Cryptocurrency, and Bitcoin especially, are more likely to draw raised eyebrows than excited grins these days. But don’t be fooled by the price volatility of crypto. There’s a bigger discussion about what crypto — and the blockchain technology behind it — can do for the entire eCommerce sector.
“Digital currencies like Bitcoin are helping both private users and online merchants to experience a whole new world of monetary exchange with complete ease,” eCommerce consultant Darshit Parmar writes.
This could prove to be the real story of cryptocurrency’s rise. eCommerce managers should still have crypto and blockchain technologies on their radars. Awareness today could create big opportunities for your brand in the not so distant future.
Bitcoin for eCommerce: Upsides and Downsides for Brands
“You want money to be based on something that no government mandarin can wish into existence with the stroke of a pen,” says Overstock CEO Patrick Byrne, who has been bullish on Bitcoin for years. His company has been accepting Bitcoin as a payment method for a half decade.
But Bitcoin adoption need not be a statement about the frailty of fiat money. For many companies, Bitcoin simply represents a system that facilitates the movement of money with comparatively low transaction costs. Mark Brinkerhoff at CyberMiles notes that payment processor BitPay takes just 1 percent per crypto transactions. Many credit card processors take 2 percent or more.
And because Bitcoin acts as both currency and payment network, it can facilitate cross-border trade. Payment localization is suddenly a matter of adding Bitcoin as a payment option, and there is no national entity to which you must remit a currency. From a user experience perspective, too, it always helps to offer multiple payment options in your shop.
Bitcoin certainly has its drawbacks, though. These include:
- Volatility. The value of Bitcoin can vary wildly. Some brands, like Steam, have stopped offering Bitcoin as a payment option for this reason.
- Adoption. The future Bitcoin as a currency is still relatively uncertain. Will users treat it as something akin to digital cash or digital gold?
- Alternatives. Bitcoin may be the first cryptocurrency, but it’s far from the only option these days. It can be difficult for eCommerce managers to keep up with the many crypto options available to them. More on that in a moment.
- Scalability. Bitcoin’s blockchain is secured by a proof-of-work algorithm. That model makes for secure and easily verified transactions, but in order to be sustainable Bitcoin needs higher transaction volume.
- User experience. The UX of crypto payment tools improves with every passing day, but it’s still not ready for mainstream rollout. Most people aren’t yet ready to manage cryptocurrencies.
Beyond Bitcoin: Other Cryptocurrencies Driving eCommerce Today
BItcoin may be the big fish, but the cryptocurrency world is no small pond.
Solvid founder Dmytro Spilka notes that the key benefit of cryptocurrencies in general is that they are “designed for storing transactional data securely.” This means at scale a vast crypto network could rapidly and efficiently facilitate transactions and keep each transaction secure. Contrast that with, say, credit cards, which are still vulnerable to crude methods of identity theft.
As such, thousands of other currencies have been built on Bitcoin’s model, and they are creating myriad interesting use cases in eCommerce.
Ripple, for example, specializes in cross-border remittance. Though Ripple’s xCurrent product is centralized rather than a blockchain-based system, more than 200 banks around the world have adopted the technology to confirm real-time transactions across borders, Forbes contributor Billy Bambrough notes.
Some industries are already exploring their own native cryptocurrencies. Game developers, for example, have long relied on native tokens to support in-game payments. With the proliferation of blockchain technology, however, massive online RPGs — games where thousands of people are playing and interacting all at once — can introduce native currencies that have real-world spending power, Hacker Noon reports.
The Underlying Technology: Blockchain Initiatives Impacting eCommerce
The promise of crypto lies in its logistical capabilities just as much as its use as an actual currency. Blockchains can be implemented essentially anywhere an intermediary is typically called for. That both reduces administrative costs and increases data security — and the implications for these changes are potentially huge.
The fashion industry is looking into ways to leverage the blockchain’s novel ability to securely store transactional data. One option: Any garment could have its own network token, which would then act as an SKU, Save The Garment Center’s Charles Beckwith argues.
This use case goes well beyond tracking inventory. Having clothes tracked on a blockchain means a shopper would be able to view any garment’s provenance — from where the cotton was grown to where the garment was sewn — right at the point of purchase. Fair trade labels could thus give way to real-time customer verification.
Blockchains could introduce all kinds of improvements to digital shopping experiences. CX consultant Adrian Swinscoe notes, for example, that eCommerce companies could power customer loyalty programs with a blockchain.
Ross Mauri at IBM Systems writes that fraud costs consumers roughly $16 billion. Introducing a distributed, independently verifiable ledger of transactions could slash those costs.
Broadsuite Media Group CEO Daniel Newman says he wants to see blockchain-based secure digital IDs in the near future. These would create better fraud protection and “empower users themselves to determine what personal data and information they share, where, and with whom,” he writes. eCommerce brands pitching transparency will do well to take note.
Customer Relationship Management
If blockchains can keep transactional data cleaner, then the same goes for consumer data, digital strategist Andrew Medal says.
Accurate consumer information is critical to effective ad-targeting, but Medal writes that around 20 percent of the $200 billion annual ad spend is wasted on bots. Blockchain-based platforms and ad networks can help brands avoid this wasted spending.
Start Thinking Now About Which Crypto Applications Could Help Your Store
The use cases above are precisely why we think eCommerce managers should still be thinking about cryptocurrencies — whether they use them for facilitating transactions or for something else entirely.
When revolutionary technologies like these emerge, it’s important to keep an eye on their development. “Whether choosing to accept crypto or not for your business, it is clearly prudent to know the facts,” branding consultant Kate Harrison writes. “Ask [others] about their experiences, evaluate your risk aversion level, and proceed with care.”
All that remains is for you to address which aspect of this shifting technology you take advantage of for your own eCommerce operations.