South African online payments provider PayFast is ditching bitcoin as a payment method, saying the cryptocurrency has several “limitations and design flaws that make it an impractical substitute for cash”.
PayFast was the first — and only — payment gateway to make bitcoin available as a payment method in South Africa. It has blamed high transaction fees and long confirmation times for buyers as some of the reasons for removing bitcoin from the platform.
“We have tried various ways to mitigate these problems, but unfortunately these issues are fundamental,” it said. “The resultant poor user experience has led us to re-evaluate bitcoin as a payment method on our platform and a decision has been taken to discontinue support for bitcoin from midnight on 20 July 2019.”
It said bitcoin had held promise as a global currency that would allow for a faster, cheaper and easier way to move money on the Internet. This included the movement of funds for day-to-day transactions, such as buying a cup of coffee. “Our aim was to enable that promise for our buyers and merchants, and to support this alternative to traditional payment methods,” it said.
“PayFast was able to process bitcoin transactions by partnering with local bitcoin exchange Luno, which acted as an intermediary between a buyer’s bitcoin wallet and PayFast. A buyer always paid the bitcoin amount while a seller received the equivalent rand payment in their PayFast account,” the company explained. “To eliminate any risk posed by bitcoin’s price volatility, Luno locked the bitcoin to rand exchange rate for a 10-minute window. If the transaction was not sufficiently confirmed within 10 minutes, the payment was unsuccessful and a refund would be due.”
“As bitcoin has grown in popularity, it has become increasingly difficult for the network to sufficiently confirm transactions within the 10-minute time limit. Since the network isn’t able to handle the volume of instructions at the speed required, the majority of bitcoin transactions on the PayFast platform ended up being unsuccessful.”
It got worse, PayFast said. In addition to the frustration that buyers experienced when their payments failed, bitcoin users also often incurred a non-refundable fee for every attempted payment. This is the fee the network charges to process a transaction. “Anyone trying to pay using bitcoin opens themselves up to the risk of paying the bitcoin processing fee, even if the payment fails. The processing fees themselves may vary according to the bitcoin price and the time required for acceptance to the blockchain. The more bitcoin gains in value, the higher these fees,” the company said.
“The overall slow performance and computational power consumed by the bitcoin blockchain to validate transactions make bitcoin less useful currently as a means of exchange and better suited as an asset.”
PayFast said that it’s estimated that the bitcoin network can only process about seven transactions per second, whereas Visa handles about 24 000 transactions a second. “Even newer cryptocurrencies fare significantly better than bitcoin, with ripple processing approximately 1 500 transactions per second.”
It said it may again support bitcoin and other cryptocurrencies in future, but not until the problems are resolved.
“Until such time, we have decided to end support for bitcoin. This means that bitcoin will no longer be displayed as a payment method on PayFast. If you, a PayFast merchant, currently have bitcoin enabled and are promoting it as a PayFast payment method on your website, we recommend that you remove any logos and references to bitcoin before 20 July.” — © 2019 NewsCentral Media