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Cryptocurrency in the world of online payments: popularity, principle of operation, security

A little over a decade has passed since a select group of cryptographers received emails from the unknown Satoshi Nakamoto announcing the launch of the innovative Bitcoin monetary system. Since then, the crypto community has developed various useful services for processing payments, including CoinGate or white-label crypto processing software like WhiteFlo (https://whiteflo.com/),  exchanges for trading like Binance, Kraken, Bybit and others, for storage like TrustWallet, MetaMask, Exodus and many other tools.Each of them adds its own value and expands the scope of blockchain in the modern world. Thus, cryptocurrencies have often begun to be used as a means of payment for online purchases and not only.

However, discussions about the essential nature of cryptocurrencies continue. What is money, a financial instrument, or an operating system? Do cryptocurrencies have value? What risks do users of cryptocurrencies bear? Is it possible to create on their basis a global cybernetic financial system that completely replaces the modern mechanisms of money creation and financial intermediation? Preliminary answers to these questions can be obtained by examining the advantages and disadvantages of this digital phenomenon. First, however, it is necessary to digress into the history of money briefly.


Advantages of cryptocurrencies in online payments

Every year, the percentage of people who use cryptocurrency as a means of payment is growing. Studies have shown that as of 2023, one in five US residents used this method to purchase goods or services online.

Also, it is worth noting the fact that blockchains can be completely different and suitable for different areas of application. For example, one or more participants can centrally manage the blockchain. Most blockchain-backed stablecoins are designed in such a way that transactions are confirmed by a single entity. At the same time, there are also decentralized blockchains, where each user or a large group is a transaction validator.


How do cryptocurrency transactions work?

Regular payments using fiat money look like this. If you need to pay for a product or service, we calculate the required amount to the seller in cash or by card. At the same time, a whole chain of intermediaries is involved in non-cash payments. These are banks, processing centers, and payment systems (Visa, MasterCard). And if, at some stage, a failure occurs or attackers hack the system, this will lead to the loss of funds.

Cryptocurrency enthusiasts put the main emphasis on the ease of use of digital assets. The simplicity lies in the following: no intermediaries are needed for user A to send a certain amount to user B. The transfer takes place directly from one cryptocurrency wallet to another.

That is, to send funds, you need to know the address of the recipient's wallet. The second option is when the sender scans with his smartphone or another device a unique QR code that the recipient represents and thus confirms the transfer.

Again, we repeat, the cryptocurrency exchange itself takes place directly. The main condition is that the operation occurs within the same blockchain network.


Why crypto payments are safe

The already mentioned blockchain technology ensures the security of payments. The literal interpretation of this term is "chain of blocks" or "distributed database," which reflects the essence of the technology itself.

Each transaction with a cryptocurrency looks like an entry in the blockchain or the blockchain. Therefore, to successfully transfer digital assets, each transaction must be confirmed in a certain set of blocks within the blockchain.

For clarity, the blockchain is a big log where records are kept of all transactions. And for the same user A to transfer Bitcoin to user B, it is necessary that other network participants put their signatures in this journal. Otherwise, the transaction will not take place.

And even if we imagine that fraudsters can hack into the computers of several participants in a particular blockchain network, this will not affect anything since they will not be able to gain control over all the blocks, which can be hundreds of thousands and millions.

IEMA IEMLabs
IEMA IEMLabshttps://iemlabs.com
IEMLabs is an ISO 27001:2013 and ISO 9001:2015 certified company, we are also a proud member of EC Council, NASSCOM, Data Security Council of India (DSCI), Indian Chamber of Commerce (ICC), U.S. Chamber of Commerce, and Confederation of Indian Industry (CII). The company was established in 2016 with a vision in mind to provide Cyber Security to the digital world and make them Hack Proof. The question is why are we suddenly talking about Cyber Security and all this stuff? With the development of technology, more and more companies are shifting their business to Digital World which is resulting in the increase in Cyber Crimes.
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