According to research, less than 1% of people use or own cryptocurrencies. And while blockchain enthusiasts predict that blockchain will soon permeate the global economy, we have to admit that most people will only join the crypto market once they can freely change fiat into crypto and back. The vast majority of people earn their income in fiat, so for them entering the crypto market (as traders or investors) means first exchanging traditional money for digital assets.
We should stress once again that most solutions for exchanging fiat for crypto work with Bitcoin and Ethereum. Such services can be divided into three types:
- a) Depositing money in a centralized exchange using a bank card or account.
Disadvantages:
– High fees – up to 5%;
– The process of registration, verification and exchange takes a lot of time and can be complex;
– Only a few major exchanges (Kraken, Coinbase, Cex) allow one to purchase XLM (lumens) for fiat directly for USD and euro. Buying XLM with other fiat currencies is almost impossible. This means that a user who has Chinese yuans, Russian rubles, Japanese yen, etc. on their hands will first have to buy Bitcoins or ether and then exchange them for lumens. Often this will require having accounts on two exchanges and transferring crypto between them. If the user wants to buy not XLM but some other Stellar-based assets, they will need to make even more steps.
– Can’t be used for decentralized trading.
- b) Exchangers
Disadvantages:
– There are hundreds of exchangers in the market, all offering different terms that user must first research and compare;
– Exchangers are based on trust: there is no guarantee that the user will receive the money they are due;
– High fees and poor exchange rates (losses of 5-10% of the whole sum are not uncommon);
– Small number of exchangers accepting Stellar – less than 20 (compare this to 120+ services that accept Bitcoin);
– Can be used for decentralized trading, but with limitations (cannot be properly integrated into a trading client);
с) Payment gateways
Gateways are superior to exchangers in several ways:
– Automation: withdrawing fiat money from a card and exchanging it for crypto takes a few seconds;
– Simplicity: a gateway can be readily integrated into an exchange or dApp;
– Reliability: there is no risk of fraud;
– Low fees (up to 2,5%);
– Options to buy XLM and other assets for different fiat currencies (including CNY, RUB, etc.);
– Optimal solution for decentralized trading.
In spite of all the advantages of payment gateways, so far there is only one project (Stellar X) that offers such a solution for Stellar, accepting just two currencies – euro and Chinese yuan.
