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Adoption is the only metric that matters in the battle for payment supremacy

Without mass adoption the network will remain largely unused and will fail to realize its grand destiny

By Daniel Lipshitz, CEO, GAP600

*This article was first published on CoinGeek on 11 March 2019.

As you may have read in a previous blog post, we passionately support cryptocurrency, with Bitcoin at the forefront. Above all else, crypto’s network effect offers the world a path to greater economic freedom and, as such, the opportunity to advance global prosperity. It is truly a wonderful, paradigm-shifting development.

Unfortunately, without mass adoption, the network will remain largely unused and will, therefore, fail to realize its grand destiny. It’s similar to holding a winning lottery ticket but never cashing it in, or operating a cargo ship that always runs at just 2% capacity. Without usage and adoption, the potential to extract the full economic value falls short. We’ve been distracted from this reality amid the hash war and hard fork melee and the prevailing bear market.

Adoption is everything — Without mass adoption, the potential of crypto will never be realised

Picking a winner

While industry debate rages on, with everyone waiting for a clear market leader to emerge, it’s worth mentioning that the technical attributes and characteristics of the various cryptocurrencies merely enables them to be considered as potential denationalized, non-inflationary money systems.

Technical advantages can be helpful but are not the defining characteristics that lead to a network effect of widespread usage and, as such, adoption.

As we’ve seen many times before, the best technology doesn’t always win out. According to research by Rahul Kapoor and Ron Adner from Wharton Business School, when we talk about new technologies replacing existing ones, the more relevant factor is the ecosystem of the emergent and incumbent technologies.

Their research focuses on emergent technology risks and the capacity to innovate with the incumbent technology. The researchers define these factors as the ultimate determinants of mass adoption.

Complex factors

The same is true of cryptocurrencies. It won’t necessarily be the technical advancements in terms of structure and characteristics that determine which coin gains mass adoption and usage over the others.

That’s because, when discussing cryptocurrency in the context of money – a pure transactional medium – there are multiple forces at play that can constrain a cryptocurrency’s ability to form the necessary ecosystem around it to deliver the user experience and functionality that will drive usage and mass adoption.

Primary in this regard is the fact that fiat technologies are benefiting from fintech innovation, especially in the realms of mobile and social media payments. As more applications emerge that enable faster, easier, more seamless transactions, the fiat user experience (UX) will remain just as good, or even more compelling, than that of cryptocurrencies.

While there have been significant developments in the crypto space over the last decade (including advancements in usability), which have helped to improve mainstream adoption, this has primarily been applied to specific use cases such as investments or speculating.

Speculation undermines potential

While evidence of crypto payment uptake continues to emerge, these instances are dwarfed by speculation and investment applications. Interestingly, a possible explanation for the current bear market may be the realisation that the actual use case underpinning the great promise of cryptocurrencies as a means of exchange has not caught up with the investment hypothesis.

Within this space, the investing and speculating ecosystems are comparatively well developed. Significant investment from enterprise custodial financial services providers and corporate trading desks has flowed to create the infrastructure required to enable the functionality and UX that drives the mainstream adoption of cryptocurrency services within these industry verticals.

Crypto as an exchange medium

Driving the adoption of cryptocurrencies as mediums of exchange, however, lags significantly in the broader market. When compared to the massive fiat transaction volumes that occur globally every day, crypto transactions are still largely in the initial growth phase.

Simply building solutions and hoping customers will adopt them will fail to catalyze widespread adoption. And, while continued adoption, albeit one merchant and one user at a time, will advance the cause, we need the large players in retail, financial and social network services to embrace crypto payments to make mass adoption a reality.

To compete and establish cryptocurrencies as the preferred, ubiquitous payment method globally, the UX and added value proposition will need to improve significantly and deliver a level of service that surpasses that of fiat currencies. Only then will crypto be able to compete with fiat.

Path to victory

The major question, of course, is how do we achieve this?

How can crypto win, hands down, against the entrenched value proposition of fiat currencies to finally deliver its powerful promise of economic freedom and the resultant prosperity for all?

How can we develop the ecosystem required to drive mainstream crypto adoption?

Many of the critical technical characteristics and capabilities that create the opportunity to succeed already exist within certain cryptocurrency ecosystems, particularly the technological capital that currently supports the mining infrastructure. These attributes include:

Massive scalability to drive global use
Superior UX
Professional, stable development
A thoroughly tested technology base that creates trust, security and a stable environment for new services to grow and flourish

With these capabilities in place, driving mass adoption becomes a factor of highlighting instances where crypto already wins hand down when compared to the incumbent fiat. By building on these superior use cases, the opportunity exists to incentivize the market and align the forces needed to build out the necessary ecosystem that brings about mass adoption.

