Cryptocurrencies were created about a decade ago with the purpose to make cross-border transactions more affordable, accessible and secure for everyone.
Bitcoin, the first cryptocurrency ever, defined itself as a “way for people to send money over the internet.” And there is certainly no better way to define cryptocurrencies today. Cryptocurrencies are digital currencies that can be used as a mode of payment. theoretically, you can use cryptocurrencies to pay for anything, anywhere in the world. This is where cryptocurrencies beat fiat currencies, as their utility is not limited by regional boundaries and is not controlled by centralised entities like banks.
Holders are the complete owners of their cryptocurrencies and can use them however they want. Even the value of cryptocurrencies is not governed by centralised entities and is purely based on supply and demand.
Doesn’t that make cryptocurrencies a risky option for payments?
Yes, it does. Because the value of cryptocurrencies is not regulated and not centrally controlled, they have high volatility, i.e. the price of digital currencies can rise and drop significantly and abruptly based on the market sentiment.
This is one of the reasons why cryptocurrencies cannot be accepted as a global medium for payments, yet. But, things are about to change.
There are now available cryptocurrencies that come with a stable price tag. These are called stable coins and have their values often pegged with a fiat currency like the dollar. USDT or Tether is a popular example of a stable cryptocurrency.
Why cryptocurrencies are a great medium of digital payments
Cryptocurrencies are the future of payments today because of the following reasons.
They are absurdly secure: Because cryptocurrencies operate on the principle of cryptography and every transaction on the blockchain (underlying technology) is encrypted and publicly stored, payments using cryptocurrencies are very secure and nearly impossible to manipulate.
Lower fees because there are no middlemen in crypto payments. Currencies are sent directly from sender to receiver over the blockchain network and using smart contracts. No middlemen cost and very low network fees. This is particularly beneficial for cross-border payments and can be used by businesses and individuals alike.
Unlimited reach, as cryptocurrencies are not limited by borders. Anyone, anywhere in the world can use cryptocurrencies to securely make/receive payments. This will enable people to access financial and other services that are traditionally either very costly or unreachable.
Prevent chargeback fraud: E-commerce merchants and retailers using cryptocurrencies will be safe from chargeback fraud, as all transactions on the blockchain are transparent, and a chargeback request for an order can be easily verified to avoid wrong refunds to buyers.
In addition, using cryptocurrency for payments gives you more access to global brands along with the ability to pay securely for your online/offline purchases. At the same time, it enables businesses to offer more flexibility of payments to their customers, ensuring they don’t loose potential sales because of limited payment options. Cryptocurrencies are global, secure and cost-effective.
As the demand for crypto-based payments systems is rising, many startups are developing their own crypto payment systems available in the form of mobile apps and ready to integrate into existing business systems. Libra Coin (LC) is a perfect example of this. Through Libra Pay, a mobile app-based payment system, any business can start accepting payments using the Libra coin from their customers anywhere in the world.