The proliferation of cryptocurrencies makes many of us wonder when the era of crypto payments is really going to dawn. Up to 17% of the adult US population own bitcoin, while only a small fraction of us can brag about it. Most cryptocurrency owners treat them as an investment rather than a medium of exchange. The reason for this is that cryptocurrencies are lousy for transactions. They lack the two main attributes that make fiat currencies attractive to trade: Price stability and broad acceptance in society.
The adoption problem could offer a solution in the form of cryptocurrency gateways, a special class of processors that enable cryptocurrency to be accepted by merchants, including companies like Bitpay, NOWPayments, and CoinPayments, which have seen increasing growth in recent years. Gateways offer the ability to integrate with a merchant’s e-commerce website, which enables a smooth transaction process for both the customer and the merchant.
Gateways can be split into two categories based on whether the merchant holds the private key to their wallet: custodial and non-custodial. Custodial Gateways retain users’ private key and control access to their funds, while non-custodian gateway users can manage their own private key and access their funds directly. Traders choose the type based on their priorities in relation to Security, data protection and convenience. Escrow gateways are known for being more convenient for less experienced users while also offering less privacy and user autonomy than non-custodial gateways.
Several leading companies have used these solutions to enable cryptocurrency adoption, including Microsoft, Etsy, and Shopify. According to Mercator’s Small Business Outlook Survey 2021, 17% of small and medium-sized businesses that don’t yet accept cryptocurrencies are ready to get started. Over the next 12 months, the growing popularity of stablecoins and the possible introduction of central bank-issued digital currencies could make cryptocurrency transactions less risky and likely lead to greater acceptance by merchants.
Many industry observers have described the rise of cryptocurrencies and their proliferation into the mainstream as a trend that will revolutionize the financial industry. This may be true, but the revolution won’t happen until cryptocurrencies gain commercial acceptance by the mainstream. Cryptocurrency gateways are key to making this happen because they are the integral technical component that connects retailers with their customers. The development of cryptocurrency gateways will shape the nature of cryptocurrency as a medium of exchange in many ways as it will determine the customer and merchant experience. Cryptocurrency adoption could pose a major threat to traditional payments industry players as well as merchants who refuse to adapt, leading the legacy payment service providers to take proactive steps to investigate the problem and prepare to come up with solutions to the ever-evolving market of the 21st century to offer.
