Glossary

Payment Rail

1 min read

A payment rail is a network or platform that facilitates digital transactions. Payment rails are measured in terms of transaction security, volume, and settlement time. Credit rails, ACH rails, and Bitcoin rails are common forms of payment rails.

Like other railways, a payment rail is the infrastructure, pathway, or technology enabling the transmission of assets to a counterparty.

Info: Historically, transacting parties did not require a digital payment rail because they could physically exchange cash or coin with ease.
Historically, transacting parties did not require a digital payment rail because they could physically exchange cash or coin with ease.

Today, governments surveil cash payments on credit and ACH rails - transactions exceeding a value of $10,000 garner additional scrutiny from the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC). The onset of payment rail analytics has caused payment data to become commoditized. Corporations monitor the patterns, amounts, and physical location of transactions on their payment rails.

Blockchain rails offer greater privacy, stronger security, and faster settlement times than legacy payment rails.

Related Terms
Blockchain
A blockchain is a chronological list of records, called blocks. Each of these blocks contains transactions. Once a block is added to the blockchain, it is infeasible to alter, giving Bitcoin its immutability.
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Transaction
A transaction exists as a record of the transfer of bitcoin from one address to another. All transactions are recorded in blocks on the blockchain.
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Counterparty
A counterparty is the other participating party in a financial transaction. Every transaction must have a counterparty; every buyer of an asset must have a seller who is willing to sell in order for the transaction to be completed. There can be multiple counterparties in a transaction.
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Decentralized Ledger
A decentralized ledger is a record of all transactions on a network. This ledger is maintained and updated by many independent nodes. Bitcoin uses a blockchain and Proof-of-Work to organize the network and maintain its decentralized ledger.
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Batching
Batching involves consolidating multiple payments into a single transaction with many outputs. This can help senders save on fees, which are paid based on how much data their transaction uses.
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