A Payment Gateway for Cryptocurrencies That Isn't Centralized
Attempts to introduce cryptocurrency payment gateways in the past have been plagued by a number of issues. The first is uncertainty, which puts every party holding and settling cryptocurrency into fiat at danger. Another factor is users' inability to pay in a currency that is increasing in value. Scalability and transaction throughput are a third problem. Finally, fees and settlement times have stymied retail payment adoption. If these problems can be resolved, blockchain would be regarded as a much superior payment mechanism to conventional payment systems. The explanation for this is that cryptocurrency gives individuals and merchants control over their money, eliminating the need for multiple parties to mediate transactions and charge fees. If we want to propose a viable decentralised payment gateway based on cryptocurrencies, we need to figure out how we'll deal with the issues listed above: uncertainty, price appreciation, scalability, and fees.
While scalability is being actively worked on across all blockchain ventures, it is still a long way off from supporting transaction volumes comparable to conventional payment rails. Significant progress is being made, so there is reason to be optimistic about scalability improving in the coming years. The other issues listed above will be the subject of this report.
Volatility is the most complex of these issues. Because of bitcoin's fixed monetary policy, it is impossible to solve it directly, but there are ways to mitigate its effect. Traditionally, a merchant has had to rely on a third party to settle transactions into fiat at regular intervals and to protect against price fluctuations in order to accept cryptocurrencies. The explanation for this is because if a retailer owns bitcoin or other cryptocurrencies, their profit margins can be impacted by large price fluctuations. Using a third party to reduce exposure to volatility is a viable option, but it defeats the intent of cryptocurrencies because merchants must relinquish control of their own funds and become entirely dependent on this third party to process their transactions. In addition to losing trustworthiness, this inevitably adds to the payment process's costs and delays.
Merchants would soon be able to process their own cryptocurrency transactions using stablecoins. Stablecoins are a form of cryptocurrency that aims to reduce, if not completely eradicate, price volatility. This article explains how merchants will be able to accept cryptocurrency as payment without being exposed to market risks or relying on third parties.
Stablecoins are important for allowing completely decentralised payment gateways, among other items. We will allow merchants to process transactions using any cryptocurrency once we have a solution for stability. We'll use bitcoin in this example, and the payment flow is as follows:
The merchant downloads and instals an open-source plugin that connects to a bitcoin wallet.
The consumer opts for bitcoin as a method of payment.
An oracle is used to obtain the bitcoin to fiat conversion rate.
The price of the products is shown in both bitcoin and fiat currency.
The client sends bitcoin to the merchant's wallet.
To validate the transaction, the payment gateway integration scans the blockchain.
The bitcoin is sent to an exchange and liquidated into a stablecoin until the transaction is verified.
This process allows merchants to accept bitcoin as payment, but they are not exposed to volatility for long because the bitcoin is immediately exchanged for stablecoins. There is no need to rely on a third party to complete the transaction because it only requires interactions between the merchant, the client, and the open market. The merchant can choose how much they want to convert their stablecoins to fiat, and they can do so using a programme that deposits fiat directly into their bank account. This ensures that the merchant has complete power over their funds before they are converted to fiat currency. This is a major change for the dealer, who has essentially eliminated fraud and is now paying transaction fees that are far smaller than those charged by credit card processors.
It's much more difficult to persuade users to invest cryptocurrency, which is a direct result of most cryptocurrencies' set token supply. When the value of a token is expected to rise, most consumers would be hesitant to invest it, resulting in more speculative appreciation. For both retailers and customers, this raises the cost of doing business. Stablecoins denominated in fiat are one solution to this issue, as users would be able to use stablecoins to make fiat transactions. Users would have no reason to keep stablecoins as an investment if they expect their value to remain stable. Stablecoins have this property, which promotes greater token liquidity: they are best used for their claimed intent, which is as a currency rather than as an asset for storing value.
The final problem is conversion fees; currently, converting crypto to fiat in most markets around the world is reasonably costly. When conversion must happen at regular intervals, these costs may become unsustainable. Customers, retailers, and suppliers can avoid the conversion entirely until stablecoins allow them to transact in cryptocurrencies. This will lower the cost of accepting cryptocurrencies even further, particularly because integration and fraud monitoring costs will be virtually eliminated. This demonstrates how the addition of stablecoins to the ecosystem not only allows for a new generation of applications, but also improves the utility of all cryptocurrencies. A stablecoin reduces the friction of operating between cryptoassets by acting as a universal settlement layer for them.
One of the many enhancements to the ecosystem allowed by stablecoins like Havven is the development of a decentralised cryptocurrency payment portal for online merchants. Please visit our website, https://havven.io, for more information on Havven. We're currently working with a range of Australian payment processors to make this solution available to their merchants. More information will be released shortly.
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