16 May, 2018 | Blogs
Bitcoin has been taking the spotlight continuously over the past couple of months as it fluctuates, with analysts having different predictions for the cryptocurrency over the upcoming couple of years. One reason we’ve been hearing a lot about Bitcoin is due to its high adoption rates, especially among people using the cryptocurrency to transfer funds. By now, there are users who are using Bitcoin as a daily currency, to sell and purchase online. Therefore, one question comes to many of us. What are the differences between using Bitcoin wallets for online payments, and other more traditional forms of online payments, such as credit cards or PayPal?
There are many differences between credit cards, PayPal accounts, and Bitcoin wallets. The main difference between credit cards and Bitcoin wallets is that credit cards weren’t specifically made for internet use only.
Type of Payments – Privacy and Security concerns
The way a payment is made through a credit card/Paypal differ from how payments are made using a Bitcoin wallet. When a user pays using credit cards or a PayPal account, the user is, in fact, giving the receiving part the permission to pull a certain amount from the account. This has continuously created great security concerns since full credit card and billing information is provided. On the other hand, payments made through a Bitcoin wallet is the same as directly paying in cash. The receiving party has no way of pulling any amount from the wallet, rather the buyer just sends a specific amount. No information is given other than a wallet Bitcoin ID.
On the other hand, a PayPal account is directly connected to a user’s bank account, and so if a PayPal account is compromised the user’s bank account and credit cards details can be easily leaked. A Bitcoin wallet is different, where security is more reliant on the user himself and can be dangerous if users don’t know what they’re doing. Users can manage their Bitcoin wallet’s security or can choose to let services such as Coinbase manage it.
When looking to make payments using Visa or MasterCard, a user must be registered with either company. The same goes for sellers who are looking to receive payments. This is done to restrict access into networks, thus increasing security. Bitcoin does things differently, where any individual can join by easily downloading a Bitcoin wallet. Payments are easily made by transferring Bitcoin from one wallet to the other, without the need for a bank approval. Bitcoin payments can be tied to different Bitcoin addresses at different transactions, that way no two transactions would be tied to the same identity. This might bring up several security risks, as this can be used for ill doings.
Depending on the networks used when handling online transactions, sometimes chargebacks can occur. A chargeback is a reversed payment, which occurs sometimes due to insufficient funds, or a miss-spelled name or account number. Chargebacks are frequently used to defraud shops, as they can happen some months later. Chargebacks can’t occur if using Bitcoin, as the only way money returns is if the merchant returns it.
Credit Cards are seen to be used and adopted everywhere. The same is not true for PayPal and Bitcoin. PayPal is supported by many online sellers, but not all, and it’s not available in all countries. The same goes for Bitcoin. The problem with Bitcoin is that you need sellers to download services like bit-pay, which helps sellers accept payments made using the digital currency.
To date, there are more than 1000 other cryptocurrencies in the market. When it comes to crypto-currencies and online transactions, these comparisons mentioned above show that it isn’t about what’s best, but more about personal preferences. And it seems like the way we go about using digital currencies is about to change. PayPal’s CEO, John Donahoe, stated PayPal’s interest in integrating cryptocurrencies into their wallets. By the time PayPal and other online payment services considers this integration, crypto-currencies will continue to appeal to many users due to their low fees, anonymity, and decentralization.