Should I Accept Payment In Ether?
Bitcoin may have hogged the headlines recently, but other cryptocurrencies are also challenging traditional online payment platforms. One of the less volatile cryptocurrency platforms is Ethereum, whose popularity has been cemented by its adoption among IT and computing companies.
The non-profit Ethereum Foundation is a decentralized online platform with no underwriter or regulatory authority. It is used to create and implement smart contracts – applications that run on an indelible public ledger called the blockchain, which anonymously records cryptocurrency transactions. Developers can make binding contracts or move funds in accordance with historic or future instructions, as well as creating digital tokens. These range from membership IDs to currencies, with developers able to issue variable amounts of tokens at any given time.
Described by its creators as the crypto-fuel for Ethereum, ether is a method of payment. It’s earned by the owners of machines whose spare processing power is used to perform tasks like blockchain calculations. Over the coming year, a new algorithm called Casper will alter the maximum level of currency issuance, which is presently capped at 18 million ether per year. Ether is stored in a digital wallet, and is used to pay for goods and services from online IT companies.
At present, few real-world businesses accept ether. But should they? After all, it has the same advantages as other cryptocurrencies from a trader’s perspective. There are no exchange rates or currency conversions, so payments can be accepted from anywhere in the world. Transaction times are short and fees are competitive, while the process of paying for something with a cryptocurrency is easier than entering credit or debit card details, CVV codes and VBV password characters. And while the digital wallets used to store ether remain vulnerable to scams and hacking, that’s not unique to cryptocurrencies.
The Big Short
A key challenge facing this sector is the arbitrary nature of cryptocurrency value. Without being pegged to a tangible real-world asset like gold, these virtual tokens are only worth what people are willing to pay for them. The decision to permit stock market trades and shorts inevitably leads to price volatility, with the value of bitcoin going from $1,000 to $19,500 and back to $10,000 within a year. Ether has experienced similar shocks, with its value against the dollar falling from an all-time high of $1,400 on the 14th to $780 just three days later. Even crypto-loyal Microsoft stopped taking Bitcoin payments recently in response to endless value fluctuations.
Uncertainty surrounding issues like the proposed Casper algorithm update is making non-blockchain companies wary of adopting ether as a method of payment. While anyone who acquired ether during its presale period four years ago should be pleased with their investment, Ethereum themselves say their creation shouldn’t be regarded as a currency or an asset. Until stock market volatility declines and its value stabilizes, ether probably shouldn’t be offered as a payment method by firms without prior experience of the blockchain.