How do digital currencies work and what impact do they have on the payment industry?
A cryptocurrency is a digital currency, which is secured through encryption techniques. This technique, cryptography, is used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. More than 700 different digital currencies exist online. Some have a similar structure, others use different approaches.
The system works from person to person, without a bank or an intermediary interposing. The currency is therefore not country-bound, and all transactions are recorded in a decentralized database. The number of currency units is usually predetermined for a certain quantity and no further ones are generated. In addition, the currency cannot be copied infinitely and is therefore protected against inflation.
Cryptocurrencies can be used to pay where accepted, online as well as, increasingly, at brick-and-mortar shops. In order to be able to do so, merchants team up with specialized payment service providers.
These include payment provider Bitpay is specialized in processing Bitcoin payments. The company also operates an open-source platform, a Bitcoin wallet and the corresponding card. The payment gateway Coinpayments help merchants accept payments in over 445 cryptocurrencies.
The leading German airline Lufthansa entered a content partnership with Swiss blockchain travel startup Winding Tree.
A new project of law, drafted by the Russian Ministry of Finance, propose to legalize cryptocurrency trading on organized trading platforms.
The Riksbank may soon become the world’s first central bank to introduce a cryptocurrency and remove traditional currency from circulation.
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