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According to recent market research, more than 50 percent of US businesses now use cryptocurrency to make international payments. It is one of the first concrete indications that crypto really is becoming a mainstream financial tool. There are several reasons for its popularity, and we will look at some of them in a moment, but leading the way is speed.
Traditionally, if we want to send money to a vendor, he sends an invoice and we arrange a bank wire transfer. That might take a matter of seconds or it could take all of two weeks. It all depends on the where you are, where your vendor is and which banks you are each using. Typically, international payments take longer. They also cost more in fees and the inevitable exchange rate losses.
Crypto transactions are both slower and faster
Google “crypto transaction speeds” and you will see a whole list of articles bemoaning the slowness of crypto transactions, especially bitcoin. You will read that Bitcoin can only process about seven transactions per second (TPS) whereas banks can perform thousands. Yet the reality is that when you send money as a crypto transaction, it will be practically instant, and will seldom take more than a few minutes.
That is clearly faster than bank wire, so what is going on? The point is that while the wire transfer itself is practically instantaneous, making it happen by taking the funds from your account, performing the currency exchange and depositing in the recipient’s account involves various third parties or “middle men.” That’s why it can end up taking days. Crypto is essentially peer-to-peer, there are no banks involved, so it only takes as long as the transaction itself.
Following the example of online casino players
It might sound strange, but it was the online gambling community in the US that first got wise to the speed benefits of crypto. One of the frustrations associated with online casinos can be the time it takes to withdraw winnings. If you hit the jackpot in Las Vegas, all you need to do is walk across to the cashier desk, collect your winnings in cash and you can go out and celebrate your good fortune. At an online casino, traditional methods like bank transfers can leave you waiting days, which takes the shine from the experience.
In recent years, Bitcoin has become a transaction method of choice among US online casino players for various reasons that we do not need to go into here. Its popularity is such that practically all US online casino platforms offer Bitcoin as a matter of course – just look through these casino sites reviewed by GamblingSites.com by way of example. Many found the transaction speed to be a nice bonus, and it inevitably got people thinking about using crypto for other transactions and deriving the same benefit.
Should you worry about TPS?
What we said earlier about Bitcoin’s vastly inferior TPS is something that might cause some concern. Right now, it is unlikely to be an issue, and even when the network usage is at its peak, it will not delay the transaction by more than a matter of minutes.
Taking a long-term view, however, that TPS figure is the main factor that has some people questioning Bitcoin’s scalability. It is not going to be a problem next week or even next year, but if crypto mass adoption finally happens and it becomes as commonplace as, let’s say, Visa, the Bitcoin network will not be able to cope.
Ultimately, we might find an altcoin surpasses Bitcoin as the cryptocurrency of choice. Ethereum, for example, is already the second most popular cryptocurrency. Ethereum 2.0 will fully launch later this year, and by transitioning from Proof of Work (PoW) to Proof of Stake (PoS), its capability will rise from the current 12 TPS to about 10,000 TPS.
Other altcoins have already addressed this issue. Stellar, Cardano, EOS and Cosmos are just a few examples of popular altcoins that are already operating on a PoS basis and that are capable of processing thousands of transactions per second. So to answer the original question, transaction speed is not something that needs to alarm us now, and there is plenty going on to ensure that it will not be a problem in future either. At worst, we might one day see a mass migration from Bitcoin to a more easily scalable altcoin.
Other benefits of crypto transactions
We mentioned earlier that speed was found to be an advantage almost by accident. Individuals and businesses are also drawn to crypto for the following reasons:
- Transaction costs are negligible, less than a dollar, even if you send millions.
- Security is second to none, it is not possible to alter records once they are on the blockchain.
- Every transaction is transparent to all stakeholders.
- Despite the transparency, there is also anonymity, as no personal details are recorded.
If you’ve not tried using crypto for financial transactions yet, this could be the perfect time to start doing so.