Crypto showcase

In this regard, non-custodial, public blockchain database services, and applications built on top of the blockchain would be the ideal places to start. You can read more about the value of non-custodial services here, but the essential added value they offer is the simplicity of managing money on the internet.

Non-custodial services cut through burdensome regulatory requirements like KYC AML. This can have a profound impact on the financial services sector, with trickle-down benefits realized by customers as well. More specifically, financial intermediaries would spend less time on administration and compliance, focusing instead on value-adding activities and engagements that improve the customer experience. A reduced compliance burden would also lower pass-through costs to the consumer.

Within the non-custodial cryptocurrency payment processing space, services such as Money Button from Yours.org already solve the flow rigidity issues inherent in peer-to-peer (P2P) payments and are revolutionizing the payment paradigm.

The simple ease of use, the capacity to scale and trade unhindered by current custodial regulations is part of the value proposition of a P2P system – a value proposition increasingly resonating with merchants around the world. And by making these payment options available at more points of purchase globally, adoption will continue to accelerate.

As cryptocurrency is adopted as an exchange medium, we will advance towards its true potential

Blockchain benefits

It is, however, blockchain services that garnered and continue to attract the greatest focus from corporations that want to embrace crypto. These organisations want to remain fully regulated while leveraging what appears to be an enticing but unstable industry.

As more companies have embraced blockchain technology, the private corporation-controlled magical database trend has emerged. However, for all the investment and innovation happening in this space, the truth is that for most private use cases, existing databases can fill a company’s needs more easily and far cheaper.

It is the public blockchain – a public global ledger that is open and accessible to all – that provides the services that are changing the world, such as databases, tokenization and the capacity to develop functions that enable smart contracts. These use cases are unique and, if proven by adoption, will enable two functions that would significantly strengthen ecosystem development to support cryptocurrency adoption.

From an economic standpoint, the blockchain strengthens the case for applying the Mises regression theorem (although not a requirement) to cryptocurrency. The theorem pertains to the price and value relationship of money. In essence, it suggests that the purchasing power of money must be traced back to the time when it was valued as a commodity with underlying value.

When considered in this way, the price value of money needs to revert to a value-adding good of sorts. And once a cryptocurrency base is built on a well-established commodity of public encrypted data transfer and a ledger, the commodity case is further strengthened.

With the ubiquitous use of the blockchain and smart contract platforms, cryptocurrencies will by default become woven into the fabric of everyday life, often without people being aware that they’re using them. At this point, application developers and money customers will become far more comfortable with the technology, which makes the jump to using cryptocurrency as a money a lot shorter.

Time to act

In our view, non-custodial services and the commoditization of the blockchain are playing fields on which cryptocurrency can win hands down when competing against fiat. Both aspects are strong enough to lead and encourage mass usage and, as such, mass adoption, by indirectly building the ecosystems that fulfil a need exclusive to the money use case.

And the cryptocurrency that is actively targeting this approach is Bitcoin Satoshi Vision, which is part of the reason why we’re so excited about the unique and fresh approach the currency offers to spur adoption, despite it being the oldest protocol design. By encouraging and enabling an infrastructure that can truly be a platform for blockchain services, BSV opens up the building of an ecosystem outside of the money case and in so doing, provides the framework to encourage mass adoption.

Fundamentally, all the talk and analysis is cheap. What will define the outcome is actual events, the building out of ecosystems that support a cryptocurrency. It is through this that the economic freedom and global prosperity which Bitcoin began and continues to lead, can be realised. It’s time for action.

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Why be passionate about Bitcoin? (…whichever flavour you choose)

It’s very simple; it offers a path to greater economic freedom, which leads to prosperity

By Daniel Lipshitz, CEO, GAP600

Money is a means of exchange, all other characteristics flow from this primary attribute. It is a critical and ubiquitous part of our world, providing the means to access goods and services in our daily existence and enabling trade, which underpins our economic lives. The emergence of free, high quality money is a foundational move towards economic freedom.

Government management and control of money has muddied the waters, negatively affecting global economies by fueling inflation, driving boom and bust business cycles. As such, breaking government monopoly on the control of our money should remain the key point of departure for every discussion on the relevance and application of cryptocurrency. Enabling free money in our economic life leads to greater economic freedom.

