Bitcoin Transactions Vs. Credit Card Transactions – Which one is better?
The inventor of Bitcoin, Satoshi Nakamoto, titled his original research paper as “A Peer-to-Peer Electronic Cash System”. This particular description reflects the main differences between a credit card and Bitcoin transactions.
The payments executed by Bitcoin are analogous to a cash transaction or wire transfer. In this method, the original payment is moved from one party to another without the need for any third party or financial institution.
The transactions are validated by nodes spread around the world and then recorded on the public blockchain.
In case of Bitcoin transactions, the customer directly sends the payment to the Bitcoin Network. The transaction is validated by the network nodes to avoid double spending. Once it is validated the payment is made to the receiver merchant without any further third party involvement.
In Bitcoin transaction there is no need to provide any kind of personal information or identification like name and address. These transactions are done with the help of an anonymous alphanumeric or by QR code that can be executed on mobile devices.
Credit card, being tangible, are kept in physical wallets, whereas transactions in bitcoin are done through electronic wallets only. These transactions are irreversible in nature and the receiving party solely can refund it. This means that no chargebacks can be made by a customer when they are taking a payment through bitcoin transactions.
There is no doubt that credit card offers a number of beneficial features such as wider acceptance, reward points, protection from fraud and the ability to borrow money. Only a few major companies accept bitcoin such as Etsy, Dell and OSTl. Credit cards also have some issues such as foreign transaction fees, interest charges, incurring late fees and others.
Credit card transactions have a few disadvantages over Bitcoin transactions. The advantages of Bitcoin transactions over credit card transactions are as follows:
- The transaction cost when payment is made through bitcoins is less than one percent which is much lesser than the transaction cost of credit card payments. The cost of transactions when paid through credit cards are approximately three to five percent.
- With bitcoin transaction there is no need of intermediaries as payment is made within the users present in the bitcoin network. In bitcoin transactions, if the transactions are managed through the user wallets, of say, an exchange, then the network fee is zero and it is upto the exchange to decide the fee for the transaction. Typically cryptocurrency exchanges charge less than <1% for transactions happening between their own wallets.
- Unlike credit card transactions, disputes cannot be raised or charge backs cannot be made by customers in case of bitcoin transactions. In credit card transactions, if the payment is authorized and the order is not placed or the product is not delivered then disputes can be raised and chargebacks are made by customers.
- Hackers can easily hack credit card transactions by acquiring information of the card and account details while the transactions is processed by the payment gateways. On the other hand, it is almost impossible to hack the bitcoin network. A hacker need to acquire more computing power than 51% of the network nodes. This is equivalent to the combined computing power of all known supercomputers of the world.
Along with bitcoin transactions, people can also opt for payments through other cryptocurrencies such as Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH) and HCX (HashCash). These digital currencies aims to mix the advantages of direct cash transactions with the abilities of digital technology.