Information on Merchant Accounts,
Ecommerce and Credit Card Processing

January 30th, 2018 by Jamie Estep

Will Cryptocurrency and Blockchain Technology change our world?

Filed in: Monthly Newsletters |

Our industry is constantly evolving. Changing terminals, tablets, smaller swipers, and now you can even just take a picture of a credit card. The Merchant Store always tries to stay on top of or in front of the latest technologies. We were one of the first ISO’s to offer our MSM mobile setup and one of the first to be able to turn your laptop (before the tablet rage) into a point of sale using our MSI gateway.

Lately, Cryptocurrency has been all over the news. Especially Bitcoin, because after all, it’s the original and currently the most valued digital coin. If you look into Bitcoin and blockchain technologies, you will also find about 1000 other coins currently being traded. In this article I would like to discuss what they are, how they work, and the future that we as Merchants and Merchant service providers may be looking at.

Like I said, we have all heard of Bitcoin (BTC) and the concept of new money. Along with Bitcoin the current top coins are Ethereum (ETH) designed more for programming, Ripple (XRP) working on international transactions, and Litecoin (LTC), the silver to bitcoin’s gold, designed to be quicker and less expensive for everyday use. To use any of the coins you have to buy them through a cryptocurrency exchange market and either hold them as your would regular stock or send them to someone for payment. When you hold your coins, you do so in what is called a digital wallet. Most Exchanges offer an online wallet with your registration. You can also get a separate Digital wallet. It looks a lot like a usb drive but it holds your coins offline so no one can access them.

Let’s say you owe someone for a 10.00 lunch, and like you, they have a bitcoin account. You can buy ten dollars in bitcoin and send it to them and they can either cash it out as normal currency (minus transaction costs), or hold it and hope it grows in value. The transaction costs are what sets the coins apart. Bitcoin being the original, is slower and costs more to move around. Currently it takes about 60 minutes to transact and roughly a 15 to 25% charge. This is a big reason why its being looked at as more of a savings account, whereas a lot of the newer coins are faster and cost less to send somewhere. So, let’s look at the above example on the ten dollar lunch. If the receiver cashes out right away not only did it take an hour to get the bitcoin, but he may only end up with 8.50 because of transaction costs. Whereas If they traded Litecoin, which takes 30 minutes and .12 cents to transact, he would have received 9.88 cents. Ripple is even quicker and less expensive. Ripple transacts immediately with only a .04 cent transaction fee. While we can still offer better transaction fees on merchant accounts, the coins are getting lower and lower.

All of these coins have two main components that tie them together. One, to use them you have to buy them with “regular” money. I’m not sure how they claim to be the “new” money when they only work with “old” money. This does set Ethereum apart since its main design is for programming and most new coins along with some programs are built on top of Ethereum. However, it is still is used for stock purposes and transferring funds. Now number two, is that all of these coins, no matter the main purpose, requires Blockchain technology.

Blockchain technology is the highway that all of these coins or digital assets travel on. This highway is getting bigger and faster. It still has not caught up to Visa’s network that can handle 72,000 transactions a second, but it’s getting there. It lives online and is protected and ran by Miners all over the world. Almost all of the coins require “mining”. Mining is when a computer is used to decipher codes and problems that only a computer can solve. Once the “problem” is solved it creates the coin and every coin has its own program for mining. Bitcoin takes the most computer power and time to create its coin while some of the newer coins can be done on everyday PC’s or run in the background on your browser. Your PC may even be part of the Blockchain and you don’t even realize it. Now, once the coin is created it goes onto the Blockchain. The blockchain codes the coin and imprints it on its online ledger, and it can never be duplicated or deleted. So far, It can not be hacked into or changed in anyway since the Blockchain is online and survives between many independent computers running these programs. Much like we can’t “turn off” the internet, we can’t “turn off” blockchain. It is security at its finest. Today, the credit card industry has implemented our EMV technology using chip cards. This is also very secure and all of our credit card terminals are programmed for these new cards. This is why Ripple is working with banks and money transfer companies including MoneyGram, Western Union, and American express to share in the blockchain technology using their xrapid (uses XRP for liquidity) and xcurrent software (does not require XRP, simply a transferring system). Mastercard is even building its own blockchain and even the federal Government has created a Cryptocurrency department to research the Technology. There is even some gossip of a possible future Fiat coin.

This brings us to the main reason for our article. At the end of the day, all coins move money around, so the battle may turn out to NOT be the new money, but who will prevail as the future of transferring money using blockchain? Like i said before, it can not be hacked or broken into or changed. Kodak, (remember them?) even has a coin coming out at the end of the month for photographers to protect their images from illegal reproductions. Mastercard, Amex, processing companies, and international transfer companies are all looking into blockchain. I really feel this is the way our industry is headed. The way I see it, it will still require backing from the coins value and Banks, and possibly using a coin such as Ripple’s coin, XRP. As a customer you will probably still use a credit card for payment on a merchants POS system, but now the system will automatically transfer the funds into a coin then quickly transfer the funds on the blockchain. From here the information is sent to the bank for approval then back across the blockchain to give the approval to the POS system. From here it goes back across the blockchain to the bank to move the funds. The transactions will happen so fast that the coin’s value goes for the most part unchanged and the transfer fees are much lower than the current slow and expensive bank to bank systems. This will add security to the transferring processes possibly stopping or at the least cutting down on breaches such as the past Target and Wendy’s breaches. This will also save the banks billions if not trillions per year. Hopefully the added savings will be passed down to the processing companies and to the merchant service providers all the way down to the merchants. Currently this credit card processing system currently does not exist, but I’m willing to bet it will before you know it, much like EMV.

I personally like the cryptocurrency market right now. It’s fun. It’s basically stock market 2.0. Only the prices are very, very, volatile, on every coin. It still has regulations that have to be met. For a coin creator or the “first miner” to sell on an exchange, they have to register and be granted a bit license. The exchanges will crack down on the coins if they believe there is insider trading. The SEC stopped a new coin from coming out recently because they were guaranteeing 100% yearly increases. Some people fear of a collapse or the government stopping the exchanges, but the feds are working with Ripple along with their own crypto agencies, so I don’t see this market going anywhere soon.

Now I’m not a financial guy nor am I trying to tell you what coin to invest in. If you do decide to invest, look into the coin closely. I try to understand what it does and its utility, usability, and of course, only buy what you can afford to lose. Personally I like Ripples XRP coin. They seem to have the most utility and usability for the real world. They created their company and coin to work with our current financial system and try and replace the current antiquated international system such as SWIFT. Currently they have over 100 banks using their xcurrent system because of its cost and speed and 2 money transfer companies using xrapid.

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