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20 July 2022

20 July 2022

Crypto payments: the story so far – and what may come next

Crypto payments: the story so far – and what may come next

Crypto payments: the story so far – and what may come next

Talk to anyone outside the industry about crypto payments and it's likely they'll see it as a recent innovation. In fact, the technology is almost as old as the public internet, with short-lived innovations in the 90s, like DigiCash and B-money, paving the way for today's cryptocurrencies. But with crypto payments rapidly becoming mainstream, now is the perfect time to take stock of crypto's recent past and to look ahead to what the future has in store for this disruptive means of commerce.

Talk to anyone outside the industry about crypto payments and it's likely they'll see it as a recent innovation. In fact, the technology is almost as old as the public internet, with short-lived innovations in the 90s, like DigiCash and B-money, paving the way for today's cryptocurrencies. But with crypto payments rapidly becoming mainstream, now is the perfect time to take stock of crypto's recent past and to look ahead to what the future has in store for this disruptive means of commerce.

Talk to anyone outside the industry about crypto payments and it's likely they'll see it as a recent innovation. In fact, the technology is almost as old as the public internet, with short-lived innovations in the 90s, like DigiCash and B-money, paving the way for today's cryptocurrencies. But with crypto payments rapidly becoming mainstream, now is the perfect time to take stock of crypto's recent past and to look ahead to what the future has in store for this disruptive means of commerce.

2008: The big bang

Arguably, the modern era of crypto payments has its roots in the financial crash of 2008. The crash saw people's trust in banks and other financial institutions plummet at the same rate that fiat currency lost value. So when Satoshi Nakamoto's whitepaper on "a purely peer-to-peer version of electronic cash" – AKA "bitcoin" – was published in 2008, the timing couldn't have been any better.

In the paper, Nakamoto outlined a decentralized financial system based on blockchain, which eliminates the need for intermediaries, maintains privacy, and increases transparency. In doing so Nakamoto described the many benefits of cryptocurrency that today makes the method so attractive to businesses and consumers alike. 


2009: The birth of bitcoin

It took just one year from Nakamoto's whitepaper for the first bitcoin to be mined. The coin, which was named "the Genesis Block" was mined by Nakamoto himself (or herself – the true identity of the person or people behind bitcoin remains a mystery). 

The Genesis Block, or "Block 0" as it is also known, is the ancestor of every single bitcoin in existence today and each transaction block on the chain (i.e. a transaction ledger) can be traced back to Nakamoto's first coin. Block 0 began the process of validating bitcoin transactions and introducing new bitcoins into existence.


2010: Pizza Day: the first crypto purchase 

One year, and many bitcoins later, the cryptocurrency received its first comparative valuation when 10,000 bitcoins were exchanged for two pizzas – $198,606,570 in today's money. The exchange was made on an online forum and it took two days for anyone to accept the offer. It can only be hoped that Jeremy Sturdivant, who accepted the pizza trade, put those coins somewhere safe. 


2012: The emergence of Coinbase

From around 2010 bitcoin exchanges started to emerge, but it was not until 2012 that Coinbase, one of the biggest and most important exchanges, launched. Founded by Brian Armstrong, a former Airbnb engineer, Coinbase went on to become the first cryptocurrency exchange to go public (on the Nasdaq in 2021). 

With the advent of Coinbase and other exchanges, it became possible for anyone to buy and trade bitcoin, marking a significant step forward in the story of the cryptocurrency. Significantly, Coinbase also enabled technology that would later make crypto payments possible. 


2013: The crypto market matures

From 2013, the bitcoin market started to show signs of maturity. For the first time the market value exceeded $1 billion as the exchange rate for each individual block of the encrypted digital currency rose above $92. During the same period, the total number of bitcoins in existence approached 11 million.