No more government monopoly on the production of money

The concept of private money is not new and is well founded in economic research. It has been long professed by great economists including proponents of Austrian Economics, such as 1974 Memorial Prize for economic science laureate Friedrich Hayek.

Hayek’s ideas about the benefits and advantages of denationalised money are based on sound, rich economic theory and research, which suggests that broader adoption would be advantageous to the world, as it can contribute to economic freedom.

Essentially, Hayek believed that no government is politically and intellectually capable of evaluating the amount of money needed for economic development. Thus, if a society concentrates economic power in the state, it risks losing its political and intellectual freedoms. Hayek was fully aware that governments, like all monopolies, would not relinquish control easily. A quote often attributed to him testifies: “I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take them violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.”

The issue with centralisation

The issue with government management of money is that it is predicated on the belief that one person, or a small group of people can know enough to make centralised decisions. Economies are extremely complex, and the collection of aggregated data in order to assign resources by centralised authority leads to sub optimum results. By having an absolute monopoly on money production through interest rates and deficits, governments and central banks control a means of central planning that greatly reduces economic freedom.

Hayek proposed that the market is wiser than us all. Free market pricing is therefore based on the principle that individuals, acting in their own interest, is an optimum way to manage resources, as opposed to central planning where no one entity is capable of absorbing enough knowledge to do so efficiently.

Economic Freedom

Economic freedom can be summarised as to how freely an economy is left to individual decentralised activity as opposed to centralised control of allocation of resources. The research on the benefits of economic freedom is vast – free market economies are more prosperous, more progressive, and grow faster and more sustainably. Quality of life in free market economies is also greater, with average incomes 7.1 times higher than in the least free quartile. Extreme poverty is also non-existent in the freest countries, which equates to better life expectancies and overall health.

Without adoption, we have nothing…

These are the reasons why everyone should care about crypto, and about the use case and sustainability of Bitcoin. However, unless cryptocurrency moves from the realm of speculative investment into true utility and adoption, it is nothing more than symbolic. Following the recent hashwar, more competition has been introduced to the market. The obvious downside of this is the potential confusion to the layman. The upside, is that competition will bring out the best solution.

Should cryptocurrency gain significant traction in global markets and introduce real competition for fiat money, it will help keep government regulation and the economic impact of their monetary and fiscal policies in check.

As such, it is essential that the community allow free market economics, not the dominance of one ideology over another, to determine the natural evolution of Bitcoin. Bitcoin was the first to crack the mould and give a chance to economic freedom by ending government monopoly on money production.

Which coin will ultimately dominate? The one that attracts the large land movers, businesses, large social networks, and applications, which will bring mass usage of the coin. This requires capacity and stability, then the market will work its magic.

The non-custodial services is the playground where Bitcoin wins hands down… cutting away the rigidities for scaling that fiat entails. This, along with ledger and tokenisation of real use cases, are attractive grounds to build for adoption.

The promise of economic freedom to our world is massive and worth being passionate about – this is the power of cryptocurrency and at the forefront, is Bitcoin. Usage and adoption will bring us to greater global prosperity – it is that important.

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The Bitcoin Cash hardfork stand-off – and impending hash war

By Daniel Lipshitz, GAP600 CEO

The Bitcoin Cash (BCH) ecosystem, like other coins, can be described using a non-perfect analogy of free market farming. Consider the hypothesis that the more people consuming a standardised produce, the greater utility everyone gets from that produce, and the size of the farm defines market share and influence on the produce standard. The farmers are the cryptocurrency miners; developer groups build farming technology/seeds; exchanges/wallets sell and store the produce, and consumers are users of the coin – the ultimate drivers of value.

The BCH ecosystem faces a “hardfork” on 15 November 2018, which will define the standardisation of the produce we call Bitcoin Cash. As detailed in this white paper, the method for standardisation of the product is the Nakamoto consensus, which allows for the “farmers” to dominate decisions, and dictate the standard of Bitcoin Cash, based on “land” size, namely hashing power.

Head-to-head

Farmers can freely decide which technology will set the standard of the produce. However, they run the ultimate risk of the product not being supported by distribution, or not being in demand by users… after all, there are plenty of other coins out there.

In a disputed hardfork, as we have now, the question is: Who in the ecosystem is positioned to dictate or persuade the market forces to ensure miners set the Nakamoto consensus in their favour?

The two groups leading each camp are nChain Bitcoin SV and Bitcoin ABC. Both support Austrian economics, massive onchain scaling, and the Bitcoin Cash vision to create global, free, stable money. The two camps have (by far) more in common than in opposition. However, they differ on a philosophical approach, which translates into minimal technical differences.

