Cryptocurrencies in Commerce: Have the Growth Barriers been Eliminated?

cryptocurrency commerce

The evolving functionality of groundbreaking crypto solutions attracts the greatest attention from market majors, like Barclays, Maersk, and Kodak, or even whole governments like Dubai. This interest makes sense, though, because distributed ledger technology handles both of the fundamental industrial problems as well as the non-monetary issues (like identification and verification).

However, the intense competition in developed markets has forced companies to provide cost leadership and strictly optimize internal processes in order to escape excessive margin pressure. According to a Cambridge Center for Alternative Finance survey, nearly 30% of all existing blockchain projects are targeted towards financial services and commerce. They facilitate large businesses to optimize expenses and get end-to-end transparency and traceability for leadership in supervision and control procedures. This article will provide an overview of the crypto technology in commerce, along with its key challenges and solutions.

Why the blockchain?

It is necessary to guide you through the purpose of blockchain for finance. First of all, the blockchain holds the promise of reducing the “trust-gap” in actions of the participants by making transactions independently verifiable by each participant. This improvement of accountability effectively eliminates fraudulent activities in many areas of business and society. Eventually, the secure value – transfer system can be achieved by reducing intermediary service providers (e.g. central securities clearing houses).

Main industry segments – wallets, exchanges, payments, and mining – form well-defined conditions for cooperation with cryptocurrencies and payment processing. They include, but are not limited to, the following ones:

The majority of existing cryptocurrencies with various degree of success tries to satisfy big business with these factors, even taking into account industry and business specialties.

cryptocurrencies

Cryptocurrencies’ implication in commerce

  • Monero: Being one of the most anonymous platforms, thanks to the ring signature, Monero has become a very popular currency on the darknet, among the companies and individuals who exclusively use it for anonymous payments. Generally, it helps you to clear your Bitcoin transaction history by hiding the account balance and not allowing anyone to fairly track you only by transaction volume.
  • Ripple: There are speculations that Amazon could accept cryptocurrencies on its marketplace soon. The first one could be the XRP token for faster and cheaper international payments. The choice of the currency is justified by the stability of the price of the currency. Moreover, the rise in supply lowers volatility and protocol specifications accelerate the transaction speed up to 10 seconds, in comparison with  Bitcoin’s 10 minutes.
  • Ethereum: JP Morgan Chase initiated the Quorum – an ETH-based network designed for interbank cross-continental payments. It creates conditions for lowering transaction fees that, in turn, influence commerce companies’ profitability and establish new types of commercial businesses. Based on management discussions, the platform is still in its early-days, but it plays a transformative role in business and becomes extremely successful even beyond financial services.

Moreover, the companies are preferring ICOs because the middleman is eliminated and the clients profits are maximized. Such a project is BANCA (an ETH-based cryptocurrency for the investment banking community). It lowers the bank’s profit maximization principle, because the ability to secretly allocate opportunities between preferred customers is prohibited and restricts insider trading due to the transparency of the data, equity, and transaction recording.

What is the potential of the blockchain in commerce?

Last year can be described as a period of the highest growth and volatility in the history of cryptocurrency, despite the fact that companies are not completely intended to use it in a large-scale implementation. The plentiful amount of solutions are not “turnkey” ones. They require a lot of R&D work, they are not practical, viable (profit-wise) or need more ramp-up time. According to a Thomson Reuters survey, even if only 20% of companies are planning to invest in cryptocurrencies, most of them are bringing advisors to consult with on this theme or opening their own departments for research in this direction (Goldman Sachs and IBM’s joint investments in the Digital Assets Holding).

financial commerce

The potential of the blockchain in commerce was also discussed by PwC Researchers. They came to the conclusion that  “many firms still struggle with making a digital transformation, even as their future growth may depend on it and new technology can attract new types of competitors.”

To a wide extent, technological problems can be divided into two groups: a small amount of expensive transactions and safe, secure, and instant payments issued. Specifically to cryptocurrencies, Bitcoin has an overloaded network and low transaction performance, Ether is relatively slow, energy-hungry, and their smart contracts are still not guaranteeing safety, Ripple is too private, and XRP is not decentralized enough. Actually, there is no product on the market that is absolutely suited for large-scale business process transformation.

Thus, the efforts of developers are targeted to solve these downsides. Here is where the room for technical component optimization from some inventive projects comes into play. Such examples are actively appearing on the market, but the product by Fiii Group – FiiiPay and the LITEX project – work exclusively and exhaustively under the abovementioned problems.

Transactions problem solving cases

A traditional blockchain weakness is that payments cannot be fast and instant. That is why FiiiPay invented the Hybrid Payment Network to make Bitcoin, Ethereum, and other cryptocurrency payments be transferred in a blink of an eye. The HPN is a workaround for the blockchain that treats all crypto wallets as bank accounts, not as digital wallets. All operations are processed and centralized in a single-payment system. Such a version is similar to PayPal or AliPay, forcing payments to be executed immediately. Moreover, the transaction fee of 0.01 USD is lowest on the market, which is great, especially in conditions of tremendously growing payment gateways.

With LITEX, there is a completely decentralized payment ecosystem built on the model of YeePay’s star product (a non-bankcard payment solution) along with the BOLT (Blind Off-chain Lightweight Transactions) Protocol. The LITEX network enables crypto purchasers to pay fiat money to stores on behalf of customers for goods, and the customers repay them in cryptocurrency. The whole process is insured by smart contracts with no need for any centralized structure. This is achieved through two-level architecture – the first one is about to match the payments and fiat money requests, and the second secures the payment channel. With a growing number of nodes, LITEX can handle the plentitude of payments necessary for daily operations with a logic of distributing the transaction fee among all of the participants involved.

Security and safety problem solving cases

The Fiii’s HPN allows for system processing for payment confirmation more than twice, using both a decentralized system and traditional banking verification logic. A self-learning AI integrated into the user apps works as a hardware watchdog. For example, if the average of your spending is around 10–100 USD in FiiiPay, when you want to spend it on goods more than 1,000 USD, it will trigger the FiiiFinance to stop the payment and request verification. As a merchant, you can possibly withdraw your sales around the first day of every month for an average of 10,000 USD. When you suddenly withdraw any suspicious amount in the middle of the month, it will also trigger FiiiFinance for verification.

LITEX’s strict division of off-chain and on-chain operations maintains privacy protection. Micropayments happen only in the off-chain environment, using the on-chain one only for confirming the results. Transaction information is not recorded on the mainnet and each node can only obtain data from up and downstream ones with no access to the details of the conducted transaction in the network. The security of funds is also guaranteed, because the trading channel can be managed at any time, as it is protected by smart contracts.

Conclusion

As a generalization to the topic above, it is unavoidably obvious that crypto business is experiencing a boom in organic growth in terms of capitalization, popularity, and functionality. They do change and optimize not only the fundamental processes, but they also even challenge the US Dollar Standard, cut out the middleman, and simplify funding procedures. This is despite the fact that the new age in “global economy adjustments” is limited by existing technological shortcomings in terms of security, transaction speed, and cost. A large business has good reason to doubt and not implement the blockchain to its full capacity, but they should closely monitor its development. A new technological breakthrough is only a matter of time, and one should be ready for a new revolution.

All materials on this site are for informational purposes only. None of the material should be interpreted as investment advice.

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