The current banking industry has been running for centuries with many institutes that already have their audience and reputation. Many such banks have increased the security levels around their apps, making it hard to compete against established players. And yet, payment apps are still limited in their capabilities.
Peer To Peer Payment- History And Development:
The history of P2P payment in banking dates back to the existence of cash. Cash as a currency is effortless; anyone can use it, and physical notes are much more complex to steal than digital data. As money gradually evolved from physical to digital, the usual form of payment shifted to credit or debit cards, as they are straightforward and widespread.
However, banks have never allowed users to make direct payments amongst each other with their platforms.
The Inception Of Blockchain:
Bitcoin was released in 2009 as an open-source project, offering several advantages over traditional currencies.
Firstly, transactions are fully transparent on a public ledger called a blockchain— it cannot be changed or altered. All users have access to this information; therefore, there is no risk of fraud or other types of manipulation.
Blockchain also offers unbreakable security, employing a cryptographic hash algorithm to ensure that no user can tamper with the data in any way. The combination of blockchain technologies and P2P payment apps could revolutionize the banking industry.
The Main Advantages Brought By Bitcoin:
The absence of a central authority overseeing Bitcoin’s transactions means no government or banks are involved with the process.
A fixed number of Bitcoins will be released into the market (market cap), and their value will only change due to supply/demand dynamics instead of inflation.
A Robust Peer-to-Peer Payment System:
A P2P payment system is an app that allows users to send and receive money directly from one another without a third party. P2P payment apps usually have low-security standards as they only include a limited number of features.
Breaking Down Security In A P2P Payment App Into Three Main Components:
- The wallet system where users store all their money
- Tokenization of funds; meaning that once a transaction is done, it does not have to take place on the blockchain but only be registered in the ledger as an available balance
- Authentication of the user’s identity to ensure that there is only one account associated with each session
Security should not be seen as a limiting factor for P2P payment apps but rather as a means to increase their attractiveness to take on more ambitious challenges like replacing national currencies.
Technical Challenges Of A Robust P2P Payment App
Blockchain technology allows for many different uses and does not necessarily require a cryptocurrency to function correctly. Moreover, it offers developers the opportunity to create their tokens that can be used in smart contracts or DApps (decentralized apps).
The blockchain brings along several technical issues in various aspects of cryptocurrencies:
- Slow transaction speed
- High transaction costs
- Low-security standards
Still, several P2P payment apps out there claim to offer users a safe and secure way to transfer money from one person to another.
Blockchain-Based P2P Payment App:
A blockchain-based P2P payment app has to be developed by an expert team of developers with a long history in the cryptocurrency industry. While creating such an app, the first step is establishing a secure system for storing fiat currencies into wallets and making them easily transferable between users. In addition, users can store tokens in their wallets and make fast, free, and secure payments to their friends or family members without relying on third parties like banks.
The next step is to create a P2P payment system for cryptocurrencies, which is much more challenging to pull off and requires the expertise of highly experienced developers. Since no token can be used in this payment system, some stable currency needs to represent all types of cryptocurrencies.
The stable currency has to be backed by a reserve of cryptocurrencies that can be easily purchased in case the value of the regular currency decreases significantly.
Blockchain-based P2P payment apps are expected to disrupt the banking industry by offering users a way to transfer money between one another securely and quickly. The developers will have to create and implement different technological solutions for each part of the P2P payment app. This approach will show people how safe and efficient these types of apps can be in real life compared to their alternative—national currencies.