In what has become a somewhat fragmented ecosystem of fork platforms since Bitcoin first entered the scene in 2009, multi cryptocurrency payment gateways represent a more direct payment platform and are viewed as a welcome development. But how do they work?
As the name suggests, the most obvious feature of multi cryptocurrency payment gateways is the ability to send and receive payments in more than one cryptocurrency. Beyond the advantage of this increased compatibility, the majority of potential users may not be aware of the innovations within this stage that enable crypto transactions to occur: from the functionality of smart contracts to the consensus algorithms behind the self-maintenance of the blockhain as a whole, each component behind multi cryptocurrency payment gateways has a key role.
However, beyond the question of how multi cryptocurrency payment gateways work technically, the question on the mind of many undecided users of cryptocurrency is how these gateways work in practice for everyday payments, and how they compare to gateways designed for traditional fiat transactions.
Conventional cryptocurrency payment gateways: Limitations in a fragmented environment
In an attempt to recognise cryptocurrency as a viable future alternative to fiat for online payments, conventional payment gateways have arguably limited the scope for this reality considerably. With a multitude of hazards and limitations, users of a conventional gateway are required to switch currencies when shifting from one fork to the next.
With the arrival of over 500 forks from the original Bitcoin cryptocurrency since 2011, the natural solution to this dilemma is a blockchain-based payment gateway capable of accepting multiple cryptocurrencies. This makes the experience almost as seamless as using traditional online fiat payments.
Blockchain-based payment gateways: Key advantages
Despite the unique challenges in making crypto-based online payments when compared to the seamless fiat-based gateways we’ve all become accustomed to, several advantages of using cryptocurrency not only mitigate some of these shortfalls, but mean they’re also a better choice than a fiat-based gateway in some purchase scenarios. One such innovation is the automated smart contract.
Although not enabling quite the same instantaneous experience when using a fiat-based payment gateway, smart contracts enable crypto transactions to be approved by both parties within only 15 to 20 seconds. This may seem lengthy compared to fiat-based alternatives, but it can be over 100 times faster by removing the need for third-party approval entirely. This, coupled with the increased transparency and anonymity facilitated by the blockchain, may lead many otherwise hesitant users to switch to Bitcoin for private and less time-constrained online purchases.
Smart contracts: The solution to a fragmented crypto ecosystem?
As a vital step towards achieving the same ease and speed of use as fiat-based payment gateways, the smart contract is a notable milestone in blockchain technology.
A smart contract is a protocol that oversees the performance of a contract by integrating the terms specified by the agreement directly into the blockchain code. By excluding the need for a third party to audit a transaction to ensure that these terms are fulfilled, this added automation has not only enabled more complex contracts to be integrated into ICOs for investment applications, but also has the broader effect of drastically reducing the cost per each transaction. Ultimately, these are much better ingredients for mass-market adoption.
However, just as the arrival of smart contracts has increased liquidity and formalised the agreements needed for ICOs to engage with potential token buyers, this functionality has also extended to automating other previously manual procedures such as voting management, the defining of interactions between ubiquitous platforms, the management of property portfolios, and even medical applications.
The implication? This arrival of smart contracts may not only indicate an increasing relevance of crypto-based payment gateways when compared against fiat alternatives, but – as with previous disruptive technologies – may also be impacting other industry sectors as a by-product.
An example payment gateway: A segue to fiat-crypto integration?
Here is an example of a payment gateway that incorporates this new technology as well as multi-cryptocurrency functionality.
BitPay
Founded in the United States, BitPay is a leading Bitcoin payment processor, and has been under development since the early days of Bitcoin in 2011.
The BitPay app enables you to include Bitcoin payment functionality into more than 40 integrations with popular point-of-sale systems and e-commerce platforms. Additionally, this gateway enables you to convert cryptocurrency into eight fiat currencies, supported by 38 different countries.
Most interestingly, beyond this enhanced functionality of harmonising integrations across multiple cryptocurrencies and platforms, the ability to crossover to fiat currency when required may mean an added layer of convenience for the online consumer for differing purchase speeds and behaviours, whilst also retaining the traffic and relevance of cryptocurrency as a relevant payment alternative to fall back to.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.