[Digital Today Reporter Chigyu Hwang] PayPal, a giant online payment company, recently announced that it will support payments using virtual assets (cryptocurrency) online.
As PayPal, which has a large-scale merchant network as a member store, launched a support shoot, it is noteworthy whether an opportunity to substantially expand cryptocurrency payments.
When it comes to payment functions, PayPal emphasizes that cryptocurrency will be a turning point in the transition from an asset class that people buy, sell, and hold to an exchange that can be used to transact with millions of merchants around the world.
However, skepticism about whether cryptocurrency will become a meaningful payment method is also difficult.
CoinDesk’s Mark Hochstein also posted a column on this issue on the 3rd (local time), and it focuses on the fact that it is not easy to secure the popularity of cryptocurrency payments right away from the big frame.
He thought that in 2013, the early days of cryptocurrency, payments would be a meaningful use case for Bitcoin, but now it is not. The situation has changed.
By 2003, he expected Bitcoin to be an alternative to payment services such as Visa, Mastercard or PayPal.
According to him, the 20 minute bitcoin confirmation time may seem awkward for in-store purchases, but even then, merchants accepted the risk of a customer with a credit card leaving the store before the transaction was confirmed.
From the merchant’s point of view, accepting a credit card doesn’t mean that the transaction really happened. The transaction is completed only when the price of the product enters the account, but it may take 2-3 days for merchants who received the credit card to receive the price of the product into the account.
Hochstein sees that Bitcoin can dig into this situation because traders don’t have to pay fees. The sender pays a fee for Bitcoin, which was small at the time when there was not much network traffic. From the point of view of merchants, there is no need to risk the price fluctuations of cryptocurrency. They can use a payment processor (processor) that immediately owns bitcoins on behalf of the merchant and sends the corresponding money in fiat currency. The related fee is about 1%. It is cheaper than credit card payment, which is 2~3% level.
As such, Hochstein saw that merchants could benefit from bitcoin without worrying about the price of bitcoin.
However, as bitcoin traffic increased, the reality turned differently. The rise in bitcoin prices in 2017 put a load on the network, and fees jumped from a few cents to a few dollars. It took hours, not minutes, to settle the transaction.
These days, which is a bullish market again, the average settlement time for Bitcoin is running again. Fees soared to double digits in dollars.
Among these, other blockchain developers emphasize that they provide a platform that offers high throughput (meaning throughput) and low fees. But none of them show bitcoin-level security, network effectiveness, or awareness, Hochstein points out. It added that Ethereum, the closest competitor to Bitcoin, is also facing its own scalability issue.
In addition to the scalability issue, there are a number of obstacles to the popularization of cryptocurrency payments. Cryptocurrency prices are still volatile and the U.S. government sees cryptocurrency as an asset. This means that buying a can of dogfood with Dogecoin is a reportable and taxable act.
Of course, where the payment infrastructure is not developed, cryptocurrency has the potential to become a means of exchange. On-chain (on the blockchain’s main network) transmission is also not the only way to transmit micro-cryptocurrencies. By using Layer 2 technology such as the Lightning Network, Bitcoin payments can be made faster and cheaper.
PayPal is also focusing on enhancing the convenience of cryptocurrency payments. In order for PayPal users to pay with cryptocurrency, they have to sell their cryptocurrency. Merchants can only accept legal currency. In this process, PayPal users don’t have to worry about on-chain fees or settling times. Complex tasks are handled behind the scenes by PayPal and partner Paxos. PayPal handles a lot of tax-related hassle.
At this point, are consumers willing to use cryptocurrency for payment? Hochstein is skeptical. He hopes that this will happen, but he thinks that the reality is that cryptocurrency payments are popular, but they are not very friendly. Even if PayPal is connected to 29 million merchants worldwide, it is not enough to overcome users paying taxes to buy a cup of coffee and not using coins that may be worth more tomorrow.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.