Minutiae

nChain favours absolute minimal changes to original protocol, taking zero possible risk to the neutral aspect of BCH; while Bitcoin ABC is more developer driven. Bitcoin ABC also exhibits a minimal approach to changes, yet is more open to technical developments. The situation has devolved into one side calling the other fanatics or crazy experimenters, with social media playing out as it usually does.

nChain represents a paradigm change in the cryptocurrency space, with a significant mining consortium of more than 50% of hashing power on BCH, and are actively pursuing to dominate the standardisation of BCH via aggressive (or, as they see it, defensive), declared actions. The group has vast, ongoing investments in mining and the Bitcoin Cash ecosystem. In the past, no mining group has actually used their power, but rather sought out social consensus before acting. Whether other miners will respond to meet this paradigm change is unclear.

Bitcoin ABC is the development group responsible for BCH as we know it today. Bitcoin ABC had the foresight and grit to split away from Bitcoin BTC, way before BCH had significant support.

Currently, Bitcoin ABC has the majority of the existing wallets and exchanges supporting it, as well as implied miner support. Yet, the level of activism these miners will show in support is unknown, and would require a complete break away from previous behaviour.

Stability

There are a number of scenarios that could play out with the impending fork, with both camps convinced of their imminent victory. Similar to WW1.

For nChain to be successful it requires its fork to be stable and the Bitcoin ABC fork to be unstable. Then, there will be great pressure for the wallet’s exchanges to change and adopt Bitcoin SV as the standard.

Bitcoin ABC’s success depends only on ensuring its fork is stable in an ongoing capacity, so that the exchanges and wallets can complete adoption of ABC as the standard. It boils down to the hash amount and activism that will be invested in stabilising Bitcoin ABC. Will (and can) miners step up and meet the paradigm change, set by nChain? Or does Bitcoin ABC have something else up their sleeve.

This is a watershed moment for BCH on its path to bringing economic freedom to the world. The behaviour of the people behind these groups displays the passion that drives Bitcoin Cash. The downside of this conflict is a negative stability reflection on a system which is claiming to be a global economic platform.

Global economic platform

The community is facing a high-risk event that could bring about prolonged instability, or a significant splintering of the ecosystem, which could impact negatively on adoption growth. The possibility of both sides pulling back and reaching agreement would be greatly welcomed.

There is, on the other hand, an opportunity for a resolution of contentious issues through Nakamoto consensus, in a clear and open governance mechanism. One which would further demonstrate the suitability of Bitcoin Cash as a global economic platform.

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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.

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GAP600 is excited to announce that we have concluded a partnership agreement with Cinnober, a leading global independent provider of exchange and real-time clearing technology, to enable instant cryptocurrency deposit transactions on the company’s exchange platform.

Cinnober develops solutions for tier-one market operators and cryptocurrency exchanges to deliver mission-critical business processes. These cover the entire transaction chain, from price discovery and order matching to clearing and settlement, and includes risk management, trade monitoring, index calculation, and market data services.

Meeting evolving customer, market and regulatory demands

Cinnober’s multi-asset class fintech solutions set includes TRADExpress™ for cryptocurrency exchanges. “TRADExpress™ offers digital asset marketplaces a complete and robust solution based on proven technology that is used by some of the most demanding financial marketplaces around the world,” explains Eric Wall, Cryptocurrency and Blockchain Lead at Cinnober.

“The system is customizable to meet evolving customer, market and regulatory demands. We also offer support for cryptocurrencies via this powerful platform, which is rich with functionality that enables competitive and agile exchanges.”

Transaction lag-time

When developing the platform, Cinnober conducted an extensive business assessment and market analysis, leveraging industry engagement and research to reveal insights into evolving customer expectations around the user experience and identify common pain points.

“Deposit transaction lag-time emerged as a major pain point for traders, especially among those who preferred to hold their cryptocurrency funds in personal wallets, off the exchange platform, to mitigate the potential risk of losses to hacking,” explains Wall.

In these instances, it could often take 60 minutes or more for a trader’s cryptocurrency transfer to reflect in their trading account. “Due to the volatility of the cryptocurrency market, these delays might occur during significant price swings, which is why we sought to implement a solution that could enable instant deposits,” adds Wall.

Instant, risk-mitigated cryptocurrency commerce

“Following initial engagements with GAP600’s co-founder and CEO, Daniel Lipshitz, we realized that the company offered a tried and tested solution that has successfully addressed similar pain points in the marketplace.”

