Despite the turbulent history they’ve had until 2021, it certainly seems like cryptocurrencies are here to stay. Likewise, a core piece of tech underpinning cryptocurrency, blockchain, is not only sticking around but working its way into a variety of sectors.
In this guide, we’re going to cover one of the most practical blockchain applications: blockchain payment systems.
But first, let’s start with the fundamentals.
What is blockchain?
Blockchain is, in essence, a ledger technology. It keeps a record of, well, whatever you want. And it holds that record using tech that is extremely secure, flexible, transparent, and straightforward.
It can help to visualize a blockchain as a row of wooden blocks lined up in a row. Let’s say that each time you want to add a new wooden block to this row, you also want to preserve the order that the blocks are already in. Each time you add a new block to the row, you take a marker and draw a unique image on the seam where the last block and the new block meet. When you separate the two blocks, half of the image remains on each block.
If each block has part of an overlapping image connecting it to its adjacent blocks, then you won’t be able to remove or replace any of these blocks. You’ll instantly recognize that they’ve been tampered with because the images won’t make sense anymore.
In essence, this is how blockchain works. It’s also where the name comes from. You can use blockchain to keep track of different file versions, people walking into a building, medical records, and financial transactions.
Not only can you not rearrange the data stored in a blockchain (making it immutably chronological), but you can also trust that it is immensely secure. Blockchains are very well encrypted and can be centralized for the private sector or decentralized for the public sector.
What are blockchain payment systems?
That brings us to blockchain payment systems. Blockchain payment systems are just one of the applications of blockchain technology. In this instance, a new block is added to the blockchain every time a transaction takes place.
Since these blocks can’t be rearranged, edited, or removed, you can have nearly total confidence that the record of transactions is accurate. This is one reason that cryptocurrencies like Bitcoin are trusted. While you don’t have physical money to hold onto, the Bitcoin blockchain proves, immutably, that you have the money your account says you do.
You can, of course, use blockchain payment systems to support a cryptocurrency. But you can also use them in other financial sectors. There’s no reason why Venmo, Visa, PayPal, or even your local bank can’t use blockchain to keep a record of transactions. In fact, doing so could be an improvement, reducing the chances of fraud and error.
Examples of blockchain payment systems
- Bitcoin. Bitcoin is synonymous with blockchain technology, and that’s because Bitcoin is the progenitor of blockchain. The Bitcoin blockchain keeps a record of every new Bitcoin created and follows the journey of that Bitcoin from one individual to the next.
- Ethereum. Similar to Bitcoin, Ethereum is a cryptocurrency that relies on blockchain. However, Ethereum benefited from coming after and has incorporated interesting features like executable code, improved security, and programmatic contracts.
- Stellar. Stellar is a unique blockchain payment system. It allows you to easily create your own form of stablecoin (a cryptocurrency that doesn’t fluctuate wildly in price) and distribute it however you like. You can use this to create cryptocurrencies tied to fiat currency, used within a specific business (“Google Coin” does not currently exist!), or just a tradable asset for you and your friends.
- Mastercard Blockchain. Mastercard has developed Start Path, a fast-track solution for businesses and organizations to create their own cryptocurrency and blockchain solution.
How to create a blockchain payment platform: You have two options
As you can see from the examples above, blockchain payment platforms are no longer just for “diamond hands” crypto fans or tech savants. There are many uses for blockchain technology, and any business (or motivated individual) can put the tech to use.
Today, there are two routes you can go down if you want to create your own blockchain solution.
Build your own cryptocurrency
The first option that probably comes to mind is creating your own unique cryptocurrency. After all, it’s the route that most have gone down in blockchain’s infancy. Building your own cryptocurrency and blockchain to back it up is the traditional route, primarily because blockchain technology is still finding its footing.
To do this, you need to either create a blockchain and cryptocurrency from scratch or create a new crypto token based on an existing cryptocurrency/currency.
Then, you need to ensure that your crypto/blockchain solution is secure, compliant, and tradable with existing cryptocurrencies (assuming that is your goal). Unsurprisingly, this can be extremely difficult and can require an abundance of serious development talent.
