An Introduction to the Payment System in Blockchain

Due to the increasing popularity and curiosity about blockchain around the world, there is a need to explore blockchain applications in various fields. One of these very useful applications is blockchain payments. In this article, we take a closer look at the concept and current developments of blockchain payment systems around the world.

Blockchain in Payment Transactions

Blockchain technology has gained a considerable amount of trust since its inception for its transparency, security, and ease of use. Nowadays, various industries are starting to trust and adopt blockchain technology for better outputs. Blockchain is now successfully used in areas such as cryptocurrency exchanges, entertainment, and healthcare. However, the most popular application of blockchain is in payment systems.

Our generation has seen payment systems go completely cashless over the years. Blockchain technology can initiate another such transition where it can replace centralized and intermediary-based payment platforms. Thus, blockchain has the potential to become a technology of the future that can revolutionize the way we make payments every day.

Stakeholders see a promising future for blockchain as a mainstream payment system as it outperforms existing payment methods in many aspects. Further down in this article, we'll go into more detail about the limitations that current payment methods have and how blockchain has proven superior in all of these areas.

Blockchain Payment System

Blockchain payment system entails the use of blockchain technology to process payments. The whole system involves the addition of a new block in a blockchain with every new transaction. No one can edit, rearrange, or remove these blocks. Thus, this technology ensures accuracy. It is one of the reasons why people trust cryptocurrencies like Bitcoin. Although there is no physical money, the Bitcoin blockchain is immutable proof that an account has the money it claims.

Examples of Blockchain Payment Systems

Bitcoin

Bitcoin is the first cryptocurrency in the blockchain. Bitcoin blockchain records all the data regarding any Bitcoin. It tracks the origin of every Bitcoin and its transaction journey.

Ether (ETH)

Like Bitcoin, ETH is a blockchain-based cryptocurrency. Its blockchain platform i.e., Ethereum has many interesting features such as executable code, enhanced security, and programmatic contracts.

Stellar

It is a unique blockchain payment system. You can use it to easily create your own form of a stablecoin (a cryptocurrency whose price does not fluctuate wildly) and distribute it. Use this to create a fiat-pegged cryptocurrency for use in a specific business or just a tradable currency for you and your friends.

Mastercard Blockchain

Mastercard has created Start Path, a rapid solution for businesses and organizations to create their own cryptocurrencies and blockchain solutions.

Why do You Need a Blockchain Payment System

Before we start exploring blockchain payment systems, it is important to understand why we need a new payment system as a whole. First, you need to know the flaws with current banking systems to understand the need to implement a new system.

Traditional payment and banking methods have some major weaknesses. For instance, banks spend a great deal of time and money storing and managing customer identity data, which is highly vulnerable to theft and misuse. Also, banks require parties to verify and facilitate payments. Cross-border payments are also a tedious task as many intermediaries are involved and processing takes about 2-10 days.

Blockchain addresses all the above issues and gives the following benefits:

To simplify cross-border payment processes.
Requires minimal intermediaries.
Takes less payment processing time.
To reduce fees charged by banks or third parties for transactions.
To reduce fraud and identity theft.

Blockchain Payment Processing Steps for Your Enterprise

Step 1: Project Planning

The first step in launching a blockchain payment processing system is planning your project. You can create a new blockchain cryptocurrency from scratch or an overlay/brand of an existing solution. Also, the planning will differ for web-based and mobile-based platforms.

Step 2: Onboard a Development Team

You need to build a development team consisting of the following:

A project manager
An IT architect
Blockchain developers
Web developers (if building a web app)
iOS and Android developers (if creating a mobile app)
Testers
DevOps engineers

Step 3: Project Execution and Tracking

Check out a few Routes in which your project could end up going down during development.

Route A: Create a New Blockchain and Cryptocurrency

When building your blockchain payments platform, the first route you can take is to create a new blockchain and a new cryptocurrency. It needs:

An IaaS Solution (like AWS): This is where the original software, coins, and backend technology will run your blockchain payment system.
A Peer-to-Peer (P2P) Business Network: The P2P exchange network will allow individuals to use your platform/cryptocurrency without a centralized center (like a bank).
A Consensus Algorithm: Consensus algorithms are essential to the success of a blockchain. The consensus algorithm verifies the authenticity of a new block is valid.

Route B: Build a dApp (Decentralized Application) with Ethereum

dApp is a unique Ethereum payment platform model in the digital world. They allow individuals to buy Ethereum, store it in a wallet, and then connect that wallet to a dApp. Some examples of dApp include investing in Ethereum in art, trading Ethereum tokens with ease, and Ethereum-based mobile games.

Route C: Use Existing Bitcoin or Ethereum Payment Gateways

Alternatively, you can create apps on top of an existing crypto payment gateway using the API. Coinbase, CoinGate, and Shopify all have APIs that you can use to make crypto transfers easier. Building an application on top of these existing application programming interfaces (APIs) is a fast way to bring innovative ideas to the world. Just be aware that changes to these existing platforms and APIs may disrupt your service. Therefore, it is best to consider this roadmap as the starting point and not the endpoint for your blockchain payment platform.

Route D: Use Ripple, Stellar, or Other Existing Blockchain Payment Systems

You can use an existing blockchain payment system for things other than cryptocurrency transactions. Stellar uses blockchain technology to facilitate decentralized transactions in any currency. Your team can build an app based on Stellar, adding unique features and selling points without being held back by the crypto market.

Use Cases for Blockchain Payment Systems

Blockchain payment systems have received a lot of attention due to their promising performance and applications. One related application or use case that we have seen or heard about is cryptocurrency trading. Blockchain networks successfully host cryptocurrency exchanges such as Bitcoin, Ether, and others.

Other use cases for using blockchain for payment systems are listed below: