A recent NBC poll showed that 21% of surveyed consumers in the United States have traded or used cryptocurrency, including half of men between the ages of 18 and 49.
In addition, 40% of Black Americans surveyed have used crypto, as have 42% of all consumers between ages 18 and 34. Some of the selling points, according to crypto advocates, include transaction speed, cost, privacy and the perception of crypto as a means for unbanked consumers to access financial services. In addition, 23% of online businesses plan to offer crypto and stablecoin payment options by 2024, and 36% of CEOs say they are ready to accept stablecoin payments now.
Among those who have experience with cryptocurrencies, 68% say they are a faster payment option than alternatives, and 37% of the total population believes blockchain technology makes payments faster. In practice, the speed of a blockchain transaction depends on the mechanism behind it. A consensus mechanism — such as the proof-of-work or proof-of-stake protocol — ensures that each transaction is genuine and unique.
Proof-of-work has been around since the early days of blockchain technology and is the part of cryptocurrency transactions responsible for the high energy consumption commonly associated with cryptocurrency, due to the complex computational processes involved. Each transaction can take 10 minutes or more, and costs per transaction can greatly increase when there is significant demand. In contrast, proof-of-stake uses a randomly selected validation method that requires less energy and fewer resources. As a result, proof-of-stake also yields faster transactions and, typically, lower fees. Proof-of-stake blockchains can also process hundreds of times as many transactions per second as proof-of-work blockchains.
This month, PYMNTS Intelligence examines the promise of faster transactions using blockchain technology and how markets and stakeholders are responding to the benefits blockchain offers.
Taking the Pain out of Transaction Speeds
With rare exceptions, even slow crypto transactions are fast compared to many of the other payment methods most commonly relied on. Most blockchain transactions are completed in minutes, rather than hours or even days, and are able to provide assurances against error or fraud through the transparency of distributed ledger technology (DLT). A recent survey of transaction speeds showed 67 cryptocurrencies with transaction speeds of five minutes or less, with another 16 cryptocurrencies having speeds of more than five minutes. Ethereum Classic was the far outlier, with transactions taking almost a week, but on the other extreme, five other cryptocurrencies — Algorand, Avalanche, Flow, TRON and Energy Web Token — recorded transaction speeds of less than a minute, and another 12 had transaction speeds approaching instant.
Merchants see the potential in that speed, with 70% of those surveyed saying faster crypto payments could revolutionize their businesses. Among merchants already accepting crypto payments, 80% said they find it easier to settle using crypto than in fiat currencies. In another survey of businesses already conducting crypto transactions, 82% of chief financial officers and finance chiefs said they are seeing faster settlements for crypto payments compared to non-crypto, and 88% of merchants reported the same.
Bringing Down Barriers With Blockchain
This added speed becomes particularly important for cross-border transactions. In a PYMNTS survey, more than 37% of businesses said they are currently using blockchain and cryptocurrencies for cross-border transactions, while almost 13% said they would like to use crypto for that purpose. Moreover, more than 14% of businesses said they are using blockchain and crypto for other payments, while nearly 23% said they would like to use crypto for that purpose as well.
Between early 2020 and early 2021, the value of remittances sent to Latin American countries using crypto exploded from approximately $100 million per month to nearly $400 million per month. This was likely fueled in large part by the desire to avoid high transaction fees, but crypto cross-border payments also offer clear advantages in terms of predictability and speed. Even the Ukrainian government has seen the benefits of crypto cross-border payments, as international aid has flowed into the country through crypto transactions, unhindered despite the country being in the middle of a war. That same event also pushed major global suppliers that had not been accepting crypto payments to develop the capability rapidly.
Richard Walker, principal at Deloitte Consulting LLP, said that crypto cross-border payments could dramatically alter the cross-border payments ecosystem. The current ecosystem is rife with inefficiencies and friction due to the need to navigate disparate point solutions and pull them together into a single chain that delivers money across the globe. Payments move not directly from payor to payee, but from node to node throughout a chain, with various steps requiring fees and each additional transaction taking time. In contrast, just as consumers have discovered, crypto payments present the potential to completely disrupt business cross-border payments by making them faster and cheaper, and they can also introduce the ability for self-service and greater control.
Those same benefits apply whether blockchain payments are crossing the globe or crossing the street, though they are most obvious in more complex transactions. By speeding up transactions both through faster mechanisms and by removing intermediaries, blockchain payments have the potential to completely change the nature of payments.