Use an existing cryptocurrency
Alternatively, you could just create a blockchain payment system that works with an existing cryptocurrency. It’s no surprise that this is a far easier solution, though it does mean you’ll have less control over the cryptocurrency. And your blockchain will need to conform to the crypto rather than the other way around.
If this is the option you choose, you can compare it to a platform like PayPal or Venmo. Neither created its own currency and for a long time, neither even offered traditional banking services. They were just a means of quickly sending money over the internet.
Blockchain payment systems can work similarly. They can act as a middleman for cryptocurrency, adding unique features that make it easier and more efficient.
Steps to implement blockchain payment processing in your enterprise
Step 1: Project planning
The first step in launching your blockchain payment processing system is to plan out your project.
Are you going to create a new blockchain and/or cryptocurrency from scratch? Or are you going to make an overlay/fork of an existing solution?
Is your platform going to be web-based, or will it be launched as a mobile app? Maybe a combination of the two is right for your business?
Step 2: Onboard a development team
Once you’ve got an idea of how you want to proceed, you’re going to need a development team. Development teams for blockchain payment systems can be challenging to find, especially reliable ones because the technology is new.
Additionally, the newness of the tech means that you won’t just have a hard time finding knowledgeable talent, but capable talent, too. In total, you’ll need to find:
- A project manager
- An IT architect
- Blockchain developers
- Web developers (if building a web app)
- iOS and Android developers (if developing a mobile app)
- DevOps engineers
Or partner with a team of development experts
If you don’t want to go through the trouble of tracking down all of this talent, you could always partner with an existing and trusted team of development experts.
You can find such a team right here at Cheesecake Labs. Our developers and software engineers are highly experienced and educated. This simplifies the process of finding a team substantially and reduces the chance that you’ll run into errors and complications down the line. Reach out to discuss your options!
Step 3: Project execution and tracking
The third step of building a blockchain payment platform is execution. Here, you’ll work with your team to realize the vision you created during the project planning phase.
Below are a few of the routes your project could end up going down during development.
Route A: Creating a new blockchain and cryptocurrency
When building your blockchain payment platform, the first route you could take is to create a new blockchain and cryptocurrency. This requires:
- An IaaS solution (like AWS). This is what will host the original software, coins, and back-end tech for operating your blockchain payment system.
- A Peer-to-Peer trading network. A P2P trading network will allow individuals to use your platform/cryptocurrency without the need for a centralized hub (like a bank).
- A consensus algorithm. Consensus algorithms are critical to a successful blockchain. The consensus algorithm confirms that each new block is valid.
Route B: Building a DAPP (Decentralized App) using Ethereum
DAPPs are a uniquely Ethereum payment platform model in the world of cryptocurrency. They allow individuals to purchase Ethereum, store it in a wallet, then connect that wallet to a DAPP.
You can see examples of DAPP’s here on Ethereum’s official website. Some examples include investing Ethereum into art, swapping Ethereum tokens with ease, and mobile games based around Ethereum.
Route C: Using existing Bitcoin or Ethereum payment gateways
Alternatively, you could build an app on top of an existing crypto payment gateway with an API. Coinbase, CoinGate, and Shopify all have APIs that you can use to facilitate the transfer of cryptocurrency.
Building an app on top of these existing APIs is a fast way to get a creative idea out in the world. Just be aware that changes to these existing platforms and APIs could disrupt your service. So this route might be best treated as a starting point and not an ending point for your blockchain payment platform.
Route D: Use Ripple, Stellar, or other existing blockchain payment systems
If you don’t want to tie yourself to the cryptocurrency world, you can instead use an existing blockchain payment system infrastructure that isn’t exclusively for crypto trading.
Stellar, for example, uses blockchain technology to facilitate decentralized transactions in any currency. Your team could build an app on top of Stellar, adding unique features and selling points without being held to the cryptocurrency market.
Partner with Cheesecake Labs and launch your blockchain payment systems in no time
Now that you understand what blockchain payment systems are and how to launch one yourself, it’s time to take that first step. Cheesecake Labs can help. Our team of development experts will work with you to bring your vision to life efficiently and effectively.