The world has entered a new phase of financial transactions characterized by the use of cryptocurrencies as a form of cross-border payment. The banking procedures are time-consuming, costly, and very exhaustive especially when it comes to international transfers. Credit facilities, especially those supported by traditional financial institutions, are costly, slow, and cumbersome, cryptocurrencies present a more efficient solution.
Here are the leading cryptocurrencies that hold the population by steering cross-border payment innovation:
The world’s first and most prominent cryptocurrency, known as Bitcoin, continues to be used in the payment for imports. Created in 2009 by an unknown individual or group Satoshi Nakamoto, Bitcoin is a digital asset that utilizes a peer-to-peer network through the internet with no central authority, and all the transactions are safe.
Widespread Acceptance: Thus, Bitcoin has become accepted by numerous merchants and service providers all over the world.
Security: From the use of Blockchain technology, arguably, the levels of security and transparency are very high with Bitcoin.
Speed: Although it currently may take from a few minutes to a few hours to complete a Bitcoin transaction due to network jams, measures such as the Lightning Network are in the process of being created to enhance the rate of transactions.
Volatility: The problem with bitcoin is that its price can sometimes fluctuate between very extreme values which can be a challenge to both senders and receivers.
Transaction Fees: One drawback of the Bitcoin payment system is that it carries higher fees than some of the other digital currencies depending on the network’s load.
Ripple which was developed in 2012 provides real-time settlement of international payments at notably lower fees. Ripple has a consensus mechanism different from other cryptocurrencies and its cooperation with banking organizations.
Speed: The Ripple transactions are very fast, therefore, taking a few seconds to process the transaction.
Low Fees: The processing fees of Ripple compared to the normal banking fees and even to most of the cryptocurrencies are very low.
Institutional Support: Ripple works with many bank-accredited institutions; thus, it is highly credible and possesses more stability.
Centralization Concerns: While Ripple is a cryptocurrency similar to Bitcoin, it is not as decentralized as Bitcoin and this has created controversy among Bitcoin purists.
Regulatory Issues: It is still important to note that Ripple has its legal troubles, especially with the SEC, which has caused some level of ambiguity in the company’s operations.
Overview
Stellar was initiated in 2014 by a man named Jed McCaleb, the co-founder of Ripple, which aims to provide dirt-cheap and fast international payments. Thus, the decentralized Stellar network and the emphasis on making financial services more accessible are advantageous for international payment.
Low Fees: When it comes to the fees charged on the transactions, Stellar boasts some of the lowest fees hence suitable for small and big transactions.
Speed: The time it takes between the initiation of a transaction on the Stellar network as well as its approval usually takes a few seconds.
Partnerships: Stellar has incorporated several financial institutions and companies as partners to improve its network and coverage.
Market Position: Stellar is not very popular or used as frequently as Bitcoin or Ripple which may be restraining in some areas.
Volatility: Similar to all other cryptocurrencies, Stellar prices can also fluctuate and that can be seen by some people as a disadvantage.
Litecoin by Charlie Lee in 2011 is considered the silver to Bitcoin’s gold due to the faster transaction speed and lower fees making it applicable in cross-border payments.
Speed: The settlement time for Litecoins is shorter than Bitcoins and stands at a few minutes at most.
Lower Fees: Litecoin’s fees are comparatively lower than Bitcoin most of the time, thus it is convenient for small transactions.
Security: For this reason, Litecoin has a strong network that can make the transaction safe and secure.
Adoption: Nonetheless, Litecoin is rather famous; yet, it is not as recognized as Bitcoin or some other coins.
Competition: Litecoin has a lot of competition from other coins that have been developed to offer the same advantages.
Dash is one of the youngest competitors that started in 2014 and specifically aims to perform the transactions as fast and private as possible. Its InstantSend feature enables ‘almost’ instant transactions, which sets it up very well for competing in cross-border payments.
InstantSend: InstantSend function of Dash guarantees transactions’ confirmation in seconds only.
Privacy: Dash also has features that make transactions private and voluntary, and this is a measure provided by the system.
Low Fees: As earlier stated, the transaction fees in Dash are considerably low making it cheaper to use in doing international payments.
Regulatory Concerns: That is why the strict privacy that Dash provides has been viewed negatively by regulators and may affect its further application.
Adoption: Dash is not used as much as some other cryptocurrencies and this may become a problem for him.
Cryptocurrencies thus present a possibly good solution to the problems of cross-border payments. Hence, it turns out that each of them offers specific opportunities that will be suitable for everyone’s choice: Bitcoin, Ripple, Stellar, Litecoin, and Dash. Thus, Ripple and Stellar are mainly focused on the solution to the four vital factors of fast and low-cost transaction types, while Bitcoin is the most accepted cryptocurrency.
There are also Litecoin and Dash with other convenient options due to their peculiarities. Thus, these digital currencies are expected to further engage the cryptocurrency market and act as new forms of efficient, secure, and low-cost border payment systems.