The Impact of Cryptocurrency on eCommerce
What is cryptocurrency and how is it affecting eCommerce?
Cryptocurrency, such as Bitcoin and Ethereum, has become one of the hottest tech trends seen in years. It’s hard to ignore the effect that blockchain technology has on eCommerce. Large eCommerce sites have been taking notice, supporting cryptocurrency payments from Coinbase, BitPay, and other crypto wallets – making it easier for customers to buy products online.
What is Cryptocurrency?
Cryptocurrency, or ‘crypto’, is a digital currency used to buy goods and services. Crypto doesn’t rely on banks or other institutions to verify transactions. Instead of physical money carried around and exchanged, payments exist purely as digital entries to an online database. When you transfer cryptocurrency funds, the transactions are recorded in a digital ledger known as a blockchain.
Cryptocurrency gets its name because it uses encryption to verify transactions. Encryption provides maximum security, safety, and fortifies the integrity of your data. Cryptocurrencies run on the blockchain, which serves as a digital record of all transactions updated and held by currency holders.
Blockchain currency is created through a process called ‘mining’, which involves computers to solve complicated mathematical problems to generate coins. Once purchased, cryptocurrency is normally stored in ‘wallets’, which is either online software (‘hot’) or an electronic device (‘cold’) used to secure cryptocurrencies. There are many types (literally thousands) of cryptocurrencies, but here are a few best-known examples:
Founded in 2009, Bitcoin was the first cryptocurrency and is still the most popular. The currency was developed by Satoshi Nakamoto – widely believed to be a pseudonym for an individual or group of people. In 2016, you could buy a Bitcoin for about $500. As of March 1, 2022, a single Bitcoin’s price was over $44,000. That’s growth of about 7,800%.
Developed in 2015, Ethereum is second in cryptocurrency popularity and even more efficient than Bitcoin. Experiencing tremendous growth, Ethereum is a favorite of program developers because of its potential applications.
Unlike some other forms of crypto, Tether is a stablecoin, meaning it’s backed by fiat currencies like U.S. dollars and the Euro, and is supposed to be more consistent than other cryptocurrencies.
Founded in 2013, Dogecoin is part meme, part functional token that’s one of the more volatile and speculative forms of cryptocurrency.
How Cryptocurrency Affects eCommerce
Cryptocurrency helps make online transactions easier, quicker, and more secure. With crypto, customers don’t have to use their credit cards or withdraw money at the bank to pay at checkout. Crypto is programmed to facilitate automatic conversion into local currency. Major companies accepting crypto payments include Microsoft, Starbucks, and PayPal. Crypto also enables traceable supply chains, online store security, shopping anonymity, and automated organizational structure.
The Benefits of Cryptocurrency in eCommerce
Besides security and efficiency, cryptocurrencies can offer other advantages for both buyers and sellers.
Blockchain technology allows for quicker, more direct transactions that can help streamline your business cash flow. And for consumers, the immediate processing of cryptocurrency means orders can be shipped quickly.
The blockchain is a secure online ledger that keeps a record of every transaction. Blockchain technology enables users to share and securely store cryptocurrency. It records each payment transaction, so whenever a payment is made, an entry is published in the blockchain.
Cryptocurrencies are not regulated by traditional financial institutions or governments. This eliminates the middleman holding the funds, therefore no processing fees.
Crypto transactions are not subject to chargebacks. Chargebacks hurt revenue, can jeopardize a merchant’s account, and take time and effort to resolve. Because cryptocurrency is intended to function like virtual cash, crypto transfers are in escrow until both parties confirm the transaction. Once the transaction is finalized and recorded in the blockchain, it cannot be reversed.
Because cryptocurrency is a simple, cash-like transaction with no bank regulation, it’s attractive to marketplaces around the world. Crypto can be used in any country without dependence on exchange rates, which can help streamline international growth for companies and increase sales volume.
Potential Hurdles
Despite its popularity, there’s been some hesitancy within the eCommerce space regarding crypto. For one, cryptocurrencies can be extremely volatile. The volatility of the digital currency is due to value fluctuation and constant reevaluation of products. Another possible pitfall is the lack of trust of some big players in the industry. For example, Apple and Amazon have noted possible concerns, mainly due to volatility. Overall, it seems the answer may depend on the preference of both consumers and sellers.
Implementing Cryptocurrency
Implementing crypto can be done through either a personal ‘wallet’ or a third-party payment processor. Most wallets can be quickly downloaded to your phone or computer, or you can get a hardware wallet. If you choose a third-party processor such as BitPay, they’ll handle the entire payment process. A third-party payment processor can also instantly convert the cryptocurrency into fiat, saving you from any price volatility.
Whether it’s Bitcoin, Cardano, or Ripple, crypto is becoming more and more popular in the eCommerce world. Cryptocurrency transactions are quick, easy, and more secure through encryption. Though not mandatory in conducting online transactions, utilizing cryptocurrency could be a good strategy for your business and may enhance your customer’s buying experience.
