Cryptocurrencies are mostly used as financial assets made to grow in value over time. But it’s also a currency, and therefore, it can be used to make purchases. Recently, eCommerce businesses have started accepting crypto payments alongside other payment methods.
One of the reasons this is the case is that cryptos are now widely available, and it’s easy enough to buy crypto with a debit card (as seen here). It’s also because security protocols have been put in place, which make these transfers much more safe. In this article, we’ll address those security measures in more detail.
There are security threats that come with using crypto. The currency is fully digital, and all that you need is an email and a password to make payments. This means that if those are compromised, your funds could be as well. Now, when there are more crypto users than ever, these concerns need to be addressed in order to persuade less tech-savvy users to join in.
The security protocols also need to be put in place in a way that’s easy to follow and comply with, even if you’re new to using it.
There are a few key protocols that are used with most crypto payment services. These present the most basic level of protection, and there are others that are optional and used for specific purposes.
Blockchain itself works as a security method. The transactions made via blockchain are transparent, and therefore, there is much less chance of fraud and mistaken transfers. It also produces an immutable ledger that can’t be altered once it’s created.
Since blockchain is also decentralized, it presents a security method because there’s no single point that could be jeopardized and hacked. Using fiat money for eCommerce payments is very vulnerable in this regard, as there’s a third party that organizes the payments.
Using cryptocurrencies to make payments for eCommerce is much safer than the alternative since the data is encrypted end-to-end. This means that the information isn’t readable to third parties unless they have the code needed to gain access to it.
The way this works is with public-key cryptography. When someone makes a crypto transfer, they use a public key to receive funds and a private key to authorize transactions. To further ensure safety, the keys are kept in a wallet that’s not connected to the internet and can’t be hacked.
Cryptocurrency wallets provide an additional level of security because of how difficult it is to make fraudulent and mistaken transfers. These wallets require multiple signatures to be used, and therefore, it’s impossible to make a transfer without confirming it.
When it comes to eCommerce uses, multi-signature wallets can also have a role in inside transfer. This means that no single employee could move or steal funds, as it requires the signature of multiple team members.
Smart contracts refer to a feature created by blockchain where the payments are automated and made once the terms of the contract are met. These conditions are written into the code itself and, therefore, can’t be altered by any of the parties involved.
In eCommerce, smart contracts are often used to provide escrow payments so that the rest of the payment is automated once the conditions are met. Some also use smart contracts to secure refunds and, therefore, ensure customer retention and loyalty.
Know Your Customer regulations are a set of regulations made to prevent money laundering. It requires the eCommerce business to identify its customers before allowing them to make purchases. This is usually done by providing some sort of an ID.
This is a new introduction to the world of crypto payments since, at first, it allowed for completely anonymous payments. However, now that cryptos are widely used and there’s much more chance for fraud, governments have stepped in and required this security protocol.
Two-factor authentication is a security protocol that requires crypto users to authenticate a payment using two separate devices. This is usually a phone and a computer, and the users use one device to initiate a transaction and the other to confirm it.
That way, no transaction can be made from a stolen device or by mistake. The authentication is usually done by entering a code sent to the users via email or SMS.
eCommerce businesses have started accepting crypto payments alongside other payment options. That’s because there’s no wider acceptance of crypto and a broader base of users. This requires security protocols to be put in place to make these transactions safe.
Some of these security protocols are simple enough, and they come from the way the blockchain itself is set up. Others are mandated by the government and used to prevent money laundering. Others still are common sense and put in place to prevent fraud.
