Understanding Crypto Payments: Guide for Beginners


Due to the popularity of blockchain technology, it is possible to make instant payments using cryptocurrencies. This article is all about basics and crypto payments and crypto payment channels.

Introduction to Cryptocurrency Payments

Cryptocurrencies are usually viewed as trading instruments. Investors can purchase, sell, borrow, lend, and swap their tokens from crypto exchanges. However, there are many cases where cryptocurrencies are used as a medium of exchange.

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It means that users decide to settle payments using cryptocurrencies such as stablecoins. When a token is used as a medium of exchange, it means that it is accepted as payment for goods or services.

In the modern world, the most common medium of exchange is fiat currency which is often the legal tender appointed by the Central Bank. Cryptocurrencies such as stablecoins are an alternative for payment.

The payment channels that are used to enable crypto payments are called payment gateways. The reason for popularity of crypto payments is international payments and remittances since it is easier and less costly in comparison to the fiat alternative.

What are Crypto Payment Gateways?

There are many services that allow users to make crypto payments from one point to another; they are called crypto payment gateways.

Crypto payment gateways are cheaper and more scalable but they charge small fees based on transaction volume and trading traffic on the network. At the same time, payment channels do not provide as much trading control like fiat payment channels.

In most cases, it is not possible to reverse the transactions once they are triggered. On the other hand, they do not entail any customer support service. However, the verification process for crypto payment gateways is less hefty and much quicker.

Crypto custodial services providers may enable free crypto transfers for its account holders for peer-to-peer transactions.

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How Do Crypto Payments Work?

In most cases, crypto payment services allow users to make transfers from one wallet account or address to another. To send crypto payments, the trader needs to have a wallet account with crypto reserves. They can select where to send payments by using the public address of the recipient.

Public wallet address is a long string of alphanumeric values and there is a chance that users may make mistakes in adding the correct address that can lead to transfer of funds to the wrong address.

Since crypto payments are usually irreversible therefore the users must make sure to select the correct wallet address for sending the wallet address to the right address. E-commerce merchants can also use crypto payment channels by integrating APIs to allow customers to pay for their goods or services in the form of cryptocurrencies.

In some cases, the crypto payment services providers also issue a card for the users who wish to use their crypto reserves as credit or debit card payments.

Advantages of Crypto Payments

Here are some noteworthy benefits of crypto payments:

Cryptocurrencies are acceptable as mode of payment in any country regardless of their jurisdiction. Therefore, making payments with tokens is easier than fiat.

Crypto payments can take place and settle in a matter of microseconds. It depends on the service provider and trading volume on the payment channels but they are usually faster in comparison to traditional bank payments.

Crypto payments are many folds cheaper and more affordable in comparison to hefty bank transfers.

Crypto payments are hassle free since they sender or receiver does not have to locate the specified fiat transfer service provider that allow their fiat pair exchange or national jurisdiction. At the same time, there is no maximum transaction limit associated among others when dealing in cryptocurrencies.

A dedicated crypto payment service provider can offer customer support in case of any technical issues in comparison to direct wallet transfers.

A crypto payment services provider mostly has a simple user interface that is easy to navigate and manage wallet reserves.

Disadvantages of Crypto Payments

Here are some risks associated with crypto payment services:

Crypto payment service users have less control over the ownership of their Bitcoin reserves once the funds are transferred to the wallet account. Crypto payment gateways make use of third party services or intermediary that can add complexity to the process.

Crypto payments services can enable KYC and AML verification options that are time consuming but increase user security. Payment networks usually charge fee that is awarded to validators that ensure transaction verification.

Crypto payments are not widely accepted as a mode of payment at most companies and online merchants that can be a hindrance for the users.


Crypto payments are becoming more commonplace. At the same time, Central Banks have designed CBDCs and new payment channels leveraging blockchain technology to upgrade the existing financial payments system.

Author: Isacco Genovesi

Isacco writes news articles, reviews and guides about cryptocurrencies including technical analysis, blockchain events, coin prices marketcap and detailed reviews on crypto exchanges and trading platforms.

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