You’ve probably heard people say that bitcoin has faster transaction speed compared to normal payment methods such as credits cards or PayPal. According to Bitcoin’s inventor Satoshi Nakamoto, the popular digital currency is a peer-to-peer electronic cash system. This depiction of crypto tackles the fundamental differences between credit card and Bitcoin and other crypto transactions.
As digital currencies continue to grow in popularity every month, determining which amongst the numerous blockchain payment methods could ultimately turn into the new MasterCard or Visa is essential.
Difference between credit card and cryptocurrency transactions
On the other hand, transactions using credit cards require the buyer to authorize sellers to pull payments from their accounts. Every transaction goes through numerous financial mediators throughout the whole process. For example, a typical transaction with Visa involves about 4 parties which include the card holder, merchant, acquirer (financial institution enabling your payments to a merchant) and issuer (bank of the card holder).
It is not necessary to provide any personal identification details when making crypto transactions like your full name and address. These are made using a private key and a completely anonymous alphanumeric address which changes with each transaction you make. You can also make payments using your smartphones through QR or quick response codes.
Credit cards are physically stored in wallets while crypto transactions are sent to and from e-wallets. You can secure a wallet on your smartphone, online or offline on your personal computer. The major difference between a crypto transaction and credit card transaction is that cryptocurrency transactions are irreversible as well and you can only get a refund from the receiving party. This means that merchants taking payment through digital coins have no charge-backs, which is the demand by credit card provides for retailers to cover any losses due to disputed or fraudulent transactions.
Cryptocurrency Transaction Speed
The Bitcoin community has been debating over the block sizes specification of the network, which restricts the maximum amount of transactions that can be processed every second. According to some exchanges like Luno, that transacting in BTC has become rather slow to the point of it being a painful process. Plus, it has also become more costly compared to a couple of years ago.
Theoretically, Bitcoin’s maximum speed is around 7 transactions per second. But in reality, the BTC network is accomplishing only 3 or 4 transactions per second. This number is low and questions have been raised on how the maximum transaction volume of Bitcoin can compare to other cryptocurrencies like Ethereum and Ripple as well as mainstream payment methods like PayPal and Visa.
There had been a number of proposed solutions for the issue of Bitcoin’s block size. Bitcoin Unlimited proposed to remove its block size limit, while Segregated Witness proposes to double its blocksize. However, the BTC community has not reached consensus yet on which direction to take. Segwit is supported by about 27of the community while Bitcoin Unlimited enjoys support from 36% of the community. This was measured by the percentage of the entire BTC mined over a definite period, with some miners not expressing support to any of the proposals.
Ethereum, on the other hand, has a speed limit estimated to be about 20 transactions per second near 2016’s end. The platform developed the Raiden system which uses ETH smart contracts in order to increase its all-out speed to as high as 1million transactions per second.
Leading the pack of major cryptocurrencies with the fastest transaction speed though are Ripple and Bitcoin Cash. Ripple has a 1,500 transaction per second speed limit, while Bitcoin Cash has a speed limit of 60 transactions per second. If you’ve been in the crypto industry for quite a while now, it is not surprising to see Ethereum and BTC to be on rear. Digital currency traders have been hit consistently with problems like transaction delays when they transfer their BTC or Ether. This is due to the ever increasing popularity of the coins outpacing the processing capabilities of their respective networks,
Credit Card and PayPal Transaction Speed
PayPal has more than 218 million users around the world, and this statistic was just during the third quarter of last year. To date, it is still one of the most well-known and preferred peer to peer digital platforms. In 2016 alone, PayPal handled more than 6 billion transactions, an average of 193 transactions per second. During Cyber Monday in 2015, the company reported that they were able to process 450 transactions per second.
Visa, on the other hand, seems to remain the fastest when it comes to transaction speeds compared to any measured payment networks with a speed limit of around 24,000 transactions per second. But based with rigorous testing, the estimate processing capability of Visa is over 56,000 transactions per second. Furthermore, it has an average transaction of 150 million per day. On average, that’s about 1,667 transactions per second.
Transaction Comparisons
Comparing transaction speeds can be tricky since there are substantial differences among mainstream and crypto payment methods. Cryptocurrencies uses the push method of payment while credit cards use a pull method, wherein your private information is shared with recipients as your funds are requested from your accounts.
There are also differences in terms of system architectures. Crypto payments are peer to peer with a decentralized transaction authentication. Meanwhile, payments made via credit cards are centralized; meaning if once the receiving or issuing bank or other intermediaries encounter an error, your transaction fails. Read more here: https://www.abitgreedy.com/transaction-speed/.
In the end, cryptocurrencies resemble cash as much as credit cards or PayPal do. Its goal is to offer a mix of convenience of offering direct cash transactions and the benefits of the power of digital technology.
