After rocketing up to almost $20,000 in late 2017, the value of Bitcoin cryptocurrency has fallen to a bit more than $8,000 in early 2018. Price swings eroding 60 percent of value are likely to scare away all but the most stalwart of supporters. However, Bitcoin and other cryptocurrencies continue to draw attention from investors and regulators alike.
In view of this, ecommerce vendors may well ask themselves whether they should accept cryptocurrency payments. This leads one to wonder, could cryptocurrency popularity help or hurt ecommerce?
What Is a Cryptocurrency?
A cryptocurrency is a medium of exchange that has some agreed-upon value set by supply and demand. Unlike standard currencies, cryptocurrencies are not subject to regulation by governments or central banks. They are “mined” by computing systems, and records of cryptocurrency transactions are maintained in electronic wallets to verify that the cryptocurrencies are not double-spent.
What Challenges Do Cryptocurrencies Present for Ecommerce Vendors?
Cryptocurrencies expose ecommerce vendors to many of the same challenges posed by other online payment mechanisms: trust, privacy, payment infrastructure, and regulatory issues. Bitcoin and other cryptocurrencies pose an additional challenge of stability. A payment exchange mechanism that loses 60 percent of its value in over a month, can be disastrous for a business.
An ecommerce entrepreneur that decides to accept cryptocurrency payments will need to address and understand this risk to assure their survival.
How Can an Ecommerce Site be Adapted to Accept Cryptocurrency Payments?
Sellers are rushing to fill the void with apps and plugins that facilitate ecommerce cryptocurrency payments. WordPress merchants, for example, can choose from several plugins, that calculate exchange rates, give snapshots of cryptocurrency wallets, and interface with other payment mechanisms. Many of those plugins allow transactions in a few cryptocurrencies other than the popular Bitcoin.
What Advantages Do Cryptocurrencies Offer?
Exchange rate instability may be holding back broad acceptance of cryptocurrency payments in ecommerce, but store operators can see some advantages. Bitcoin and other cryptocurrencies impose no or very low transaction fees on ecommerce stores. The fraud rate for cryptocurrency transactions is currently very low. Cryptocurrencies offer the same anonymity as cash payments, and are accordingly secure for both the purchaser and seller. Lastly, cryptocurrencies can simplify international transactions.
Do Any Major Ecommerce Vendors Accept Cryptocurrencies?
At the beginning of 2018, at least thirteen ecommerce sites are accepting Bitcoin payments: Overstock.com, Expedia, eGifter, NewEgg, Shopify Stores, Dish, Roadway Moving Company, PizzaForCoins, Intuit, Microsoft, Reeds Jewelers, Gyft, and CheapAir. Smaller stores that are interested in cryptocurrencies can use services that provide a storefront with an ecommerce theme to showcase cryptocurrency acceptance.
Do People Actually Use Cryptocurrencies to Make Ecommerce and Other Payments?
As of the beginning of 2018, only a negligible number of people appear to use cryptocurrencies as a regular medium of exchange. The experience of an employee of the Bitcoin startup, Coinbase, demonstrates some of the challenges. That employee has used almost nothing but Bitcoin for 3 years. He reports that he regularly relies on hacks and workarounds to convert cryptocurrencies into dollars to pay bills. He also acknowledges that currency conversions have potential capital gain and loss effects in a volatile market for tax purposes.
Will Cryptocurrencies Help or Hurt Ecommerce Popularity?
Unlike bank card payments that have been available since the dawn of ecommerce, cryptocurrency is relatively new. Cryptocurrency payments in ecommerce will likely experience periods of fits and starts before gaining widespread acceptance.
For now, ecommerce vendors interested in accepting cryptocurrency payments should verify they have adequate systems in place to handle them. Early adopters may well realize competitive advantages if they exercise appropriate caution.