The first product that thrust cryptocurrency into relevance and the public conversation was Bitcoin. Satoshi Nakamoto originally designed a solution with one main goal: to develop a peer-to-peer electronic cash system. In other words, an electronic way for one person to pay/transact with another person. Because of many previous attempts (and failures to create a wallet), Bitcoin’s genius in its design was that it used the internet (now very well established by 2009) to create a decentralized way of authenticating a transaction. In other words, a new or private system that would have most of the same features of Visa’s credit card system or the federal ACH system.
The main difference is there is not a central entity (Visa in the credit card world or Federal Reserve in the ACH world) in Bitcoin. This decentralized design (using the internet and just two people to authenticate a transaction) coupled with Bitcoin starting to gain users of its system in mass, has given legitimacy and you could say birthed a larger market called cryptocurrency. When more and more people (consumers) start to use a product, then demand is generated for additional similar products-that is just a law of economics which explains why there are literally hundreds of different cryptocurrencies now coming out as products for consumers.
There is obviously a lot that goes into setting up a cryptocurrency and really a full payment network with accounts, balances, and transaction capabilities and reporting. Many diagrams and schematics can show you this, and other articles can walk through details around all the players in the ecosystem such as “miners” for example. I do want to spend a minute on describing one element for you that I believe is very important, and I will explain why in the last part of this article. That is a system of record keeping called blockchain. Here is how blockchain works. A transaction occurs, it then goes to a pending queue, people “miners” in Bitcoin language confirm the transaction, once two different people (miners) confirm the transaction, the nodes of that transaction are logged in every “miners” database (cloud and physical). And at this point it can‘t be reversed, it is part of an immutable record of historical transactions. So, in other words, this type of authentication and reporting/record keeping blows away other more established payment systems…not to mention something like an individual deleting files is IMPOSSIBLE in a properly designed cryptocurrency payment system.
Bottom line question for a software developer. What should I do to stay ahead of my competitors in offering payments acceptance as it relates to different payment types such as cryptocurrencies?
I feel your pain! As the Head of Product and Strategy at Singular Payments, my job is to sort through these types of what I like to refer to as ‘noisy topics’ to uncover opportunity and threats and I ask three questions to help me do this:
- What do consumers desire?
- What about merchants?
- What about the existing leaders in similar product offerings?
This quote sums this scenario up nicely, “Numbers do not lie”. This sentiment is a filter I keep in the back of my mind as when I am answering these questions. I look hard for the underlying data because everyone who produces numbers has an agenda. Therefore, to be creative and competitive you have to look beyond that to larger macro DATA to find the highest probability of truth.
Tune in for part two of this series on cryptocurrencies to learn more about the impacts of these emerging payments ecosystems on merchants and software developers and further unpack the answers to these questions.