- Digital payments firm Square has won a patent for a payment network that allows merchants to accept payments in any currency, including Bitcoin and another cryptocurrencies.
- Square is not the first payment processor to offer this capability, but it already has ‘tremendous market penetration’, so adding crypto payments to its system would allow millions of merchants to accept Bitcoin without having to on-board another payment processor, or manually convert crypto funds into fiat.
Comments
- So far crypto has been a spectacular failure as an everyday medium of exchange. Bitcoin’s (and many other cryptos’) use of expensive ‘proof of work’ consensus ensures that crypto is cost ineffective for everyday transactions, while the ten minute block settlement time creates either a practical impediment to everyday merchant use, or a need to transfer settlement risk to a party willing to adopt it. And then there’s cryptocurrencies’ famed volatility. Most merchants have concluded that they are not willing to adopt such risk.
- Hybrid systems (e.g. TenX, Wirex, and now Square), where crypto sits on top of an existing (centralised) payment processor, such as Visa, are one way of solving the problem(s). In the hybrid approach, the merchant does not have to worry about settlement risk, or crypto currency volatility – they get paid in fiat, while someone else takes the settlement and volatility risk.
- In Square’s case, the patent proposes a way to eliminate crypto settlement latency but at the cost of accepting some risk of double spend – in Square’s case the risk is transferred from the merchant to the payment provider – i.e. Square (see article for a more detailed description).
- I view Square’s Bitcoin functionality as a way of bringing in new users and demonstrating its technical capabilities”.
What do you think?
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