However, while bitcoin still dominated the popular perception of cryptocurrency, significant innovations were taking place. In 2014 one of the most important of these innovations occurred when BitUSD, the first ever stablecoin, was launched. This crypto-backed stablecoin was issued on the BitShares blockchain and functions as collateral for other stablecoins pegged to local currencies. With BitUSD and the invention of stablecoins, the foundations had been laid for cross-border payment and settlement using cryptocurrency. 


2014: Crypto payments gather pace

From 2014, some serious momentum started to gather around crypto as a payments option. That year both Stripe and PayPal started processing bitcoin transactions, and interest from retailers in accepting bitcoin payments took off. Zynga, Overstock.com, Expedia, Dell, Dish Network, and Microsoft all started to accept bitcoin as payment in 2014, making it an annus mirabilis for bitcoin payments worldwide. 

2014 was also remarkable for the Initial Coin Offering (ICO) of Ethereum, where buyers received ether in exchange for bitcoin. More than seven million ether coins were sold in the first 12 hours of the sale, worth approximately $2.2 million. This ICO sparked a craze for raising money for blockchain projects through ICOs, which peaked in 2017 and 2018.


2018: Stablecoins take root

In 2018, another significant moment in the evolution of crypto payments occurred when Circle launched its USDC stablecoin. Every digital dollar of USDC can always be exchanged 1:1 for cash, making it easy to on-ramp from fiat and creating a stable store of value. As such, USDC creates a fast and effective means for settling payments across borders and moving money rapidly, securely, and transparently. 

The launch of USDC came as major global corporations started to take cryptocurrencies seriously. 2019 was a landmark year in that respect, triggering a significant buy-in to Ethereum that would continue over the next few years. Companies to invest at this stage include JP Morgan, Chase, Amazon, IBM, and Walmart.

In the same year, retailers including Whole Foods, Lowes, GameStop, Petco, Barnes & Noble, Ulta Beauty, Regal Cinemas, Bed Bath & Beyond, Baskin Robbins, Crate & Barrel, and Nordstrom enabled the purchase of goods through crypto payments platforms, marking a dramatic ramping up of the crypto payments space. 


2021: Crypto's boom era

In 2021 cryptocurrencies and digital assets could do no wrong. Towards the end of that year the total market capitalisation for cryptocurrencies surpassed $3 trillion, having quadrupled in size since the start of 2021. Meanwhile, NFTs had become the acronym on everyone's lips and 2021 saw the most expensive NFT sold to a single user: The First 5000 Days, a collage of 5000 individual NFTs that Beeples created for his Everyday’s series. The NFT sold for $69 million / 42329.453 ETH in 2021 at the Christies Auction house.

Concurrently, the adoption of crypto banking and payments services by enterprises accelerated dramatically. This is because companies like BVNK had emerged to offer enterprise-grade payments services such as payments processing and cross-border payments that bridge the crypto and fiat worlds. 

Now in 2022, crypto payments services are in more demand than ever and across all types of industries. One area to see particular growth this year is in luxury retail, with brands including Gucci, Balenciaga, Tag Heuer, and others all announcing plans to accept crypto.  


The future of crypto payments

While the first half of 2022 will no doubt be remembered for the crash in the price of crypto assets, such fluctuations are to be expected as the technology scales. Looking further ahead, the future is very bright indeed, with crypto payments fast heading for mainstream adoption. Certainly, what we're seeing on the ground is that more merchants and Payment Service Providers (PSPs) than ever are looking to include crypto in their propositions.

The liquidity that comes within decentralised stablecoins means that the technology will likely soon become the primary settlement rails for the digital age. As it does so, the model for how money moves around the world will be transformed, with the legacy SWIFT infrastructure giving way to blockchain. 

As adoption picks up, it's also likely that global regulations will coalesce to ensure that the cryptocurrencies underpinning payments services are truly stable. This regulatory scaffolding will help build further confidence in crypto payments and further boost adoption.

Already so much has been achieved in crypto. But the technology is only just getting started.

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