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Blog Payments

Sep 8, 2021

(Bu blog yazısı sadece İngilizce olarak mevcuttur.)

The Basics of Cryptocurrency Payments

If you're reading this article, it stands to reason you already have some practical knowledge and experience of what cryptocurrencies are, or at least have heard of them in the news. Investing, speculating, mining, hoarding. These are just a few terms bandied about when there is talk of cryptocurrencies.

The Basics of Cryptocurrency Payments

Today, however, we’re here to discuss one of the lesser-mentioned, but very powerful functions of cryptocurrencies: payments. Payments? Really?

I know payments might seem boring, blasé, or basic. They’ve become so because they are fundamental and have been deeply established in our society and daily lives (in the USA and other developed areas). Like roads or pipes or email. Nothing awe-inspiring, yet elemental in our society. I have cash, credit cards, or PayPal to easily take care of all my payments.

Yet, there are millions of people worldwide that go without these things that we take for granted, a method of making low-cost and trustworthy payments being just one of them. Imagine if we could instantly provide these populations with the powerful tool of payments.

Not Your Ordinary Payments

But it’s not just payments. The payments we’re talking about are cryptocurrency-based, blockchain-driven, web 2.0 transactions. Payments that take advantage of blockchains, making them fast, secure and cheap. Payments available to the previously unbanked that leave its predecessors in the digital dust.

Pay or get paid for a product and have the transaction settled in seconds. Securely send money to a small vendor who has a mobile phone, but may not have access to the traditional banking system. Send or accept cryptocurrency micro payments to/from anyone. These things aren’t possible with the payments of the past.

What We’re Used To

For reference, below is a typical credit card payment processing flow (in the USA at least).

  1. Customer connects to an agency’s web storefront (e.g. online store) via the Internet.

  2. Customer’s web session is redirected to U.S. Bank’s E-Payment Gateway.

  3. Customer enters card information on payment pages hosted by U.S. Bank.

  4. Authorization request is sent from U.S. Bank E-Payment Gateway to the merchant processor.

  5. The merchant processor routes the authorization request to the Credit / Debit Card Network.

  6. The Credit / Debit Card Network sends the authorization request to the customer’s card issuing bank.

  7. The customer’s credit / debit issuing bank approves or declines the transaction based on the customer’s available funds and passes the transaction results back to the Credit / Debit Card Network.

  8. The Credit / Debit Card Network relays the transaction results to the merchant processor.

  9. The merchant processor relays the transaction results to the U.S. Bank E-Payment Gateway.

  10. The U.S. Bank E-Payment Gateway displays the authorization results to the customer and forwards a real time payment confirmation to the agency (if applicable).

  11. The customer’s credit / debit card issuing bank sends the appropriate funds for the transaction to the merchant processor.

  12. The merchant processor deposits the daily authorized payments to the agency’s bank account. This step is known as the settlement process. Authorizations approved during the 24 hour period ending at 1:30 a.m. (C.T.) are deposited at 8:00 a.m. (C.T.) the same morning.

There are quite a few steps, many of which are in place for security and verification. The information is processed automatically, but passes through quite a number of entities. This invites room for error or malicious activity.

What Payments Could Be

A cryptocurrency payment, on the other hand, is a streamlined version of the above. Take a look at the basic steps necessary for a blockchain payment process flow.

  1. Customer makes a payment or agency requests payment (using proper agency address is important).

  2. The transaction is added to the blockchain.

  3. Fees are taken and any currency exchange happens now.

  4. Transaction is verified via blockchain protocol.

  5. Payment shows up in the agency’s wallet.

As you can see, there are much fewer steps. True, more responsibility is placed on users to keep their own data safe. However, within these steps, there is simplicity and security baked in. Despite what you may hear or read, cryptocurrencies and blockchains are very safe, especially when compared to traditional forms of money transfer. Having more independence with your financial decisions is one of the benefits of blockchains.

What Crypto Payments Look Like for A Customer and Merchant

There are some boxes to check when setting up a cryptocurrency payment system. We’ll address them from the perspective of a customer and a merchant. We will look at hypothetical examples in the Stellar Network ecosystem. The Stellar blockchain is one of the best for affordable, efficient, and secure transactions.

As a customer:

  1. Open a cryptocurrency wallet. This may include regulatory measures such as AML/KYC to thwart disreputable activity. You will need to do a little research to find a wallet service that fulfills your demands.

  2. Record and store your private keys in a secure place.

  3. Deposit funds into your wallet. This will include sub-steps of on-ramping (getting money into the system) by way of an asset issuer and exchanging into cryptocurrency or stablecoin.

  4. When you visit a merchant accepting digital currencies, you can now pay through your wallet.

  5. Be sure you input the correct merchant address. Many vendors will have a QR code to scan to eliminate user error.

  6. You should receive an email, text message, or transaction item regarding the completion of the transaction.

  7. When the merchant has received the transaction confirmation, they will move ahead with shipping or sending product(s).

As a Merchant:

  1. Set up an account with a cryptocurrency payment processor such as COINQVEST.

  2. On your site, advertise that you accept cryptocurrencies such as BTC, ETH, XRP, or XLM.

  3. When customers pay with digital currencies, funds will be deposited in your wallet or account.

  4. If a customer chooses to pay you with a different currency than your default,

  5. You can then set up withdrawal through an asset issuer to move funds to your traditional bank.

Cryptocurrency payment processing developed on the Stellar Network empowers individuals and businesses with capabilities to leapfrog most traditional forms of payment by removing the obstacles of outdated technology and infrastructure. As you can see, it’s not all that difficult to get started with cryptocurrency payments. With just a few simple steps, you can get your online business set up to accept cryptocurrencies from your customers. Welcome to the future of money.

If you are interested in learning more, visit and see how we can help you get started.

Randall Wong
Randall Wong Head of Content
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