Speed Is Critical for Crypto Payments to Succeed
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Developments in personal computing and connectivity have encouraged consumers to sport “always-on” lifestyles. Everything seems conveniently accessible. Information can be readily obtained through search engines. Thoughts, no matter how mundane, can be easily broadcast to the world with just a few taps on a screen.
This growing ease and convenience has encouraged customers to expect highly optimized user experiences from the apps and services that they use.
According to Google, 53 percent of visitors leave pages that take more than three seconds to load. This level of impatience applies to audiences across industries. In the case of e-commerce, speed and performance translates to revenue potential. Ensuring quick page load times can increase sales. Slow loading times can cost online retailers $2.7 billion annually.
Because of this, e-commerce efforts must now prioritize speed and convenience when building interfaces. Each part of the service must be carefully optimized to create a speedy and frictionless experience. Perhaps most critical is the checkout stage. 28 percent of customers say that long and complicated checkout processes lead them to abandon their shopping carts.
Businesses now know how important payments is to their bottom line. As such, digital payments have become a much highly competitive space. Banks and tech companies are all working on their own respective payments platforms and services.
Payments solutions providers have even turned to blockchain and crypto technologies to gain an advantage. Blockchain does bring key advantages to the payments space. Security and auditability are critical to finance.
The Need for More Speed in Crypto
More businesses are also contemplating supporting cryptocurrencies as payment method. Thanks to the crypto boom last year, crypto’s early adopters now have buying power and they are looking for ways to easily spend their assets.
Unfortunately, it is in user experience where crypto payments has hit a snag. Early efforts like Bitcoin have proven to be wanting for the payments use case. Despite being the pioneering cryptocurrency, it has failed to take off as digital money because of how slow and inefficient it is for real-time payments.
For ICOs and cryptocoins one of the more important things to look at is transactions per second (tps). Most days, it can only handle between two to three tps. Confirmation also takes several minutes to complete. When congestion hits the network, confirmations can even take several hours making Bitcoin a bad fit for the speed demanded by e-commerce and retail.
This slowness is largely because of how Bitcoin was designed. Aside from the ten-minute block time, Bitcoin uses proof-of-work (PoW) as consensus algorithm. PoW is slow and requires immense amounts of computing power and resources to perform.
Subsequent projects have worked on specifically overcoming Bitcoin’s limitations with speed and scalability. Finance-focused crypto platforms Ripple and Stellar were both designed for financial transactions in mind. Ripple claims that its network is capable of handling 1,500 tps for on-ledger transactions while Stellar asserts it can process 1,000 tps.
Up-and-coming payments platform T.OS uses a hybrid multi-token system to maximize the benefits offered by blockchain. It has a public blockchain token (TOSC) designed for transparency and auditability. It also features TOSP tokens used on fast private blockchain designed specifically to settle payment transactions. TOSP is actually pegged to the currency the user resides in, making TOSP a stable coin for payment to merchants across the world. This approach enables T.OS to handle 1,000 tps.
These speeds show that these more recent crypto payments projects can compete with other digital payments solutions. PayPal is reported to handle around 200 tps. Visa may state a capacity of 24,000 tps but it only processes a fraction in reality. Ripple even claims that it can exceed Visa’s figures since it can scale up to 50,000 tps for off-ledger transactions.
With the network speed and capacity becoming comparable, what crypto payments need now is to contribute to the enhancement of user experiences. The reason why card companies like Visa continue to be among the preferred processors is because of their ubiquity not just in digital payments but in brick-and-mortar as well. Users are also familiar with card technologies. They require little effort in on-boarding consumers and merchant.
Crypto payments must offer innovations that would make interfaces more intuitive and frictionless. It would not matter if the blockchain network is even capable of handling 1 million tps if users need to perform 20 steps just to pay using crypto. Better integration with commercial e-commerce systems and better merchant services are also needed to improve the overall experience and satisfy an increasingly impatient audience.
Fortunately, these blockchain projects are working towards such improvements by creating interfaces and applications that bridge the gap with what is currently available and familiar to users.
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