Improving User Experience with Rapid Cryptocurrency Verification: An Analysis
- Peter Johnson
- Dec 18, 2023
- 5 min read
Graviton initiated a bold effort to make cryptocurrency payment acceptance by mainstream online merchants a reality. We sought to demonstrate the potential of instantaneous, worldwide transactions powered by blockchain technology through the process of integrating digital assets into user-friendly payment flows and digital wallets.
The vision soon butted up against unbending realities. All blockchain networks struggle with speed and scalability issues due to the inherent confirmation protocols that are consensus-oriented. Principles of permissionless design can guarantee strong decentralization, but come at the expense of scalability, which user experience currently pays for.
As an example, Bitcoin - the most widely accepted cryptocurrency - currently takes an average of 60 minutes to receive sufficient blockchain confirmations to detect any risk of double-spending. Ethereum and other popular networks also face similar time lags due to an increasing amount of traffic. To put this into perspective, it takes between 2 and 5 seconds to authorize Visa credit card payments, leaving a noticeable discrepancy.
Delays have a significant impact on business and customer usage of mainstream applications. Our research has revealed how serious this problem is through users' visible reactions:
Sixty-six percent of people who attempted to purchase cryptocurrency gave up on the process after waiting more than twenty minutes for payment confirmation.
Approximately one-quarter of those who made crypto purchases expressed a lack of willingness to engage in similar transactions in the future after having a negative experience.
The merchant interviews we conducted overwhelmingly demonstrated that payment processing lag was the most significant deterrent to accepting crypto, outranking even price volatility in their minds.
The successes of instant settlement solutions such as PayPal showed the importance of real-time retail payments. If cryptocurrency confirmation delays were not addressed, this posed an existential threat to further business adoption.
Initiatives with the purpose of introducing modifications to cryptocurrency protocol layers with the goal of raising throughputs, such as Ethereum 2.0's sharding, have been initiated. However, the realization of results from these improvements is still years away, making it a risky proposition to rely on for user experience. Consequently, we have devoted our efforts to innovating the transaction layer, which is accessible right now.
Our aim is to create an innovative transaction validation engine that permits instantaneous payment settlements without compromising decentralised security systems or necessitating specialised tokenization.
We especially strive to introduce novel settlement assets, as opposed to the centralised custodial risks often employed by some of our competitors. By providing confirmations based on the target cryptocurrencies already held by users, we are reinforcing, rather than threatening, the network effects that existing users rely on and trust.
After examining existing Payment Service Provider (PSP) options in the market, it was observed that two methods emerged to reduce crypto settlement delays, each accompanied by its own set of benefits and drawbacks.
BitPay deducts payments from customer wallets right away upon purchase and issues payouts to merchants from company funds. However, complete settlement does not take place until the blockchain is verified, which may take up to 60 minutes. While bettering the short-term user experience, vendors remain open to settlement reversal dangers from malicious activities or errors. Carrying extra working capital increases centralization on the processor's side.
Move to utilizing proprietary token substitutes for settlement.
Crypto.com and other solutions offer native stablecoin tokens which facilitate faster settlements off major blockchains. However, this results in users having to adopt new and unfamiliar assets that are incompatible with widely used payment cryptocurrencies. This fragmentation of liquidity and the additional risks to custody hamper usability and user experience.
We decided not to accept the compromised models, and instead embarked on a research program that would identify the reasons behind long confirmation delays. We asked ourselves: could we establish a different approach if we understood the fundamental causes of the delay?
Our investigation took us to mempools, which are an important but frequently disregarded aspect of blockchain transaction processing. A mempool is a memory of pooled transactions expecting to be verified for a specific cryptocurrency network.
When a user sends a transaction, it is sent to nodes across the decentralized network, then added to the mempool which contains other pending transactions. Algorithms prioritise which transactions are selected from the mempool to be included in the next set of blocks which will be confirmed.
Miners assemble blocks with a preference for submissions with higher fees, which they receive as block rewards. This fee-based sorting, combined with various technical regulations, creates the differences between payments that are likely to be confirmed quickly, eventually or not at all.
We found that nearly 22% of attempted transactions failed to be confirmed due to them not meeting the minimum network criteria. A large number of valid transactions then had to wait for hours due to the capacity restrictions of blockchain networks. We studied multiple data points and identified certain predictive patterns in real-time that had a direct impact on the outcomes. mempools were actually predicting miner behavior.
We discovered a wealth of information when examining mempools. We sent a dummy transaction into the pool and then took a look at the characteristics of other transactions nearby that were awaiting confirmation. This enabled us to build a model that predicted the likely sequence of miner behaviour. This was a revolutionary risk-scoring system. fee level, confirmation priority, and blocktime window.
When customers use our platform to make cryptocurrency payments, our algorithms quickly put an unannounced transaction into the mempool line and inspect the situation around it, assessing three aspects of transactions close to it: fee amount, priority for confirmation and time for the block.
Our scoring system amalgamates these characteristics into a 1-100 risk score that determines the probability of final authorization. A score higher than 90 conveys enough trust to enable pre-settlement. Any transactions that score lower are subject to the normal regulations as a backup.
By utilizing contextual signals other than static historical rates, we were able to raise our predictive accuracy to 93% through backtesting, which comfortably meets our risk tolerances.
Our mempool-based transaction validator has been perfected, leading to improvements in our core user flows.
Cryptocurrency payments with high scores are now pre-validated to enable instant payouts for merchants, without having to wait for the blockchain to catch up.
This hybrid model takes on a certain amount of statistical risk in order to meet customers' needs regarding speed. At the same time, decentralized protective measures are still in effect to ensure security and freedom from any middlemen.
The results of customer conversion and loyalty demonstrate that the solutions were successful since users experienced crypto payments that are similar to modern fintech.
There was a 66% decrease in shopping cart abandonment during checkout.
A 57% increase in the rate of purchase completion conversions
Ninety-two percent of people are inclined to use cryptocurrency for their future transactions.
Merchant partners highlighted substantial growth, with volumes increasing 850% in the first year. By analyzing mempool activity, cryptocurrencies maintain their decentralized nature while becoming widely accepted with rapid practical confirmations.
Our transaction scoring system brings crypto user experience up to the level that current users and businesses desire. Additionally, exposing blockchain data unlocks the potential of connecting decentralized networks to mainstream usage and rate of speed. The opportunity of crypto's next stage of growth is in sight.
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