GAP600 facilitates instant, risk-mitigated cryptocurrency commerce by enabling exchanges to recognize unconfirmed Bitcoin and Bitcoin Cash transactions as final. This is made possible by GAP600’s proprietary risk engine, which analyzes and performs live risk scoring for each transaction as it reaches the mempool. This enables the company to guarantee cryptocurrency payments before they reach the blockchain. In addition, GAP600 has an underwritten insurance policy from a U.S. based A+ rated insurance company, which would cover financial loss from an algorithm failure.

“We were confident that adding these capabilities to our offering would give our customers a competitive advantage against other cryptocurrency exchanges in the market. We subsequently commenced with a thorough due diligence process to assess the working relationship with GAP600, before signing the partnership agreement,” adds Wall.

Improving the crypto exchange value proposition

“GAP600 is easily integrated, which means the instant payment transaction functionality is ready to go live on the Cinnober platform. GAP600 will then be offered as a value-added feature to Cinnober customers,” explains Lipshitz.

Offering this functionality will significantly improve the crypto exchange value proposition, as they will be able to offer instant deposits and immediate trading – this has liquidity and customer experience implications adding further to the value proposition, says Lipshitz.

“The partnership also signifies a significant growth opportunity for GAP600. It validates our ability to add value to top-tier service providers in the crypto space, as Cinnober is a market leader in terms of solution quality and technology maturity. With many global exchanges looking to add crypto services, we believe there is significant scope for long-term value extraction through this partnership and we are excited to explore the opportunities it will create,” concludes Lipshitz.

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It's no longer a choice – crypto payment processors need to offer instant confirmations

The pace and intensity of technological innovation continues to reshape the payment industry. Traditional institutions need to innovate in the face of rising disruption from fintech providers, while consumers increasingly demand seamless, frictionless and more efficient payment experiences beyond the vanilla credit card, EFT and cash payment options.

And this trend extents to the cryptocurrency payment market. However, to entrench their relevance in the mainstream marketplace, cryptocurrencies, with BTC and BCH at the forefront, need to add significant value and provide a service that is orders of magnitude better that current fiat services.

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. More importantly, instant tx with fiat currency is rapidly becoming the norm. This has amplified the urgency and necessity for the enablement of instant crypto tx – functionality that is already available.

Speed, convenience, cash flow

These trends have resulted in a growing number of innovative mobile and contactless payment solutions. However, beyond these developments in digital payment modalities, fundamental functionality in payment processing is being overhauled across the spectrum as financial services providers seek to address the need for improved consumer and corporate experiences.

According to a KPMG report, instant payments are rapidly becoming the “new normal” in the financial services space. This trend is being driven by a number of converging factors. Whether they are transacting with fiat or cryptocurrency, modern consumers demand speed and convenience, while businesses and merchants want transfer and payment transactions to reflect in their accounts immediately to improve cash flow and the availability of operating capital.

However, most of the available payment services in both domains are ill-equipped to meet the requirements of our modern on-demand economy, taking anywhere from a few hours, up to a few working days to reflect in business or merchant accounts, depending on the instrument of payment used.

Instant fiat and crypto payments, on the other hand, enable near-instant account-to-account transfers. Various options in this regard also offer businesses cost-saving benefits over more expensive traditional payment methods, such as credit cards which attract interchange and other merchant fees.

And demand for instant payment services is rapidly rising. The European Union’s Single Euro Payments Area (SEPA) instant payment platform launched late last year already offers 24/7/365 availability across 34 countries. It ensures funds are available to the beneficiary within 10 seconds, with a maximum transaction amount of €15,000 at present – proving that even the European Central Bank believes that instant payments are set to become the norm.

Get up to speed, crypto

It’s a prolific trend that the cryptocurrency payment industry ignores at its peril. Perceptions around crypto as a valid form of payment are already skewed, with 64% of respondents in a recent survey of finance and treasury professionals conducted by TD Bank stating that they do not view cryptocurrencies as a legitimate form of digital payment.

To ensure the relevance and increased adoption of cryptocurrencies amid this shifting fiat currency market dynamic, the cryptocurrency value proposition must be affirmed through the adoption of the instant payment model.

Without this capability, the customer experience will be compromised, increasing the risk that other, more efficient payment options will be adopted. Any purchase using cryptocurrency as a method of payment should therefore be optimised to be simple, straightforward, and safe and secure.

Complexity, doubt and delay

There is no room for complexity, doubt and delay. Yet, these are the traits that currently characterise much of the crypto payment sector, because merchants generally wait to receive multiple confirmations before completing a transaction. This can be a minimum of 10 minutes.

