When was the last time you went to dinner with a group of friends and figuring out how to split the bill took way longer than it should have? Nobody carries around enough cash, so everyone throws their credit cards into a pile and someone explains the breakdown to the hapless waiter. Perhaps a few among your group use Venmo, Zelle, or another mobile payment app to transfer money to the designated buyer. These mobile applications are no doubt the most convenient option and are likely to replace credit cards over time. Taking this evolution one step further, it’s my belief that, crypto will eventually become the preferred payment option, and not just for settling the bill.
Why aren’t people using crypto now?
The biggest factor hindering adoption of crypto payments is the slow processing speeds suffered by the underlying decentralized ledgers. The most well-known, Bitcoin and Ethereum, process a paltry 7 and 20 transactions per second, respectively. Compared to Visa’s 24,000 transactions per second, these blockchains aren’t even in the race. There are many projects developing supposed solutions to the throughput issue, such as Cardano and EOS, but many of these projects sacrifice privacy, security, or decentralization to do so, and even then their transaction speeds remain slow.
Mobile Payments on the Rise
Mobile payments are rapidly gaining steam, especially among young people. More than 25% of millennials now using Venmo, but adoption isn’t as high as it could be. The reason for this could be that mobile apps are still not markedly different from credit cards. The main elements people care about when it comes to adoption of any new technology include security, cost, and convenience.
To use Venmo as an example, the app is supposed to offer bank-grade security, but this claim is undercut by highly questionable treatment of user privacy. Payments are public by default and so, unless users know to update their settings, anyone can view their payments online, and loan payments, vet visits, and date nights are all public. Additionally, the cost to consumers and merchants is not necessarily an improvement from credit cards. Most vendors must accept a 3% fee for credit card transactions, which is ultimately reflected in the price paid by the consumer. Users tying their Venmo account to a credit card must accept a 3% fee, and if the user’s account is tied to their bank account, then the merchant must pay a 2.9% fee. Either way, someone is paying a price for convenience.
Why Crypto Makes More Sense
Though there is no doubt that Venmo introduces a new level of convenience to situations like splitting the bill or paying the dog walker, the app fails to address the two other issues of great concern to consumers: security and cost—two issues already solved by cryptocurrency. Due to its decentralized framework, cryptocurrency is inherently more secure, as it is invulnerable to the failings of any single individual or centralized entity. What’s more, consumers using credit cards must accept the fact that their personal information can be gathered and sold to third parties without their knowledge.
Cryptocurrency users retain control of their personal information, and the elimination of intermediaries ensures there is no opportunity for bad actors to steal account information, drastically reducing the risk of fraud. Because crypto doesn’t require verification by any third party, a much lower cost per transaction can be achieved, as there is no fee going to a credit card company, app, or bank. Before long, the development of more efficient blockchains will allow crypto to catch up to mobile apps on the convenience front. From there, the transition from mobile apps to dapps will be quite seamless.
Most importantly, cryptocurrency empowers people over corporations and endows individuals with more control over their own value. Any project that sacrifices that ethos for convenience takes a hypocritical shortcut that should not be accepted by consumers. The rise of mobile payment apps makes it more likely that crypto payments will eventually become the norm. Beyond using crypto to split the bill, crypto will be used by customers paying for online services, by businesses paying their employees, by family members sending money to relatives… the list goes on.
In full disclosure, the team I lead at Pyrofex is developing a solution, called CDelta which will be able to process 50,000 transactions per second.