Are Crypto Payments Even a Thing or Just a Dead Gimmick?

The Bitcoin whitepaper touted the cryptocurrency as a payment method 12 years ago. A report by Checkout.com revealed that 23 percent of all online businesses aim to accept crypto as a payment method by 2024. Many prominent brands like Tesla and others have started to accept crypto (Bitcoin and also some altcoins) as a form of payment.

Global Crypto Transaction Value, Courtesy: Insider Intelligence

According to some estimations, there are around 300 million crypto users globally and more than 1,800 businesses are accepting cryptocurrencies. This high adoption of crypto makes the futures projections of digital currency payment transactions bullish.

However, its volatile nature and long resistance from financial institutions have kept it out of the mainstream payments industry. Though Bitcoin’s technology was a barrier to its usage in payments, the  lightning network 
Lightning Network

The Lightning Network is a second-layer payment protocol that operates on top of a blockchain-based cryptocurrency. It enables fast transactions among participating nodes and has been touted as a solution to the Bitcoin scalability problem.This framework features a peer-to-peer (P2P) system for making micropayments of cryptocurrency via a network of bidirectional payment channels without delegating custody of funds.Transactions on the Lightning Network are only added to the blockchain when the two parties that are involved in a payment channel open or close the channel. Therefore, multiple transactions can be sent within a single channel without requiring the consensus of the entire blockchain, making the transaction process considerably faster. Normalized use of the Lightning Network involves the opening of a payment channel by committing a funding transaction to the relevant base blockchain or first layer. This in turn is followed by making any number of Lightning transactions that update the distribution of the channel’s funds without broadcasting those to the blockchain.Additionally, these may or may not be followed by closing the payment channel by broadcasting the final version of the settlement transaction to distribute the channel’s funds.How Does the Lightning Network Affect Everyday Users?For example, one Lightning Network user, Jim, can open a payment channel with a local corner store and deposit $100 worth of Bitcoin in it. Every time he visits the store, he can use his balance to instantly buy whatever he pleases. At the same time, Jane, another Lightning Network user, has opened up a channel with the cafe next to the corner shop. She also buys things from the corner shop. Because Jim has opened a channel with the corner store, Jane can also use the Lightning Network to pay for things there. Similarly, Jim can use the Lightning Network at the cafe.

The Lightning Network is a second-layer payment protocol that operates on top of a blockchain-based cryptocurrency. It enables fast transactions among participating nodes and has been touted as a solution to the Bitcoin scalability problem.This framework features a peer-to-peer (P2P) system for making micropayments of cryptocurrency via a network of bidirectional payment channels without delegating custody of funds.Transactions on the Lightning Network are only added to the blockchain when the two parties that are involved in a payment channel open or close the channel. Therefore, multiple transactions can be sent within a single channel without requiring the consensus of the entire blockchain, making the transaction process considerably faster. Normalized use of the Lightning Network involves the opening of a payment channel by committing a funding transaction to the relevant base blockchain or first layer. This in turn is followed by making any number of Lightning transactions that update the distribution of the channel’s funds without broadcasting those to the blockchain.Additionally, these may or may not be followed by closing the payment channel by broadcasting the final version of the settlement transaction to distribute the channel’s funds.How Does the Lightning Network Affect Everyday Users?For example, one Lightning Network user, Jim, can open a payment channel with a local corner store and deposit $100 worth of Bitcoin in it. Every time he visits the store, he can use his balance to instantly buy whatever he pleases. At the same time, Jane, another Lightning Network user, has opened up a channel with the cafe next to the corner shop. She also buys things from the corner shop. Because Jim has opened a channel with the corner store, Jane can also use the Lightning Network to pay for things there. Similarly, Jim can use the Lightning Network at the cafe.
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eased the troubles on this front.

“Cryptocurrency has not revolutionized the payments industry as of now, but it has had a significant impact on how people can make payments without a bank account,” said Lyle David Solomon, the Principal Attorney at Oak View Law Group.

Additionally, the volatile nature of Bitcoin and other cryptocurrencies have kept them away from being a payment mode. While Bitcoin rallied last year, it has lost 70 percent of its value from its peak this year.

This extreme  volatility 
Volatility

In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.

