The crypto industry in 2023 could see an uptick in Bitcoin payment services, as well as customers and merchants using crypto for payments.
With every passing year, the adoption of cryptocurrencies consistently increases, with more people reportedly owning, hodling, or using cryptocurrencies for payments. Digital assets have come a long way from their outlook as merely speculative instruments to respected assets with exciting and applicable use cases. Today, people use crypto for everything from investments to payment services via assets like Bitcoin (BTC).
The uptick in using Bitcoin and other cryptocurrencies for payment services threatens traditional payment systems on some level. This is because crypto services address the weaknesses plaguing existing frameworks for payments. Common problems with traditional systems include long settlement times, costly transactions, and many intermediaries.
The Current State of Bitcoin Payment Services
Crypto suffered quite the bear market for most of 2022, such that even the largest cryptocurrencies by market cap had little to nothing to show for the year. Although still the world’s largest crypto, BTC lost about 65% of its market value in 2022. The bear market extended into 2023 and is still uncertain, even though the king coin has been slowly fighting its way up over the last few weeks. The ETH market was similar in 2022, losing more than 66% but retaining its position as the second-largest crypto asset by market cap.
Regardless of the bear market, the number of merchants and customers seeking to initiate or complete crypto transactions is increasing. According to stats provided by payment processor Bitpay, Bitcoin is still the asset most commonly used for transactions. BitPay also saw a 15.5% increase in crypto transactions between 2021 and 2022, from 58,000 to 67,000. In addition, a report published by BitPay and payment data provider PYMNTS revealed that nearly 80% of all crypto consumers use Bitcoin for in-store and online payments.
Centralization of Payment Services
One of the biggest criticisms of Bitcoin payment services is the largely unavoidable centralization. For a blockchain as decentralized as Bitcoin, the payment services connected to the network are usually centralized.
There are quite a few reasons for this centralization. For instance, Bitcoin payment service providers usually function as a bridge between the Bitcoin community and the traditional market. They help merchants receive Bitcoin from a buyer and convert the BTC into supported fiat currencies at current market prices before crediting the merchant. Since payments are involved, these services are sometimes required to implement certain KYC and AML requirements.
Another reason for their centralization is compliance with financial rules and regulations. Although the Bitcoin blockchain is decentralized, payment services that use the network must maintain centralization to ensure easy compliance with relevant laws and regulations. Many regulators require these providers to retain control of user accounts, which may be useful if one or more accounts are complicit in fraudulent transactions.
Decentralization and Bitcoin Payment Networks
Decentralization is the distribution or transfer of control, information, supervision, and functions to a large group of entities instead of retention with a single entity. Enforcing decentralization eliminates the need for trust between members of the network, so no entity is strong enough to circumvent rules and regulations or abuse its power. This is why decentralization is essential for payment networks.
A decentralized payment network system supports the transfer of value between users or customers without trust. All network operations are secure and transparent such that any member of the network can verify transaction authenticity and audit the network. There are more than a few benefits to decentralized payment networks. They include:
- Data Reconciliation: Anyone can view all available blockchain data in real-time. This way, there is little to no chance of data loss or transaction manipulation.
- Reduced Risk of Error: Since governance is a collective effort instead of an individual one, it is nearly impossible for anyone to tamper with transactions.
- Resource Distribution: A decentralized payment network system distributes resources and ensures adequate incentivization of participants. Decentralization ensures that resources are optimally spread and utilized to avoid any strain on one or more network members.
- Financial Access: Decentralization in payment systems helps to bring financial access to millions in rural, developing, or otherwise unreachable areas. The ease and quick access enjoyed with blockchain payment systems ensure a low barrier of entry, which guarantees access to more people than traditional systems satisfy.
Most Bitcoin payment services are centralized, as this may be the only way to comply with legal requirements. However, users of centralized payment gateways still enjoy the benefits of the underlying decentralized blockchain, which ensure that funds are safe, transactions rarely fail, and data remains immutable.
Examples of Bitcoin Payment Services
The following are a few examples of Bitcoin payment services:
- Blockonomics: Blockonomics users enjoy very low fees and non-custodial direct-to-wallet payments. While the first 20 transactions are free of charge, subsequent ones cost a flat 1% fee. Merchants can also accept Bitcoin, create invoices, and customize payment buttons on their websites for a more attractive user interface. Since Blockonomics already supports more than 10,000 shops worldwide, users can rest assured the payment processor has evolved to simplify its processes for all users. All these and more are available to merchants who can complete the Blockonomics registration process within 5 minutes without any documentation or KYC requirements.
- Confirmo: Also known as BitcoinPay, Confirmo is a Bitcoin payment gateway that lets users send direct crypto payments from their USD or EUR balances. Confirmo supports Bitcoin, Litecoin (LTC), and several fiat currencies, including CAD, JPY, GBP, and CNY.
- BitPay: With BitPay, users can buy and spend crypto using a credit card, debit card, or Apple Pay. Merchants using BitPay for custodial services can manage multiple wallets and secure funds in the non-custodial app.
Conclusion
Bitcoin payment services continue to serve hundreds of merchants looking to integrate cryptocurrency into their businesses. These services also help customers who would sometimes rather spend crypto than fiat. As the Bitcoin market continues to grow and adoption increases, the industry will likely witness the entrance of more Bitcoin payment services and a corresponding market force to match the service providers.