Blockchain is a solution for tamper-proof payment and other processes. Using distributed computer algorithms, it works as an open or shared ledger that enables transaction processing with no use for third-party verification. It is now championed by most institutions, and this decentralised technology behind Bitcoin and other cryptocurrencies is also used to improve the financial and operational services of institutions like banks.
The history of blockchain
To understand what a blockchain payment system is, let’s have a look at some interesting chapters in the history of blockchain. In 1982, a cryptographer David Chaum first introduced the concept of a blockchain-like protocol to his essay “Computer Systems Established, Maintained and Trusted by Mutually Suspicious Group”. A more comprehensive perspective on it was provided in 1991 by Stuart Haber and W. Scott Stornetta, who were developing a system where document timestamps could not be touched or changed. Later in 1992, Stornetta, Haber, and Dave Bayer added Merkle tries to their concept; this enabled several certificate documents to be stored in one block.
In 2008, the first computerised version of blockchain was created by Satoshi Nakamoto. Nakamoto improved the concept by using a hashcash-like method to put a timestamp on blocks without needing the help of a third party. Nakamoto also found a way of stabilising the rates at which blocks are included into the chain; blockchain was the core component for rolling out the first cryptocurrency – Bitcoin. In 2014, the blockchain file size of Bitcoin, which included all the information and records of mining, transaction, and exchanging, reached 20 GB. A few months after that, the file size grew to 30 GB. and in January of 2016 and 2017, to about 50 GB and 100 GB respectively. By early 2020, the Bitcoin blockchain file size reached about 200 GB.
Initially, the terms ‘block’, and ‘chain’ were used separately in Nakamoto’s whitepaper. In 2016, however, they meshed into a single term, blockchain.
What is a blockchain payment system?
Before diving into the Bitcoin payment system, you need to know how payment systems work. A payment system is a system that is used to settle and process a financial transaction through the transfer of monetary value from one point to another. This includes people, instruments, rules, organisations, institutions, standards, procedures, and technology that makes monetary exchange possible. For example, a person may try to make a payment or initialise a transaction and the payment system makes this possible.
A blockchain payment system is a technology that helps individuals make and process transactions involving cryptocurrencies. It provides decentralised access to the monetary value known as cryptocurrencies; these services also provide a way for these currencies to be sent to other people with the use smart contracts to ensure speed and security. Countless businesses offer blockchain payment system services, and they can also convert the performed transactions into any currency you want.
How does it work?
Bitcoin is by far the most famous cryptocurrency, and different countries have different cryptocurrency regulations. Nevertheless, the increasing use of Bitcoin indicates that more and more countries and international users are keen on using crypto for transactions.
Our system for merchants to accept cryptocurrencies is called GoCrypto. It is available as a stand-alone solution or as part of the Elly POS terminal, which also allows you to accept cards and digital payments. Start accepting Bitcoin and other cryptocurrencies at your store or service today!
Should you switch to a blockchain payment system?
The current traditional financial system has many disadvantages. A blockchain payment system is decentralised; this can make the payments much faster and easier, getting rid of the layers of intermediaries that crowd the traditional payment system and represent one of its risks. It also enables easy development of new financial products, and allows individuals who can not access the traditional financial institutions fast transactions regardless of time and location.
Research shows that making payment systems more transparent results in greater trust and less cost. If you would like to know more about the technologies of such payment systems, we invite you to visit Ellypos.com, where you can read more about the type of payment products that could actually help your business substantially – by allowing you to accept both traditional payment methods like cards, but also digital payments and cryptocurrencies.