In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.
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has even affected the laws in some Bitcoin-friendly jurisdictions. El Salvador, a country that provided Bitcoin with the status of legal tender, mandated all businesses to accept the crypto as a form of payment, but the government is also providing merchants the option to instantly convert their Bitcoin into fiat.

However, crypto proponents remain bullish on the advantages of Bitcoin over fiat currencies.

“Crypto has completely changed the payments industry for the better by enabling consumers to take full custody over their funds to transact more freely,” the CEO of Divvy.bet, Carlos Liang, said.

“With blockchain technology becoming more and more mainstream, people are realizing that there is a better option out there. Despite the current bear market, the benefits that come with leveraging Web3 and crypto technologies are glaringly apparent: faster transaction speeds, lower fees and more direct access to funds.”

However, the area where cryptocurrencies have immense potential to disrupt is cross-border payments. People can easily transfer cryptos from one wallet to another, across borders, without going through the costly and time-consuming banking process. Companies like Ripple are even working with banks and financial institutions to make decentralized technology a norm in banking cross-border payments.

A Marketing Gimmick?

To date, many established companies have started to accept Bitcoin and a few other cryptocurrencies as payments. Tesla, which is run by the billionaire and Dogecoin-proponent, Elon Musk, is accepting the meme token as payment for its merchandise.

Microsoft, Paypal, Overstock, Whole Foods, Starbucks, Rakuten, Twitch, AMC Theatres and AT&T are only some of the major mainstream brands that have started to accept crypto as payment.

Naoshad Pochkhanawala, Estate & Financial Planner and Chartered Life Underwriter at Amiko Benefits

Naoshad Pochkhanawala, Estate & Financial Planner and Chartered Life Underwriter at Amiko Benefits

“It doesn’t matter how many brands have decided to accept Bitcoin or other cryptocurrencies – the question is how many carry it as a significant asset on their books,” Naoshad Pochkhanawala, an Estate & Financial Planner and Chartered Life Underwriter at Amiko Benefits, pointed out.

“If a company accepts cryptocurrency in but immediately switches it to a regular currency post purchase, that company is basically just accepting a new type of payment but not really participating or showing faith in the future of cryptocurrencies.”

This is true for most of the companies accepting crypto as payment. In addition, it raises the question, are they accepting cryptocurrencies only as a marketing effort?

Lyle David Solomon, Principal Attorney at Oak View Law Group

Lyle David Solomon, Principal Attorney at Oak View Law Group

“In today’s highly competitive digital world, businesses need to be adaptive to stay relevant in the eyes of the public. In such an environment using crypto payments as a method of appealing to crypto enthusiasts is undoubtedly a marketing ploy. It helps businesses in getting media coverage and wide social media engagement,” Solomon added.

However, many of those companies are bullish on crypto and making long-term bets. Tesla continued to accept Dogecoin despite a massive decline in its value. AMC started accepting crypto after the November 2021 market crash and Twitch allows creators to accept donations in certain cryptocurrencies.

“This clearly shows that some businesses are serious about sticking around with crypto payments regardless of the market conditions,” Solomon said.

Altcoins for Payments

While Bitcoin is the most accepted crypto form of payment, altcoins are also making strides. Some of the altcoins have a technological advantage: Ripple, Stellar and Algorand offer much faster and cheaper solutions to settle payments.

“With further innovation and focused development, altcoins will have multiple advantages over Bitcoin as a payment solution moving forward,” Solomon said.

However, altcoins have a smaller community backing them when compared to Bitcoin. These individual coins came into the market much later and each (the legitimate ones) is trying to solve some particular problem, limiting the target community.

The popularity and loyal community around Dogecoin and Shiba Inu, two of the meme tokens, have prompted many companies to accept them as payment modes. This clearly shows that most of the companies mostly try to gain the attention of a community while accepting cryptocurrencies for payment.

What Is the Future?

Bitcoin and other cryptocurrencies are more suitable as assets rather than payment modes. However, many companies continue to accept them as forms of payment mostly to gain some recognition within the growing crypto community.

However, the future of cryptocurrencies as alternative payment will heavily depend on the regulations of this industry. Many countries like Thailand have imposed a ban on crypto payments, while El Salvador has made Bitcoin legal tender. Now, it is to be seen how the United States, Europe and other developed nations approach crypto payments.