A solution like GAP600 enables the acceptance of instant zero-confirmed (0-conf) payments and deposits made in Bitcoin and Bitcoin Cash transactions, with plans already in the pipeline to accept additional cryptocurrencies.

Of course, as more businesses look to implement instant payments, mitigating fraud becomes a key consideration. While there is a risk in accepting 0-conf transactions – transactions which have been published and as yet haven’t been included in a mined block – GAP600 mitigates that risk with a proprietary risk engine that analyses and performs live risk scoring for each transaction as it reaches the mempool.

Revolutionise the system

This enables us to guarantee cryptocurrency payments before they reach the blockchain, which enables exchanges, payment service providers, and other operators and merchants that accept cryptocurrency to recognise unconfirmed Bitcoin and Bitcoin Cash transactions as final.

This solution is revolutionising 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 a simple, more efficient user experience. Without this functionality, the use of cryptocurrencies as a mainstream and pervasive payment method will fail to ever gain traction.

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Accepting instant Bitcoin deposits in the gaming industry is critical

The estimated value of the global sports betting market ranges from $700 billion to $1 trillion, with the online gaming industry expected to reach $59.79 billion in volume by 2020, reports The Daily Hodl.

It’s a massive market with an ever growing number of gaming and betting platforms, including an explosion in Bitcoin casino options. These are proving popular due to better house odds over conventional gambling sites – around 1.5-2% – and the ability to offer ‘provably fair’ games, with the option of anonymity on sign up.

So, whether online casinos or gaming platforms offer crypto-only gameplay, or augment their current payment options by accepting Bitcoin (the most popular digital currency in the sector) and a growing number of altcoin deposits, enabling cryptocurrency deposits is increasingly becoming a non-negotiable.

Seamless functionality

However, acceptance alone is not enough. To attract and retain players, these platforms need to combine a slick user interface with seamless functionality to create a customer experience that meets player expectations and their demand for instant gratification.

In fact, the gambling and gaming industry is so focused on delivering exceptional customer experiences that conferences devoted entirely to addressing this specific requirement are hosted around the globe.

Providing a seamless experience enables players and gamers to immerse themselves in their preferred activity, without rigidities or a limitation of choice in terms of how and when they play.

And a pivotal element of the gaming and gambling customer experience is the ability to transact and make deposits or withdrawals instantly.

Considering compromised CX

However, this can prove exceptionally challenging for cryptocurrency payment gateway providers, because multiple confirmations may be required before a transaction can be processed. This can take anywhere from 10 minutes to a few hours, which severely compromises the customer experience.

Crypto payment processors targeting the gambling industry also need to meet and surpass the functionality offered by entrenched traditional payment enablement solutions to ensure their relevance and applicability in the sector.

To do so requires, first and foremost, a credible service and solution that meets specific requirements around fraud detection and prevention, and provides security for data and transactions. A suitable payment gateway must also be easy to integrate, and cost effective.

0-conf tx as final

GAP600 is a solution that addresses all of these pain points for cryptocurrency payment gateway providers that operate in the gambling and gaming sectors. GAP600 makes instant, risk-mitigated cryptocurrency transactions on gaming and gambling platforms possible by recognizing unconfirmed (0-conf) Bitcoin and Bitcoin Cash transactions as final.

This is done using a proprietary risk engine that analyzes and performs live risk scoring for each transaction as it reaches the mempool. This enables GAP600 to guarantee cryptocurrency payments before they reach the blockchain.

Integration is soft and simple, requiring minimal time to set up and activate. Once the service is switched on, customers can start playing immediately following a deposit. Importantly, anonymity and customer privacy are also guaranteed, because the GAP600 system never requires customer information to enable the transaction.

However, despite the anonymity of crypto payments, this intelligent solution also helps to mitigate instances of fraud, which is a high-risk factor in the gaming and gambling sectors according to GAP600’s market experience. Anonymous games in particular are vulnerable to fraud, and the capacity exists to attempt fraud multiple times if the correct safety and security checks are not in place.

GAP600 therefore supports gaming and gambling platforms by leveraging that experience when dealing with crypto deposits, payments and withdrawals, with the ability to guarantee and secure transactions. These capabilities ensure that online gaming and gambling operators build credibility among their customers, while crafting a memorable user experience by meeting the demand for instant deposits, which is rapidly becoming the industry standard.

