After witnessing the success of the crypto market, many are trying to bring it into the mainstream. Although once shunned, cryptocurrency is gaining popularity amongst government officials, and there are a few merchants who accept it as an alternative mode of payment.
Payments are usually carried out with the help of a credit card, which has its advantages too. In case you are not satisfied with the goods you purchased or you get the wrong goods that you have not purchased, you can go for a chargeback.
After the popularity of cryptos has increased in recent years, it comes as no surprise that many crypto users are pushing cryptos as an alternate mode of payment. So, the Cryptocurrency Scams are increasing day by day. Before we dive into the pros and cons of using crypto in our daily lives, buying daily consumables, and how the chargeback works,
Pros of using crypto for transactions
Decentralization: Crypto users have a high degree of financial freedom and autonomy since cryptocurrencies are decentralized. Several people have embraced cryptocurrency only for this reason. Decentralized, peer-to-peer transactions take place without the need for middlemen, making them quicker, less expensive, and more secure than conventional financial transactions.
Lower Fees: Transaction fees, or the gas required while completing a transaction, are comparatively lower than traditional credit card fees. As a result, it is advantageous for both merchants and you as a buyer.
Security: Transactions involving cryptocurrency are more secure than those involving traditional fiat currencies. It is difficult to hack or alter the entry of a transaction due to the novel application of blockchain technology, where transactions are recorded in the form of a decentralized ledger. As a result, it is impossible to alter or manipulate any record in the decentralized ledger. Those who worry about their financial information being stolen or compromised should pay special attention to such a high level of protection.
Anonymity: Transactions involving cryptocurrencies offer a high degree of anonymity without revealing any personal information, such as names and addresses. As a consequence, a high level of privacy is preserved without the disclosure of personal information, in contrast to conventional financial transactions where the security of data is in doubt when completing a financial transaction.
Speed: Traditional banking systems are regulated by the nation’s central bank. The central bank oversees all the transactional operations that are being carried out. It can be a tiring process since one bank communicates with another and the transaction gets complicated after verifying and authenticating the bank accounts of both the merchant and you as a buyer. It is a lengthy process. The period increases drastically if you are buying from another country.
Cryptocurrency transactions, on the other hand, are quite fast compared to banking transactions. The borderless crypto transaction can only be slowed down if there is a huge crypto transaction taking place. But since such transactions are rare, you end up paying low gas fees and getting a quicker transaction.
Accessibility: Since cryptocurrency transactions are borderless, you can buy any product from any part of the world. These transactions are cheaper compared to transaction fees paid when traditional banking services are involved. As pointed out earlier, these traditional banking services are slow compared to crypto transactions.
Innovations: The developers of cryptocurrencies have transformed how transactions are conducted; they have produced digital currency, something priceless that has transformed the conventional banking sector. It created the many forms of cryptography that exist today.
Transparency: The transparency of cryptocurrencies is well known. A public ledger that is accessible to everyone may be used to view each transaction. The benefit is that any cryptocurrency user can see other cryptocurrency users’ transactions while they are being carried out. A ledger’s records cannot be altered because of the great level of transparency present. Those who worry about fraud or corruption in the conventional banking system are happy to see such a high level of openness.
Cons of using crypto for transactions
Volatility: Cryptocurrencies are known to be highly volatile. The price fluctuation of cryptocurrencies is rapid and highly unpredictable. It is challenging to know the exact worth of a cryptocurrency at any given time. As a result, changes in the likelihood of incurring significant losses cannot be ignored when the price of crypto drops.
Acceptance: Although cryptocurrency is quite popular among the masses, it has not yet been entirely considered as an alternate mode of payment. Many still consider paying in hard cash or through a credit card. As a result, the number of merchants offering cryptocurrency as an alternate mode of payment is relatively low. Merchants also find it challenging when they offer crypto as an alternative mode of payment for smaller purchases.
Security: Although cryptos are known for their security, they are still vulnerable to cyber threats. Crypto exchanges and crypto wallets are frequent targets for hackers, resulting in the theft of large amounts of cryptocurrency.
Irreversibility: Cryptocurrency transactions are irreversible. If you happen to send your cryptos to the wrong address or a fraudulent merchant, they are lost forever. There is little or no recourse for reclaiming your crypto assets.
Complexity: Cryptocurrency requires the user to be a bit tech-savvy. Although it is not difficult to understand, a few might find it challenging during the first few transactions. As a novice crypto user, you need to make yourself familiar with cryptography technology, especially when transferring funds or paying someone. A wrong address entry can result in the loss of cryptographic assets.
A chargeback is a process where the buyer opens up a dispute with the merchant to halt the payment procedure. As discussed, there may be several reasons why you as a buyer may decline the product and get a refund on the product that you may return if you are dissatisfied with it.
How do chargebacks work?
Whenever you are dissatisfied with the product, you have the option of asking for a refund. How do you do it? You simply open a dispute with your bank. There are four parties involved in the process: you, your bank, the merchant, and the merchant’s bank.
You open a dispute with your bank to reverse the transaction; your bank then connects with the merchant’s bank to verify the transaction and pays your bank; simultaneously, the merchant is also notified. Although you, the buyer, get a refund, it is a nightmare for the merchant. Despite the money being refunded, the merchant has to pay a hefty fine of $240 for every $100.
From a merchant’s point of view
As merchants, they dread the idea of the chargeback as it drains their resources. It not only drains their financial assets but also puts their account at risk. After several reported cashbacks, merchants are forced to close the account for good. Although several merchants dealing in e-commerce are quick to welcome any new tool or device, a strategy that can mitigate chargebacks, many are still reluctant to embrace cryptocurrency as a part of the payment.
Besides the obvious cons that we have stated above, many merchants still believe it is not only volatile but also way too complicated to accept cryptos where traditional currencies and credit cards solve the problem.
Chargebacks can, in the end, pose a serious problem for cryptocurrency transactions. Yet, by taking the appropriate precautions and a proactive approach to dealing with chargeback concerns, you may help safeguard yourself and your company. It solely depends on you, either as a buyer or a seller.