The Bitcoin whitepaper touted the cryptocurrency as a payment method 12 years ago. A report by Checkout.com revealed that 23 percent of all online businesses aim to accept crypto as a payment method by 2024. Many prominent brands like Tesla and others have started to accept crypto (Bitcoin and also some altcoins) as a form of payment.

Global Crypto Transaction Value, Courtesy: Insider Intelligence

Global Crypto Transaction Value, Courtesy: Insider Intelligence

According to some estimations, there are around 300 million crypto users globally and more than 1,800 businesses are accepting cryptocurrencies. This high adoption of crypto makes the futures projections of digital currency payment transactions bullish.

However, its volatile nature and long resistance from financial institutions have kept it out of the mainstream payments industry. Though Bitcoin’s technology was a barrier to its usage in payments, the  lightning network 
Lightning Network

The Lightning Network is a second-layer payment protocol that operates on top of a blockchain-based cryptocurrency. It enables fast transactions among participating nodes and has been touted as a solution to the Bitcoin scalability problem.This framework features a peer-to-peer (P2P) system for making micropayments of cryptocurrency via a network of bidirectional payment channels without delegating custody of funds.Transactions on the Lightning Network are only added to the blockchain when the two parties that are involved in a payment channel open or close the channel. Therefore, multiple transactions can be sent within a single channel without requiring the consensus of the entire blockchain, making the transaction process considerably faster. Normalized use of the Lightning Network involves the opening of a payment channel by committing a funding transaction to the relevant base blockchain or first layer. This in turn is followed by making any number of Lightning transactions that update the distribution of the channel’s funds without broadcasting those to the blockchain.Additionally, these may or may not be followed by closing the payment channel by broadcasting the final version of the settlement transaction to distribute the channel’s funds.How Does the Lightning Network Affect Everyday Users?For example, one Lightning Network user, Jim, can open a payment channel with a local corner store and deposit $100 worth of Bitcoin in it. Every time he visits the store, he can use his balance to instantly buy whatever he pleases. At the same time, Jane, another Lightning Network user, has opened up a channel with the cafe next to the corner shop. She also buys things from the corner shop. Because Jim has opened a channel with the corner store, Jane can also use the Lightning Network to pay for things there. Similarly, Jim can use the Lightning Network at the cafe.

The Lightning Network is a second-layer payment protocol that operates on top of a blockchain-based cryptocurrency. It enables fast transactions among participating nodes and has been touted as a solution to the Bitcoin scalability problem.This framework features a peer-to-peer (P2P) system for making micropayments of cryptocurrency via a network of bidirectional payment channels without delegating custody of funds.Transactions on the Lightning Network are only added to the blockchain when the two parties that are involved in a payment channel open or close the channel. Therefore, multiple transactions can be sent within a single channel without requiring the consensus of the entire blockchain, making the transaction process considerably faster. Normalized use of the Lightning Network involves the opening of a payment channel by committing a funding transaction to the relevant base blockchain or first layer. This in turn is followed by making any number of Lightning transactions that update the distribution of the channel’s funds without broadcasting those to the blockchain.Additionally, these may or may not be followed by closing the payment channel by broadcasting the final version of the settlement transaction to distribute the channel’s funds.How Does the Lightning Network Affect Everyday Users?For example, one Lightning Network user, Jim, can open a payment channel with a local corner store and deposit $100 worth of Bitcoin in it. Every time he visits the store, he can use his balance to instantly buy whatever he pleases. At the same time, Jane, another Lightning Network user, has opened up a channel with the cafe next to the corner shop. She also buys things from the corner shop. Because Jim has opened a channel with the corner store, Jane can also use the Lightning Network to pay for things there. Similarly, Jim can use the Lightning Network at the cafe.
Read this Term
eased the troubles on this front.

“Cryptocurrency has not revolutionized the payments industry as of now, but it has had a significant impact on how people can make payments without a bank account,” said Lyle David Solomon, the Principal Attorney at Oak View Law Group.

Additionally, the volatile nature of Bitcoin and other cryptocurrencies have kept them away from being a payment mode. While Bitcoin rallied last year, it has lost 70 percent of its value from its peak this year.

This extreme  volatility 
Volatility

In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.

