To entrench the relevance of the cryptocurrency payment industry in the mainstream financial services space, cryptocurrencies, with Bitcoin (BTC) and Bitcoin Cash (BCH) at the forefront, need to add significant value and provide a service that far exceeds that offered by contemporary fiat currency.
Decentralized, non-censorable currencies that have no inflationary effect and enable low transaction fees all offer improvements over fiat currency. However, if the customer experience (CX) around using crypto is not orders of magnitude better, adoption will not scale.
While bank, cross-border or credit wire transfer services are not yet instant, often taking up to a few days or weeks to clear, the demand for instant payment services is on the rise. A growing number of payment processing applications and services are emerging that specifically target this pain point by enabling instant transactions (tx) with fiat currency, and this payment paradigm is therefore rapidly becoming the norm.
This has amplified the urgency and necessity for the enablement of instant crypto tx. These capabilities must span the spectrum of financial transactions if cryptocurrencies hope to reach the network effect and prompt greater adoption.
In this regard, the ability to enable instant payments and deposits are non-negotiables, because anything less is more of the same when compared to fiat options. Thankfully, this is functionality that the GAP600 solution already enables.
0.1% of transactions fail to reach the blockchain
At present, the norm is that merchants, crypto gaming providers, and crypto exchanges generally wait to receive multiple confirmations before completing a transaction to reduce the risk of fraud and double spend.
From our data, we’ve seen that only a small percentage of transactions – around 0.1% – published on the network fail to reach the blockchain. While this is an extremely low statistic, we have no way of knowing how much of those failed transactions are malicious or simply testing. Since most merchants or service providers that accept BTC payments don’t offer 0-conf services, there is no incentive for attackers to try and double spend.
Tx acceptance times are unacceptable
However, by design, the average time between BTC block publications is 10 minutes. Our own data reflects that the median time for a typical BTC tx to be accepted in a block was 8 minutes. Real transaction acceptance times can often take much longer, though – up to 16 minutes on average based on historical data. In extreme cases, tx acceptance can take days, or even weeks.
While BCH is more efficient – the average time for transaction inclusion in a block is around 10 minutes – this is still unacceptable in the modern context, where consumers demand instant tx for an enhanced experience, and merchants and service providers require instant payment enablement to bolster cash flow and liquidity.
Of course, as more businesses look to implement instant payments, mitigating fraud becomes a key consideration. In fact, we have seen on our platform that as soon as a merchant starts to accept zero-confirmed (0-conf) BTC transactions, they experience a rise in double spend attempts.
Risk: real and perceived
The major concern with failed BTC or BCH transactions or double spend is not the actual loss, or the probability of loss, but rather the perceived risk involved in accepting instant payments with cryptocurrencies. This inherent risk of loss is what creates a stumbling block to the widespread adoption of 0-conf acceptance.
The GAP600 solution addresses this concern by enabling the acceptance of instant cryptocurrency payments and deposits made in BTC and BCH transactions for any wallet, with plans already in the pipeline to accept additional cryptocurrencies.
Instead of trying to affect the protocol in any way, our approach has rather focused on accepting the network consensus to add value by enabling instant confirmation for service providers. We achieve this by analyzing actual events and failed transactions to create predictive and preventive tools that enable us to guarantee 0-conf transactions.
Live risk scoring
We analyze transactions across a number of fronts and our proprietary risk engine combines these data sets to perform live risk scoring for BTC or BCH transactions on the network as they reach the mempool. When our algorithm approves a transaction, we guarantee the value of that transaction should it not be included in a block eventually
One avenue of analysis utilized is a statistical model that is based on characteristics of the static information published with a transaction, while the other monitors propagation activity and historical aspects of addresses.
This enables us to guarantee cryptocurrency payments before they reach the blockchain, which allows exchanges, payment service providers, and other operators and merchants that accept cryptocurrency to recognize unconfirmed BTC and BCH transactions as final.
Adding value to the commercial environment
The solution has already revolutionized the speed of cryptocurrency transactions and adds significant value to a range of commercial environments. By enabling instant, risk-mitigated cryptocurrency commerce that is safe and secure, yet still offers simple, more efficient CX, GAP600 delivers the level of service needed for crypto adoption to leapfrog fiat currency use.
Since launching in August 2016, we have processed over 3.5 million tx with a total value in excess of $1 billion. Our experience and expertise in this regard is helping to drive the adoption of cryptocurrencies as a mainstream and pervasive payment method among both consumers and a wide range of merchants, service providers, operators and exchanges.