There are several reasons why people prefer to conduct transactions via crypto instead of using traditional channels. One reason is that traditional transactions are restrictive because they must follow strict financial regulations, which may vary between geographical regions. Sending and receiving funds across borders makes transactions significantly difficult because of laws in the initiating and receiving countries and the high cost charged by intermediaries. With crypto, funds are speedily exchanged between wallets since these strict money transfer regulations do not apply.
This speed is advantageous in finance, as it considerably quickens transaction processing. In addition, fast crypto transactions benefit sectors like online gaming, which require many microtransactions. Players get to quickly deposit funds, whether for private gameplay or to join casino tournaments, and place wagers in only a few seconds. Also, players can get the earnings quicker when they win instead of waiting days to cash out. Whether it is finance or online casinos, crypto’s transaction speed has revolutionised financial transactions by leveraging the following:
Decentralised Blockchains
Traditional finance is sometimes very slow, largely because transactions involve several intermediaries. Depending on the type of transaction, there could be more than one middleman, each ensuring that the payment passes regulatory checks, or helping to transfer funds from one point to another. However, crypto is not impeded by this problem because of decentralisation. The distributed nature of crypto networks ensures that most transactions are directly completed between parties in a permissionless manner.
Consensus Mechanisms
A consensus mechanism is a protocol that allows nodes to independently agree on blockchain records, adding to the authenticity and validity of transactions. The primary purpose is getting nodes to validate blockchain transactions in the correct order.
Although there are many different consensus mechanisms, the two most common are Proof-of-Work (PoW) and Proof-of-Stake (PoS). Since most blockchains are decentralised, these consensus mechanisms help to process transactions faster. While the PoS method is quicker and promotes rapid transaction processing, the PoW consensus mechanism processes transactions faster than traditional methods.
Smart Contracts and Flexibility
Blockchain’s programmability helps to achieve impressive transaction processing speeds. Smart contracts are programmable contracts that can self-execute according to encoded rules and terms of agreement. This directly means that there is no need for manual interference. Therefore, transactions that meet the necessary requirements are immediately processed with precision and speed. The application of smart contracts is more common in decentralised finance (DeFi), where transactions such as lending, borrowing, and staking, are automated.
Uninterrupted Availability
The traditional finance landscape is limited by constraints that border on timing. In some cases, users cannot initiate or complete transactions at certain times of the day or during holidays. Transactions initiated during a weekend or holiday may only be processed during working hours, which could sometimes stretch transaction time by up to a week. On the other hand, the blockchain is always available and allows users to send and receive funds between wallets 24/7. Regardless of location, time zone, or holiday, anyone can initiate and complete crypto transactions, notwithstanding geographical or temporal limitations.
Layer 2 Options
Most blockchains struggle with scalability. As adoption increases and more users engage in digital assets, the volume of crypto transactions also spikes. Fortunately, this problem has been chiefly solved by layer-2 solutions specifically designed to help blockchains process more transactions than they can handle originally. Some solutions, like the Lightning Network on the Bitcoin blockchain, do this by taking transactions off the network for off-chain processing before bringing them back to the main blockchain for settlement.