In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.
Read this Term
has even affected the laws in some Bitcoin-friendly jurisdictions. El Salvador, a country that provided Bitcoin with the status of legal tender, mandated all businesses to accept the crypto as a form of payment, but the government is also providing merchants the option to instantly convert their Bitcoin into fiat.

However, crypto proponents remain bullish on the advantages of Bitcoin over fiat currencies.

“Crypto has completely changed the payments industry for the better by enabling consumers to take full custody over their funds to transact more freely,” the CEO of Divvy.bet, Carlos Liang, said.

“With blockchain technology becoming more and more mainstream, people are realizing that there is a better option out there. Despite the current bear market, the benefits that come with leveraging Web3 and crypto technologies are glaringly apparent: faster transaction speeds, lower fees and more direct access to funds.”

However, the area where cryptocurrencies have immense potential to disrupt is cross-border payments. People can easily transfer cryptos from one wallet to another, across borders, without going through the costly and time-consuming banking process. Companies like Ripple are even working with banks and financial institutions to make decentralized technology a norm in banking cross-border payments.

A Marketing Gimmick?

To date, many established companies have started to accept Bitcoin and a few other cryptocurrencies as payments. Tesla, which is run by the billionaire and Dogecoin-proponent, Elon Musk, is accepting the meme token as payment for its merchandise.

Microsoft, Paypal, Overstock, Whole Foods, Starbucks, Rakuten, Twitch, AMC Theatres and AT&T are only some of the major mainstream brands that have started to accept crypto as payment.

Naoshad Pochkhanawala, Estate & Financial Planner and Chartered Life Underwriter at Amiko Benefits

Naoshad Pochkhanawala, Estate & Financial Planner and Chartered Life Underwriter at Amiko Benefits

“It doesn’t matter how many brands have decided to accept Bitcoin or other cryptocurrencies – the question is how many carry it as a significant asset on their books,” Naoshad Pochkhanawala, an Estate & Financial Planner and Chartered Life Underwriter at Amiko Benefits, pointed out.

“If a company accepts cryptocurrency in but immediately switches it to a regular currency post purchase, that company is basically just accepting a new type of payment but not really participating or showing faith in the future of cryptocurrencies.”

This is true for most of the companies accepting crypto as payment. In addition, it raises the question, are they accepting cryptocurrencies only as a marketing effort?

Lyle David Solomon, Principal Attorney at Oak View Law Group

Lyle David Solomon, Principal Attorney at Oak View Law Group

“In today’s highly competitive digital world, businesses need to be adaptive to stay relevant in the eyes of the public. In such an environment using crypto payments as a method of appealing to crypto enthusiasts is undoubtedly a marketing ploy. It helps businesses in getting media coverage and wide social media engagement,” Solomon added.

However, many of those companies are bullish on crypto and making long-term bets. Tesla continued to accept Dogecoin despite a massive decline in its value. AMC started accepting crypto after the November 2021 market crash and Twitch allows creators to accept donations in certain cryptocurrencies.

“This clearly shows that some businesses are serious about sticking around with crypto payments regardless of the market conditions,” Solomon said.

Altcoins for Payments

While Bitcoin is the most accepted crypto form of payment, altcoins are also making strides. Some of the altcoins have a technological advantage: Ripple, Stellar and Algorand offer much faster and cheaper solutions to settle payments.

“With further innovation and focused development, altcoins will have multiple advantages over Bitcoin as a payment solution moving forward,” Solomon said.

However, altcoins have a smaller community backing them when compared to Bitcoin. These individual coins came into the market much later and each (the legitimate ones) is trying to solve some particular problem, limiting the target community.

The popularity and loyal community around Dogecoin and Shiba Inu, two of the meme tokens, have prompted many companies to accept them as payment modes. This clearly shows that most of the companies mostly try to gain the attention of a community while accepting cryptocurrencies for payment.

What Is the Future?

Bitcoin and other cryptocurrencies are more suitable as assets rather than payment modes. However, many companies continue to accept them as forms of payment mostly to gain some recognition within the growing crypto community.

However, the future of cryptocurrencies as alternative payment will heavily depend on the regulations of this industry. Many countries like Thailand have imposed a ban on crypto payments, while El Salvador has made Bitcoin legal tender. Now, it is to be seen how the United States, Europe and other developed nations approach crypto payments.

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