Home Technology Cryptocurrency Blockchain Can Solve Rising Fees of Online Payment Gateways—Here’s How

Blockchain Can Solve Rising Fees of Online Payment Gateways—Here’s How

Blockchain Can Solve Rising Fees of Online Payment Gateways—Here’s How

GIt is a well-known fact that going to the mall and shopping have long been favorite pastimes of people around the world, but the. The COVID-19 pandemic restricted this greatly for almost two years,; and people were relegated to shoppingshop online. 

According to the United Nations Conference on Trade and Development (UNCTAD), the sales of 13 major e-commerce companies worldwide, which includes Amazon and Alibaba, roseincreased from $2.4 trillion in 2019 to $2.9 trillion in 2020 and $3.9 trillion in 2021. At present, global retail e-commerce sales amount to $6.3 trillion. 

People have become used to online shopping despite the pandemic being over and malls reopening to the public. This is because not only does it offer lower prices, it also allows for people to gain access to specialty goods that are hard to find in malls. To sustain this growth, it is imperative for payment gateways to be able to process online transactions in a way that is economical for both sellers and consumers.

Payment gateways, which refer to the interface that processes online payments such as credit card transactions, deliver a hassle-free shopping experience. But standing between customers and merchants’ exchanges is an average 2% transaction fee. These transaction fees are eating up at least half of merchants’ margins, resulting in higher product prices that reduce the customers’ purchasing power.

The solution to this lies on blockchain. However, only a scalable blockchain will be able to handle transactions on a global enterprise level. A blockchain that can scale on demand enables the processing of the increasingly high number of online transactions. At present, only the BSV Blockchain has unlocked unbounded scaling. 

The BSV Blockchain’s unbounded scaling enables it to handle 4GB data blocks to process 50,000 to 100,000 transactions per second (TPS) at an average fee of $0.000015. And as the network scales further, block size can reach exabyte sizes at billions of TPS. Fees will continue to be lowered until it becomes next to nothing, which makes it cost-efficient for both business and government transactions.  

In comparison, the BTC Blockchain retained a 4MB block size that limits the network to a mere seven TPS. If there is a high volume of transactions, the network experiences latency and a surge in fees. For instance, BTC’s current average fee per transaction is at $1.99, with the highest surge this year rising to a whopping $31.15 in April. 

Assuming that a business executes 1,000 transactions daily, merchants who use BSV blockchain would only have to pay $0.015, while they would have to shell out $1,990 on the BTC Blockchain. This not only renders BTC incapable of handling the transaction volume that multiple small companies need, but it is obviously unsustainable for merchants.

Transacting on BTC then does not offer much incentive to switch from using Mastercard or Visa, despite small merchants shouldering higher charges than their competitors because they lack the volume to negotiate fee reductions.

BTC’s perceived lack of intrinsic value other than being a speculative trading asset is among the points Peter Schiff, chief economist and global strategist at Euro Pacific Asset Management, highlighted in his heated debates against BTC maximalists. He was one of the few forecasters who accurately predicted the 2007 housing market collapse and the subsequent 2008 financial crisis before becoming a BTC critic.

In fact, Schiff does not even recognize BTC as a currency because it is not and cannot be backed by gold—a fundamental vulnerability that cannot survive the looming financial turmoil. He explained on Day 3the final day of the London Blockchain Conference how record rates of inflation have reached a point where fiat is devaluating too rapidly for it to be considered reliable in trade. This gradually led the U.S. dollar to lose its role as a reserve currency.

In Schiff’s perspective, sellers who want to be paid in “real money” will drive the monetary system to an alternative since they will not risk selling anything on a diminishing currency. Among a currency’s key functions is being a store of value that people can save and retrieve in the future without a significant loss of purchasing power—a position that gold previously held before 1971.

Because gold does not lose its properties over the centuries, it is an ideal store of value to bridge exchanges in the global economy. The U.S. took advantage of this fact by adapting the gold standard, where each dollar is backed by gold. It was on this basis that it convinced the rest of the world to back their own currencies by the dollar, concurrently climbing its way to owning the reserve currency title.

All was well until it halted guaranteeing the exchange of dollars for gold in 1971 in favor of fiat. Since then, Schiff explained, the world has been operating on a fiat system where one currency backs up another currency, but there is ultimately nothing of concrete value backing up the system. 

Gold may have been what was underpinning the dollar, but it supersedes gold because it is transactable. Note that gold, especially in larger quantities, is a burden to hold. But Schiff stressed that the selling point of BSV is making gold liquid enough for it to become a better medium of exchange.

“Online merchants can price their products in grams of gold, in fractions of a gram of gold, and everybody can effect these transactions on the blockchain,” he explained. It does not matter whether it is a small or big transaction because a scalable blockchain like BSV can do it for the lowest possible cost, leaving a larger portion of margins for merchants to enjoy.