The second annual report from Cambridge University on the crypto sector is so rich in data and analysis that it requires an article specifically linked to exchanges and the evolution of payment systems.
One of the most critical factors in the activities involving cryptocurrencies is the relationship between fiat currencies and virtual assets, or rather the conversion between them.
The research of the University of Cambridge shows that there is a substantial difference depending on the branch of activity that is taken into consideration.
The graph looks like a multichoice because the companies interviewed to prepare the report – including Eidoo, Genesis Mining, Bitmain and many others – have the ability to accept multiple payment methods in order to convert from fiat to crypto or to make withdrawals:
In the left column, you can see the deposit methods, in the right one the withdrawal ones.
In general, for all types of services, the most common method of conversion between the two monetary worlds is through bank transfers that become almost exclusive in the case of cryptocurrencies linked to payment systems.
Multiservices and exchanges have a greater variety and activity, as far as the methods of conversion are concerned and even the use of cash is quite widespread.
It can be added that the variety in the methods of access/exit from crypto services is often apparent because 36% of companies only accept one method of payment, a percentage that rises to 51% in the case of withdrawals.
What are the links between cryptocurrency payment systems and traditional payment networks, such as banks, credit card schemes and ATMs?
The situation is less negative than one might think:
Only 12% of crypto payment systems currently have no plans to make agreements with the payment network, which indicates an increasing link between cryptocurrencies and ordinary payment systems. Besides, a division would be functionally illogical.
How much do exchange customers trust leaving their own tokens deposited in the same company’s wallets?
This depends on the size of the exchanges themselves: large companies give more security guarantees than small entities and therefore the latter see customers withdrawing tokens more frequently:
Finally, let’s consider both exchanges and external custody services, what kind of service is most successful among them:
- Extreme custodial service, where the custodian has the private keys and total control
- Non-extreme custodial service, where the user has the private keys
- Non-custodial service, where the keys are shared between the user and the service
- Extreme non-custodial service, where the private keys are only of the user
What is the most popular choice among custodial service customers and exchanges?
Here are the results:
Even in this case, the greater the organisation, the greater the trust and the concession of keys.
A large company gives more guarantees to the client who, in these cases, prefers the practicality and therefore entrust the custody to the counterparty.