data. The transaction fees paid by the sender of the transaction are intended to pay the owners of mining platforms confirming the transactions but may be lower because they reduce the number of intermediaries involved.
Manager of entrepreneurs: if sellers could give up the plastic and the commissions that come with it while still providing cost-effective payments to their customers, they would probably do it. Retailers may be more competitive when they can stop paying 3% of every credit card purchase for abusive occupations in the payments industry.
Customers will appreciate the convenience of paying by simply scanning a QR code instead of digging a plastic card from their wallet. Still they will not have to worry about what happens under the hood if their transactions can be confirmed in a few seconds, at most. They might also like that information on their credit card can not be stolen if they are not stored on anyone's computer system.
In an environment where so many Bitcoins are overfocused on cryptocurrency prices, it may not be easy for Bitcoin to keep up with its existing competition. Any crypts that can successfully compete with Visa and Mastercard will have abandoned the mentality that cryptocurrency is only useful as an investment vehicle and has paid attention to making it useful to people who simply want to make their daily lives.
As these two graphs demonstrate, cryptocurrencies can reduce transaction costs by reducing the number of intermediaries involved in transactions. This means opportunities for sellers who want to be more competitive and entrepreneurs willing to do the work of building cryptographic technology and blockchain to make it useful for true large-scale adoption.