Blockchain in payment processing
What is blockchain?
Blockchain is a continuous chain where each block contains records of various transactions. Unlike regular databases, records in the blockchain cannot be changed or deleted; you can only add new ones. So, if any data changes, the information is saved in the ledger, and none of the blocks or records is edited or deleted, but a new record with changes appears. It is a crucial benefit of blockchain in payment processing.
It is also called the technology of distributed ledgers because the entire chain of transactions and the current owners’ lists are stored on many independent users’ computers. Even if one or several computers malfunction, the information will not be lost.
Data acquisition speed and accuracy are critical for business. With that in mind, blockchain technology is perfect for these means. It provides authorised network participants with instant and completely transparent access to information in an immutable ledger. The blockchain network allows you to track orders, payments, accounts, items, and more. Since all participants share a single source of trusted data, each can view all transaction details at any time. It also allows them to work more confidently and gain new benefits and opportunities.
Advantages of blockchain in payments
Traditional payment methods depend on the central counterparty. Owning the ledger, it registers and distributes the assets' ownership. Speaking of international payments, the situation is even more complicated. The cost of payments increases, and the speed of transactions slows down significantly. So, one of the most valuable uses of blockchain is in the payment industry. And here are its main benefits.
Implementation of blockchain technology mitigates operational risks during payment processing due to a distributed ledger-based accounting system. In the blockchain, the owner's register is not stored on a single organisation server. Its copies are simultaneously updated on many independent computers connected via the Internet. As a result, registries with data on asset owners cannot be faked.
The data about each payment is stored on the computers of a huge number of network participants. To keep the information for all users absolutely complete and correct, the concept of consensus was introduced in the blockchain. If some participants turn their computers off and some of the transactions are not reflected, or the records are incorrect, this will not affect the operation of the network. The consensus procedure — reaching an agreement — will restore the correct information.
The distributed nature of the ledger in blockchain technology allows each participant of a transaction to access the ledger and check it at any time. By joining the blockchain network, you ensure you will always receive reliable and timely information, and your confidential blockchain records are available only to the network participants of your choice.
The transaction requires the consent of all participants regarding the accuracy of the data, and the records of all verified transactions are unchanged. No one, even a system administrator, can delete a transaction.
The absence of so many intermediaries affecting the process of transferring funds makes payment processing much faster. Only three parties participate in transferring — the payer, the recipient, and the validator, who confirms the transfer in the blockchain network.
Assets in the blockchain are represented by cryptocurrency tokens that cannot be counterfeited. Their security is significantly higher than that of fiat currencies. The buyer and the seller of an asset confirm the transaction using cryptographic keys — special unique digital codes.
It is hardly possible to guess the sequence of characters of the digital code of cryptographic keys. This makes blockchain technology one of the best for financial transactions. At the same time, wallet hacking happens, so it is better to connect them to the network only for the duration of transactions and store them offline the rest of the time.
This technology allows users to make anonymous payments and cross-border transfers between jurisdictions. Anonymity allows you to hide the direction of payment and its amount to avoid paying taxes. Crypto blockchain-based payments also provide an opportunity to overcome sanctions regimes.
How does blockchain payment processing work?
Blockchain-based transaction processing is built on a distributed ledger to maximise the benefits of the technology. In such shared registries, all data entered is collected, synchronised, and verified. Due to distributed ledgers, the blockchain remains decentralised since all transactions are repeatedly confirmed by independent network nodes worldwide.
How is blockchain used in payments?
Blockchain offers a comprehensive solution with all the features essential for payment processing. Transactions recorded in the blockchain are verified in a distributed peering (peer-to-peer) network, which significantly complicates the counterfeiting of sending and receiving funds. In addition, smart contracts allow for the automation of processes and transactions are carried out in seconds. Finally, blockchain payment processing can be customised to the needs of almost any type of service, making it one of the most versatile options.
The interest in the blockchain has grown along with that of cryptocurrencies. Today, this technology is widely used for transactions with bitcoins as a payment option and other cryptocurrencies. We at Corefy provide our clients with an opportunity to connect dozens of payment methods, including cryptocurrencies, through a single connection with our platform.
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