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Crypto as a payment system? These thorny problems must be overcome.



Last week, global payments giant PayPal announced that it has started letting users in the United States pay for things online with cryptocurrencies. The ideal is full, but the reality is very skinny. There is still a long way to go to use encryption technology as a payment system.

"We see this as a transition point where cryptocurrencies go from being an asset class that you buy, hold or sell to now being carried out in the real world by millions of merchants," CEO Dan Schulman told Reuters. The legitimate source of funding for the transaction. Transitional is an apt word to describe this situation, especially for anyone using PayPal's encryption technology.

Since last fall, the company has allowed customers to buy or sell bitcoin (BTC), ethereum (ETH) and a few other coins, but not for much else.

Indian lawmakers propose raising cryptocurrency tax to over 30%: Jinse Finance reported that Congressman Sushil Kumar Modi urged Indian Finance Minister Nirmala Sitharaman to consider raising the capital gains tax on cryptocurrency income to over 30%. Started on the 1st. In addition to imposing a 30% tax on cryptocurrency income, India plans to introduce a 1% source tax deduction on every cryptocurrency transaction starting July 1.

Cryptocurrency investors, traders and exchange owners in India have taken to social media to urge the finance minister to reconsider imposing high taxes on an asset class that is still in its very infancy. (forkast) [2022/3/30 14:26:47]

PayPal announced on October 21, 2020 that it will follow the trend of global industrial layout and launch cryptocurrency payment services. PayPal said that users will be able to buy, hold and sell cryptocurrencies through their PayPal accounts, and shop around 26 million merchants around the world. The company said its digital wallet will initially allow transactions in bitcoin, ethereum, Bitcoin Cash and litecoin.

Survey: More than a third of Goldman Sachs interns view cryptocurrencies as an asset class: October 28 news, according to a survey of Goldman Sachs' latest interns, 33% of interns see cryptocurrencies as an established asset class. However, most interns are still ignorant of digital assets, claiming that they need to do more research before jumping into the crypto craze. The vast majority of respondents (95%) chose stocks over cryptocurrencies as their preferred method of investing. (U. Today) [2021/10/29 21:06:51]

So far, the service has arguably been nothing more than a way to game the price of these assets. How many users will take advantage of this new feature? Given the technology's long struggles as a payment mechanism, a dose of skepticism is warranted.

1. High volatility of cryptocurrencies

It is well known that the volatile exchange rate of Bitcoin against the US dollar will scare most merchants into taking currency risk.

Today in History丨Uzbekistan Government Triples Crypto Miners’ Electricity Rates: On September 27, 2019, the Cabinet of the Republic of Uzbekistan has ordered that cryptocurrency miners must pay electricity rates three times higher than the existing electricity rates. Last September, a decree legalizing crypto trading, which makes crypto transactions tax-free, came into effect. Under Uzbekistan law, foreign citizens can only trade cryptocurrencies in the country by establishing a subsidiary in the country. The law also states that the minimum capital requirement for setting up a crypto exchange is around $710,000. Additionally, crypto traders will not be subject to Uzbek stock market regulations and will be exempted from the obligation to pay taxes on trading income.

On September 27, 2019, President of the Scientific Innovation and Technology Council of the Republic of Peru, Member of Parliament Francesco Petrozzi, and Marco Esparza Montejo, Chief Operating Officer of Blockchain Life Solutions, discussed the potential of blockchain technology and the daily reality of the fourth industrial revolution. chat with apps in . Esparza proposed creating an equivalent blockchain regulator in Congress that would track bad behavior, raise funds to create action plans, value it, and generate a regulatory framework, among other things. [2020/9/27]

While Bitcoin’s three-month realized volatility has fallen back to 86% from above 90% in February, the six-month volatility indicator appears to be stable at around 73%, which remains elevated.

News | OKWAVE intends to incorporate cryptocurrency exchange LasrRoots as a subsidiary: According to, on March 13, OKWAVE expressed its intention to incorporate LasrRoots as a subsidiary. LastRoots will acquire all 35,000 shares of the third-party private placement implemented on April 16, including the current holdings of 39,200 shares. OKWAVE will hold 82.88% of the issued shares. According to previous news, Japan's SBI Holdings sold all shares of cryptocurrency exchange LastRoots to OKWAVE. [2019/3/14]

JPMorgan pointed out that Bitcoin's high volatility has discouraged institutional investors and is a key consideration for institutional risk management, as the higher the volatility of an asset, the higher the risk capital consumption.

2. The 20-minute bitcoin confirmation wait time is too long

A 20-minute Bitcoin confirmation wait is embarrassing for an in-store retail transaction. Depending on the size of the purchase, merchants who accept Bitcoin may be taking a certain risk by letting customers walk away before the transaction is confirmed.

3. Network congestion

In the bull market of 2017, web traffic became congested, “pennies” became dollars, and settlements could take hours rather than minutes.

Today, another bull run, with average confirmation times skyrocketing again and fees hitting double digits in USD terms. The delay has disrupted bitcoin payments for at least one potential Tesla buyer.

Developers of other blockchains are touting their higher throughput and lower fees, but none of them have Bitcoin's level of security, network effects, and popularity. Its closest competitor, Ethereum, faces its own scaling challenges.

4. Policy risks and tax issues

On top of everything else, crypto prices remain volatile, and in the U.S., the government treats digital currencies as property, meaning buying a can of dog food with Dogecoin (DOGE) is a reported and taxable event.

None of this bodes well for cryptocurrencies being used in day-to-day commerce in the short term, at least from the perspective of the average person. If you don't know how much a currency will be worth from one minute to the next, you might have to wait an hour, pay $20 to complete the payment, and incur a tax liability, you're buying diapers for a newborn at Walmart. Why on earth would you choose this approach? Just swipe that credit card and get on with life.

But then again, there is some evidence that crypto is starting to catch on as a means of exchange in other parts of the world where payment systems are less developed.

On-chain transfers are no longer the only way to transfer small amounts of digital currency, and "layer two" systems like Bitcoin's Lightning Network can make transfers as fast and cheap as ever. One of the space's most promising entrepreneurs, Jack Mallers, a scion of a bitcoin dynasty, is teaming up with Visa to use Lightning to clear dollar transactions.

Bitcoin's value as a store of value depends on its utility. The more there is remaining demand for Bitcoin as a payment token, regardless of its price, the more investors will believe that demand for it will rise in a sustainable manner.

PayPal, to its credit, is driving the development of crypto payments. When consumers use the Crypto checkout feature, it doesn't charge the usual fees for selling cryptocurrency (you have to sell it, because PayPal doesn't require its merchants to accept anything that isn't a currency). PayPal's customers also don't have to worry about on-chain fees or confirmation times, which are handled behind the scenes by the company and its partner Paxos. And PayPal will provide U.S. customers with a 1099 form to record their crypto sales and report the transaction to the IRS, thereby alleviating the tax headaches for U.S. customers.

According to public data, PayPal has more than 305 million active-zce registered accounts and 29 million merchants around the world. It has huge influence, and it is also a daunting task to promote encrypted payments.


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