By on ALTCOIN MAGAZINE
A couple of weeks ago, by which merchants get paid when you buy something from them. Today, we will discuss how payment gateways can save merchants up to 70% in processing fees.
For this example, we are again using a $1,000 purchase made online. The traditional payment gateways we are looking at are PayPal, Stripe, and Square. Each of these gateways has a similar fee structure of 2.9%, plus $0.30 for PayPal and Square, or $0.25 for Stripe. Square has the quickest processing time of 1–2 days, with PayPal coming in at 3–5 days.
By contrast, most of the popular crypto payment processors charge around 1%, with . For a breakdown of transaction times, read on below the image.
For the sake of simplicity, we will look at transactions made in . The average transaction needs 6 confirmations from miners to process. Depending on traffic on the network, this can take anywhere from 15 to 90 minutes. As block confirmation is determined by the network, the likelihood of a quicker confirmation can be increased by raising the fee. This is a small reward offered to miners on the network to perform the first confirmation. Historic fees can be , and in April ranged between $0.20 and $2.15 per transaction.
The transaction process is as follows:
1. Once the payment is initiated from the customer’s to the merchant’s , the transaction goes into a pool of unconfirmed transactions.
2. miners, distributed across the globe, will choose a transaction from this pool and put it into a block of transactions.
3. The miners then . This requires computing power (and thus electricity) for the miner, hence the incentive of a transaction fee for processing. This fee is a flat fee that isn’t dependent on the size of the transaction.
4. The transaction is then confirmed by other agents on the Network.
5. The block is then added to the , finalizing this process. The merchant will now have the payment that has been confirmed to not be double spent.
But what about volatility?
One of the primary concerns for merchants is the volatility of . After all, the $990 worth of that they receive today might be worth more or less tomorrow. Depending on how risk averse the merchant is, there are a few scenarios to consider:
- The merchant holds onto the bitcoin, converting it to fiat at a later date.
- The merchant immediately converts the bitcoin into fiat currency. This will incur a fee of 1% + $0.15. See our for the table laying out these fees.
- The merchant immediately converts the bitcoin into a stablecoin that is nominally pegged to a fiat currency, such as Tether. This helps to address the volatility issue, but .
Payment processor CoinGate launched a (LN) payments last summer and now allows LN payments on all stores that use its payment gateway. LN allows for near-instant transfers of and without requiring the normal network confirmations.
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Published at Sun, 05 May 2019 04:04:57 +0000