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Enhance exchange liquidity and CX with instant BTC & BCH deposits

The exponential growth experienced within the cryptocurrency economy over the past five years has largely been driven by the explosion in the number of exchanges, which enable cryptocurrency trading, and crypto-mining.

Various innovative enterprises that cater to the demand for these services have launched during this time, with a significant number growing from startups to billion-dollar ventures within just a few years.

Cryptocurrency exchanges, in particular, are in the midst of a boom phase, with hundreds of millions of dollars in value traded on a daily basis across the various decentralized and centralized exchange platforms. According to Bitcoin.com, over 500 exchanges are currently in operation, with more added on a weekly basis at present.

With interest in cryptocurrencies on the rise, especially as their appeal and application grows within the mainstream investment market, the demand is also increasing for more sophisticated, advanced and user-friendly services.

Liquidity and CX

However, for both custodial and non-custodial exchanges to encourage and accommodate greater trading volumes and thereby generate more revenue, it is essential that two pertinent challenges be addressed. These include the need for increased liquidity, and an enhanced customer experience (CX) that does not compromise user security.

In their quest to provide a secure service, most exchanges generally wait for at least six confirmations before processing a transaction (TX). This helps to mitigate double spend by validating deposits. However, although waiting for six blocks to confirm is a prudent standard from an exchange perspective, it seriously compromises the CX.

Traders don’t want to wait for 10 minutes before their TX is finalized, and it can take even longer for funds to be transferred between accounts. They also want reliable, secure and safe services that offer seamless functionality. With so many exchanges currently in operation, those that fail to deliver on this value proposition will quickly lose their relevance and appeal.

Enabling flow

As it relates to liquidity, this delay in confirming and processing transactions also means exchanges hamper the natural flow of cryptocurrencies between buyers and sellers. Without adequate liquidity, activity on the exchange slows, and the resultant pent-up demand also places strain on the exchange, further compromising the CX.

In the search for a substantive solution to these and other common impediments to a seamless and streamlined experience, a number of innovative solutions have been developed by forward-thinking start-ups, and this list includes GAP600.

The GAP600 solution facilitates instant, risk-mitigated cryptocurrency commerce by enabling cryptocurrency exchanges to recognize unconfirmed (0-conf) Bitcoin and Bitcoin Cash transactions as final. This is made possible through GAP600’s proprietary risk engine, which analyzes and performs live risk scoring for each transaction as it reaches the mempool. This enables GAP600 to guarantee cryptocurrency payments before they reach the blockchain.

Revolutionary speed

This functionality is revolutionizing the speed of cryptocurrency exchange transactions, which address both the liquidity and CX challenges that currently afflict the sector. By enabling instant and secure cryptocurrency trading, traders will no longer need to wait for confirmations, which means liquidity enters exchanges quicker. It also enables traders to trade arbitrage opportunities, which further improves liquidity.

In terms of enhancing the CX, GAP600-enabled instant transactions ensure there’s no frustrating delay as traders watch and wait for a deposit to confirm. The added value of implementing a secure service like GAP600 on the exchange platform adds to the peace of mind that every provider wishes to convey to their traders. It creates the impression that the exchange and its management consider the security and safety of a trader’s funds to be a high priority. This helps to craft a compelling value proposition and point of differentiation in an increasingly cluttered marketplace.

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Quoine partners with GAP600 for instant Bitcoin & Bitcoin Cash deposits

GAP600, a global pioneer in cryptocurrency payment transaction enablement, has concluded an agreement with Quoine to implement a solution that expedites deposit confirmations for the fintech provider’s cryptocurrency exchanges.

Quoine provides trading, exchange, and next-generation financial services powered by blockchain technology. It operates fully compliant cryptocurrency exchanges and will soon launch Liquid, a global liquidity platform backed by Quoine’s Qash token for all crypto investors, token issuers and a new generation of financial services customers.

“Generally, crypto exchanges wait to receive at least six confirmations before processing a transaction,” said Seth Melamed, Quoine Global Head of Operations.

Customer experience

While this mitigates risk for the exchange by nullifying instances of double-spend and ensuring deposit validation, the process takes time, which negatively impacts on the customer experience and trading strategies.

“It can be a frustrating and limiting experience for users and traders to wait at least an hour before a Bitcoin transfer reflects in their account, or a transaction is finalized, which is why we sought a service that could streamline the process.”

According to Melamed, Quoine chose GAP600 following a due diligence process because the company offers a specialized solution that few providers in the marketplace can deliver.

