Blockchain-based payment is becoming a viable alternative to credit cards. What’s the real difference between them? What happens behind the scenes every time someone taps their card or sends cryptocurrency? Why are users and businesses exploring the shift?
This blog will explore the technical aspects of both systems, from transaction flows to user verification and settlement processes to system architecture. We will also show you how Clevor Cards can reshape the future, combining the security of EMV cards with the innovative features of blockchain payments.
The Traditional Credit Card Systems: What They Are and How They Work
Credit card transactions are based on central protocols that involve several layers of trusted intermediaries.
Who’s Involved?
A cardholder makes a purchase.
The merchant will accept the payment.
The acquiring Bank processes payment on behalf of the merchant.
The card issuing bank supplies the cardholder with funds and the card.
Card Networks such as Visa or Mastercard ease the routing and processing.
How Transactions are Processed
The terminal initiates an authorization when a credit card transaction is made. The request is sent through the network of the card and arrives at the bank that issued the card, where it undergoes various checks (funds or fraud patterns). Before approving or rejecting, the request is run through the card network and lands at the issuing bank. Merchants group all transactions at the end of each day and send them to clearing. Settlement, or the actual transfer of funds, usually takes place 1 to 3 business days after.
This legacy system relies heavily on proprietary APIs and centralized databases. It also relies on fraud monitoring tools and compliance frameworks such as PCI-DSS. It’s reliable but slow, has multiple failure points, and hides a lot of the process.
Blockchain Payments: An Alternative Approach
Blockchain transactions are run by a decentralized infrastructure that is peer-validated. It relies on transparent, tamper-resistant systems powered by cryptographic principles instead of banks and card networks.
Core Participants
The sender initiates the transaction using their crypto wallet.
The recipient is an address or wallet that receives the funds.
Network Nodes validate and propagate transactions.
Validators or Miners secure the network by validating blocks of transactions.
Transaction Lifecycle
The user signs the transaction digitally using a secret that can be stored on a hardware device, such as Clevor’s crypto debit card. The transaction is broadcast to the peer-to-peer network, where nodes confirm its authenticity and fund availability. Once verified, miners or validators will add the block to their database.
The transaction becomes permanent once it is added to the Blockchain. This system is based on open-source protocols, decentralized ledgers and a completely new experience compared to traditional finance.
Comparison of the Two Payment Models
Both systems are designed to transfer value between parties, but their architecture and processes differ fundamentally.
Infrastructure: Credit cards work within a permissioned and centralized model. Blockchain works on decentralized, open networks.
Verification: While blockchain relies on cryptographic signatures for authentication, credit card systems depend on fraud detection systems and banks.
Transparency: Card payments can be opaque for the user. Blockchain transactions, however, are transparent and auditable.
Settlement Speed: While cards may take several days to settle, crypto transactions are often completed in just a few seconds.
Control: Blockchain gives users full control over their funds and reduces the risk of unauthorized access.
Security and Fraud Prevention
Fraud is a major concern with traditional card systems. Users are at risk when third parties “pull” money from their accounts, whether it is through card skimming or phishing.
The model in blockchain is reversed – only the wallet owner can “push” a transaction, and only if he or she holds the private key. The attack surface is reduced and the risk of unauthorized transfers is virtually eliminated.
Clevor Cards go one step beyond. Our smart cards use high-security chips (such as EAL6+, FIPS 140-3 or EAL6+) with PIN and UPK layers to offer the best protection possible for blockchain transactions.
Speed, Intermediaries, and Real-Time Processing
Even though card swipes seem instantaneous, settlement can take several days. Before funds are delivered, each transaction is routed through networks, banks and processors. This delay adds to processing fees.
Blockchain is a network that allows for near-instantaneous settlements.
It may take 10 minutes to send Bitcoin.
Ethereum processes blocks every 15 seconds
Fast chains such as Solana and Polygon can be completed in less than a second
Blockchain reduces both the time and costs involved by reducing the number of parties.
Privacy vs. Transparency
Although credit card information is not visible to users, it’s available to card networks, banks and advertisers. Much of this data is sold or shared commercially.
Blockchains are open by design – all transactions appear on a public ledger. This increases transparency but also poses privacy issues. New solutions, such as privacy tokens and zero-knowledge certificates, are addressing these concerns while maintaining auditability.
Cost Implications
Chargeback penalties and high hardware costs for merchants are just some of the hidden and visible costs associated with credit card use.
Blockchain transactions are typically cheaper and have no chargebacks. It only takes a simple wallet to send and receive money, which makes it more accessible for businesses.
A Converging Future: How Clevor Cards Bridge the Gap
Clevor Cards combine traditional and decentralized payment methods into a single, highly secure solution.
Each card includes:
EMV-based functionality for standard Credit Card Use
Hardware wallet Integration for On-chain Crypto Transactions
FIDO2 authentication secures password-free logins
With a single tamperproof smart card, users can sign blockchain transactions and spend fiat or crypto. They can also authenticate online.
Let go of managing multiple devices and wallets. Clevor is a secure, all-in-one tool that brings together everything you need for your financial future.
Summing Everything Up
Both credit cards and the blockchain are essentially aimed at serving the same purpose – transferring value from one party to another. Their approaches are vastly different.
Credit Cards are based on intermediaries and permissioned-access systems.
Blockchain empowers people through decentralization and cryptographic security.
Clevor Card is a hybrid tool that makes it easy to navigate the two worlds using a single secure solution.