When it comes to creating an impact, no Fintech has made quite as much of a splash in the last few years as blockchain. The Bitcoin blockchain was the first technical application of the tech and the one that has had the longest reaching effects. After all, the network is extremely secure.
Nothing can be deleted or changed once it has been recorded in the chain. This makes it next to impossible for hackers to create mayhem. Blockchain tech has been turning a lot of heads, and many financial institutions have been taking notice and looking at developing their own blockchain based applications.
Pundits have hailed this the “payment solution of the future,” but is it really as good as it seems? We certainly cannot argue with the fact that the system is a lot more secure, but at what cost? And, considering the options that we already have available to us, is that cost worth paying?
But Transactions On The Network Are Less Expensive
If you are looking purely at transactional fees, then yes, this is true. For now. The cost of transacting on the Bitcoin network has gone up by over 1,000% since its inception, and this trend is set to continue when all available Bitcoin have been mined. That won’t be for a while yet, but it is something to consider. But the costs we are referring to here are the costs of making a mistake.
Part of what makes the network so secure is that it is so unforgiving, and transactions are permanent. There are no resets or even refunds and that is where the cracks start showing. With a cryptocurrency, you access your funds through the use of an e-wallet. This wallet stores the keys that you need to sign transactions. You need to secure the e-wallet, either on your computer, by using a specially designed hard-storage device, or by backing it up to an offline source. You could also print out the key and store this information offline instead.
There are a few issues to deal with here:
- A paper wallet, where the key is printed out and stored offline, can be a very secure option if they have been properly set up. Paper cannot, after all, be hacked. However, this option becomes tedious when it is time to perform transactions. You either have to type in your key or scan it in. This will take some time. It is also dangerous in the sense that if the paper is lost or damaged, you have no way to access your coins.
- If you store your wallet on your computer instead, your key is only as secure as your computer is. So, while the actual blockchain system is secure, can you say that your computer won’t get hacked?
- If your computer dies, and you haven’t backed up your wallet, you lose access to your account. In fact, should you lose the key for any reason, you lose access to your funds as well. If you consider these aspects as potential costs, you have to wonder if the extra security is worthwhile. At least with other online options like PayPal, you know that if you lose access to your password, you have some recourse. It is not an all or nothing situation.
Cryptocurrencies are Hard To Use
This is one aspect that no one really discusses. Unless you are tech savvy, figuring out how to actually access and use a cryptocurrency can be hard. It is not quite as convenient as putting in your details and then making a payment. In this respect, PayPal wins out every time – all you need is a valid email address. You don’t even have to link a card initially, but it is easy to do so. Accessing your balance is quick and easy.
No Refunds in Crypto
To be fair, once you understand how to use the system, and you have found a way to secure your wallet, you can get around the two issues that we have discussed above. But there is another pressing issue and one that could cause serious issues for you. Transactions cannot be reversed or refunded at all. This is a case of all sales are final. So, if you send too much money by accident, you just have to hope that the person returns it.
If you send the money to the wrong address, the same thing applies – there is no way of getting it back. And, just as problematically, if your funds are stolen, there is no way to recover them on the blockchain. The dangers here were highlighted by the DAO hack on the Ethereum network in 2016. The hacker managed to exploit a loophole in the smart contracts that were used for this project and stole millions.
He wasn’t able to cash it out immediately, so if this had been like a normal bank account, the bank would have been able to recover all the funds. But that is not how the blockchain works, and this is where things get interesting. There were basically only two ways of dealing with the situation – the community could either implement a new contract with the aim of retrieving the stolen money, or they could let the hacker keep the money and move on from there.
The community was divided when it came to what the response should be, and so not everyone went along with the refund contract. As a result, we now have two basic versions of the Ethereum network – one in which the hacker got his money, and one in which the funds were retrieved.
The simple fact is that the price of all that extra security is too high. PayPal offers a simple and convenient service that offers a much more attractive solution. With 227 million active users and a 71.89% market share, PayPal is a force to be reckoned with. It is used by more than 770,000 merchants worldwide. Around 18% of all ecommerce transactions are processed through PayPal. It is an easy solution for merchants starting out because it is a complete payment gateway and offers instant credibility. It also offers an excellent solution for more established businesses as well.
World Market despite having an awesome website and good online presence, accepts only PayPal or Visa when it comes to payments. eBay is a little more flexible when it comes to payments, but PayPal still ranks highly on the site as a payment option. Either company could quite easily create their own payment gateway, but find that PayPal offers a highly workable solution.
That is not to say that PayPal has not had its own problems. Back in 2010, the company experienced numerous cyberattacks because it stopped taking donations for WikiLeaks. To date, though, there have been no major data breaches with the company itself, which is pretty impressive.
The closest it has come to a major breach was last year when it was revealed that there was a breach in its newly acquired subsidiary, TIO Networks. In this instance, around 1.6 million TIO clients were affected. The breach was a result of problems with the platform, though, not PayPal itself.
If only the cryptocurrency industry could boast the same record. As we have mentioned already, e-wallets in this industry are hard to keep secure. Another aspect that is worrisome is how many of the exchanges have also been hacked.
One notable example was the Mt.Gox Exchange where $473 million of Bitcoin was stolen in 2014. The scary part is that this was not even the first time the exchange had been hacked. The Mt. Gox attack was blamed on incompetence and mismanagement. And this highlights another issue when it comes to cryptocurrencies – the general lack of regulation within the industry makes it easy for anyone to set up shop. Had this exchange been as expertly managed as PayPal, there would not have been such a huge breach.
Stick To The Name You Trust
On the whole, PayPal has proven itself to be an effective payments system. It has almost 20 years of experience in the industry and offers merchant a reliable, secure payment processing system that is extremely flexible. With PayPal, you have everything you need for transacting with your clients. You can send and receive payments, request payments and send out invoices, and keep track on the invoices sent out.
The system is extremely easy to use for both buyers and sellers, and it is easy to see why it has been able to garner such a huge share of the market. It is the perfect fusion of security and convenience and operates at a level that cryptos just cannot manage at this time. A lot of work still needs to be done to bring cryptos up to the same level of usability.
In conclusion, therefore, PayPal still appears to be the safest and fastest option with regard to processing mass payments. The lack of flexibility when it comes to cryptos is a serious disadvantage for them in this area.