"Historical Retailers Need to Embrace the Change with Cryptocurrencies"
In the rapidly evolving world of digital payments, the adoption of cryptocurrencies by online merchants is on the rise, expanding businesses and offering new opportunities. However, the question of whether traditional (land-based) merchants will follow suit remains uncertain, as stringent requirements and conditions in money processing pose potential barriers.
The security systems underpinning cryptocurrencies differ significantly from those used in credit cards and other virtual payment systems, particularly in land-based transactions.
Confidentiality, a crucial aspect of security, is addressed differently in both systems. Cryptocurrency security, enhanced by advanced solutions like Multi-Party Computation (MPC) wallets and hardware wallets, employs cutting-edge cryptography to secure private keys. This approach offers enhanced privacy and resistance to phishing or malware attacks, as key authorization is split among multiple encrypted shares, and private keys are often kept offline [1][3][5].
On the other hand, credit cards and traditional virtual payment systems rely on standardized encryption protocols like TLS during transactions and PCI-DSS compliance to protect cardholder data. Confidential information is typically stored and processed by centralized financial institutions within regulated frameworks.
Integrity, another security domain, is a point of contrast between the two systems. Cryptocurrencies use blockchain technology, ensuring tamper-evident, immutable transaction records. However, decentralized finance (DeFi) systems lack centralized oversight, posing risks if any component is compromised, potentially leading to cascading failures without backstop mechanisms [2]. In contrast, credit card systems depend on centralized authorities and payment processors that use real-time fraud monitoring, machine learning, and traditional checks to maintain transaction integrity and quickly reverse fraudulent charges if detected [4].
Availability, the third security domain, is a concern in cryptocurrency platforms due to network congestion, software bugs, or blockchain forks. Decentralized systems lack a central authority to intervene during crises, which can lead to systemic contagion in interconnected components [2]. However, hardware wallets and MPC wallets provide high availability of funds to users, assuming device and network access. Credit card and payment systems, on the other hand, generally offer higher availability for land-based transactions due to robust infrastructure, continuous monitoring, and customer service support.
Despite the advantages of cryptocurrency security systems, which emphasise decentralized cryptographic protection and user-controlled keys, offering strong confidentiality and integrity assurances, they face challenges in systemic availability and crisis management. Traditional credit card systems, on the other hand, leverage centralized control, regulatory frameworks, and fraud monitoring to provide robust availability and customer recourse, though they rely on trust in central authorities and handle confidentiality differently.
As the landscape of digital payments continues to evolve, it is essential for land-based merchants to carefully consider the security systems needed to protect them and their users when adopting virtual currencies. While no official or exact method for calculating transaction fees with cryptocurrencies is mentioned, the security concerns surrounding their use in land-based establishments remain a significant hurdle to widespread adoption.
References:
[1] https://www.trezor.io/blog/2019/05/28/trezor-model-t-security [2] https://www.investopedia.com/terms/d/decentralized-finance.asp [3] https://www.ledger.com/academy/what-is-a-hardware-wallet [4] https://www.visa.com/about-visa/newsroom/visa-news-articles/visa-fraud-management-and-security [5] https://tangem.com/blog/what-is-a-tangem-smart-card-wallet/
In the context of digital payments, cryptocurrency security systems, utilizing advanced technologies like Multi-Party Computation (MPC) wallets and hardware wallets, prioritize confidentiality over traditional systems through enhanced cryptography, maintaining privacy and resisting attacks. On the other hand, credit cards and traditional virtual payment systems rely on standardized encryption protocols and PCI-DSS compliance, storing and processing confidential information within centralized institutions.