Risk-mitigated, final

“GAP600 facilitates instant, risk-mitigated cryptocurrency commerce by enabling exchanges, and other payment service providers, operators and merchants that accept cryptocurrency, to recognize unconfirmed Bitcoin and Bitcoin Cash transactions as final,” said Daniel Lipshitz, GAP600 founder and CEO.

GAP600’s proprietary risk engine analyzes and performs live risk scoring for each transaction as it reaches the mempool. This enables the company to guarantee cryptocurrency payments before they reach the blockchain.

Instant score, validity guaranteed

While the Quoine implementation is currently in a ramp-up phase, once fully operational – expected October 1st 2018 – Quoine will be able to send a cryptocurrency transaction query to GAP600 and the system will instantly score it and guarantee its validity.

“The bespoke solution implemented for Quoine includes unique implementation aspects, which will provide significantly faster deposit authorization than the industry standard for other exchanges. It will also enable transactions guaranteed against double spend by GAP600, which is insured with a superior A+ underwriter,” said Lipshitz.

With the ability to reflect deposits in customer accounts faster than other exchanges, Quoine would gain a distinct competitive advantage over its global competitors. “It will also craft a more compelling user experience, which will be positive for our service offering, especially for high volume traders, for whom speed is essential,” explained Melamed.

Serving clients with innovation

This ability to drive additional users to trade on Quoine’s exchanges will boost trading volumes and liquidity, which is a key strategic objective for the fintech company. “Enabling these capabilities would mark another significant step towards maintaining our position as one of the top tier cryptocurrency exchanges in the world. Our partnership with GAP600 and fast BTC deposits reflects Quoine’s focus on serving our clients with innovation,” added Melamed.

“We’re extremely proud to be pioneering instant exchange transaction enablement with Quoine, a company that is not only an industry leader in the Asian market, but a prolific global innovator,” continued Lipshitz. “The team at Quoine has big ambitions and we’re excited to be a part of enabling their vision.”

The partnership is significant for GAP600 as it marks the company’s entrance into the Japanese market – a truly powerful region in the cryptocurrency arena. The Quoine partnership completes GAP600’s offering to a global client base. “The fact that Quoine is a fully licensed and regulated provider lends significant credence to the GAP600 value proposition, and is validated recognition of our capabilities,” Lipshitz concluded.

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Guaranteeing zero confirmed bitcoin transactions

Insights from GAP600 data

Reposted from Linkedin article

Last summer we launched GAP600, a service that guarantees zero confirmed bitcoin transactions for any wallet. Essentially, we enable instant acceptance of bitcoin transactions before they’re actually included in a block. To this end, we analyze and score every single bitcoin transaction on the network. When our algorithm approves a transaction, we guarantee the value of that transaction regardless of whether it’s included in a block. Our customers include bitcoin service providers, payment processors and exchanges. Since going live, we’ve processed more than 200K transactions for clients that accept zero confirmed transactions.

Looking at the actual data that has passed through our clients networks, we’ve managed to gain real insights about the nature of bitcoin transactions and the risks involved in accepting zero confirmed transactions.

Double Spend is a real issue

Double spend transactions are a known phenomenon in the bitcoin world and are essentially fraudulent transactions. While the actual percentage of successful double-spends on the network is low, we noticed that it still represents significant value. In the month of December 2016 alone, we rejected 121 double-spend transactions which would have amounted to a loss in excess of US $80k had they been accepted. From our observations, providers who offer instant bitcoin acceptance become more susceptible to double spend attacks (to be expected). In the transactions we processed, we saw 0.16% double spends, which is 0.09% higher than our observed bitcoin network average of 0.07%.

Transaction block acceptance takes time

By design, the average time between bitcoin block publications is 10 minutes. This is reflected in our data where we saw that the median time for a typical transaction to be accepted in a block was 8 minutes. It is important to note however that many real transactions don’t necessarily get included in the next block and the real transaction acceptance times can be much longer. For this reason, the average time we saw for a transaction to be accepted in a block was actually 16 minutes.

Block acceptance time is unpredictable

Averages are averages, but the real data shows a very large variance in the time it takes for transactions to be accepted. In many cases, it can take hours to be accepted and in extreme cases it can even take days or weeks.

Zero confirmation is risky business

If, as a bitcoin service provider, you’re willing to wait until your transaction is included within a block, you would have little to no risks. However, in a world where customers expect a minimum level of service that includes instant response from services, providers cannot afford to wait for block inclusion. Zero confirmation acceptance is becoming a standard for bitcoin service providers and as a result these risks need to be mitigated in order to accept zero confirmed bitcoin transactions.