Should My Ecommerce Site Accept Cryptocurrencies?
Wikipedia might not be the most dependable source of information, but it tends to be a highly accurate purveyor of cryptocurrency data. The open-source nature of the world’s leading online encyclopedia is a perfect match for decentralized digital currencies, and Wikipedia is a treasure trove of facts about Bitcoin and its brethren. According to Wiki pages, there are over 1,600 cryptocurrencies presently in existence, from established platforms like Ethereum to emergency measures such as Petro. This is the Venezuelan Government’s attempt to tackle hyperinflation, supplementing the increasingly worthless bolivar with a digital cousin.
Petro is regarded by many economic analysts as a glorified scam, created as a response to Venezuela’s s six-figure inflation rate. However, like Wikipedia pages and a million other online activities, it raises a wider question about what is legitimate and what isn’t in the new digital world. Should we regard Petro as a genuine currency, since it’s tied to the oil production of Venezuela’s (heavily indebted) national oil company? Or is the absence of a single token or blockchain entry evidence that Petro is nothing more than a diversionary tactic?
The ecommerce question
Such uncertainty poses a dilemma for ecommerce websites. Historic attempts to translate fiat currencies (legal tender produced by a government) into the digital environment have been clumsy at best. Think about PayPal redirecting users away from ecommerce portals to its own website, or proxy servers breaking the HTTPS connection needed to complete transactions. It’s hardly convenient having to enter CVV codes and expiry dates, yet the autocomplete functions of some modern web browsers make our financial data less secure. A digital currency is the ideal payment tool for digital goods and services – web design, content streaming, WordPress plugins, and so forth.
Unfortunately, cryptocurrencies haven’t yet established themselves as a viable alternative. Of the 1,600 currently in existence, the larger ones all have their own unique pitfalls from a retailer’s perspective:
Bitcoin has become the plaything of stock market investors looking to make a profit (paid in fiat currencies, of course). As a result, its value has fluctuated alarmingly, making it very difficult to accept confidently. Its value fell by $300 in one hour at the start of September, and one Bitcoin is currently worth less than a third of its value last December.
Ethereum. While Bitcoin was losing $1,000 in value over a 24-hour period, Ethereum shed 20 per cent of its total value on the same day. This doesn’t matter to the stock market investors buying and selling it. However, it would matter a lot to a company marketing a product at a cost of one Ethereum, who complete the transaction only to discover they’ve effectively banked 0.8 Ethereum.
There are key differences between Ripple and other cryptocurrencies – it has a bespoke payment infrastructure, and its entire coinbase is already in circulation.
However, the majority of these coins have been retained by founder Ripple Labs Inc, making this more like a fiat currency with a centralized lender. It’s also more focused on banks and payment providers than consumers or ecommerce sites.
The name is no accident – one Tether equals one US dollar. This means that its value is pegged, dependable and obvious. It also makes Tether a centralized digital currency which could be closed down by legal action against its founders. The same thing happened to predecessor eGold a couple of years back, and investors are wary of backing Tether.
So where does that leave the ecommerce website owner debating whether or not to accept cryptocurrencies? Quite simply, it depends on their attitude to risk. Each of the currencies above has experienced dramatic fluctuations in value, which could mean a company exchanges goods or services for less remuneration than expected. That hurts the balance sheet. Setting up payment gateways is also tricky, especially when a proprietary payment infrastructure like Ripple’s is involved. The digital wallets used to store cryptocurrency are vulnerable to hacking, making payment gateways a key focus among cybercriminals. And since the overwhelming majority of consumers are happy with dollars, Euros and Sterling, it’s potentially a lot of effort for minimal uptake.
Even so, there’s much to envy about cryptocurrency payments. The absence of processing fees or international exchange rates benefits firms trading around the world, while the instant receipt of funds will be a blessing to anyone old enough to remember bouncing checks. A cryptocurrency transaction is either executed or not, so chargebacks are impossible. A small number of customers may be attracted specifically because of the cryptocurrency option, providing a USP over rival consumer platforms. And among tech-focused firms offering digital goods and services to a global audience, there’s a compelling argument for accepting the cryptocurrency platforms business owners feel most comfortable with.