Adopting Cryptocurrency & Blockchain To Fuel Growth in 2022
With cryptocurrencies such as Bitcoin, Ethereum, Dogecoin or Stellar generating headlines in the last year, it's been difficult not to notice the influence of blockchain-based cryptocurrencies on regular people. So, how does the use of cryptocurrencies and blockchain in e-commerce affect online businesses in particular?
As the race to establish cryptocurrencies as a popular alternative to traditional banking heats up, it's critical to grasp what cryptocurrency is, how it interacts with the blockchain ledger, and how both of these technologies are expected to affect e-commerce businesses.
Just as online credit card payment gateways enabled e-commerce in the 1990s, and then PayPal, Venmo, and other third-party payment vendors stepped in to provide alternative payment options, the e-commerce industry must now reckon with the introduction of cryptocurrency and what it means for e-commerce businesses to incorporate this payment method.
With cryptocurrencies comes the blockchain - a public, digital ledger that records all cryptocurrency transactions. Blockchain technology provides several advantages to e-commerce firms, including faster and more cost-effective business processes, as well as increased data security.
As the excitement surrounding cryptocurrency grows, more brands, marketplaces, and payment processors are accepting Bitcoin in exchange for goods and services. As this transition occurs, it becomes increasingly difficult to deny the impact that Bitcoin and blockchain have on e-commerce. Understanding the possible ramifications of this technology can assist e-commerce firms in unlocking important future business opportunities.
Let's begin with learning about cryptocurrencies and blockchains, as well as their potential effect and implementation in an e-commerce business.
Understanding Cryptocurrency and Blockchain
A cryptocurrency (abbreviated "crypto") is a digital currency that may be used to purchase goods and services. It is an asset that derives its value from the native blockchain as opposed to fiat (or cash as it is commonly known) that derives its value from government-issued currency. Cryptocurrencies operate on a decentralized basis, and regulations being added, mean more stability in shifting volatile crypto markets.
To safeguard online transactions, an online ledger with strong cryptography is utilized. This ledger is known as distributed ledger technology (DLT), and it is a shared database where every cryptocurrency transaction is recorded.
The blockchain is the most widely used DLT. Blockchain is a novel technology, not a programming language or an application. It is a safe online ledger that records every transaction that occurs in a certain location. It allows users to securely share and store digital assets such as cryptocurrencies. Cryptocurrency transactions are recorded using the blockchain, and the information cannot be changed or removed, creating a permanent record of the transactions conducted using multiple cryptocurrencies. In a nutshell, this is how cryptocurrency payments are made viable and reliable.
The popularity of cryptocurrency with consumers
Although Bitcoin (abbreviated BTC) was the first cryptocurrency, there are now over 4,000 cryptocurrencies available globally. Bitcoin has become a generic moniker for cryptocurrencies, with many individuals using the term "Bitcoin" to refer to any cryptocurrency, just as one may refer to any vacuum cleaner as a "hoover"!
The fact that Bitcoin is finite contributes significantly to its popularity. Satoshi Nakamoto designed Bitcoin with a restricted supply in mind; only 21 million Bitcoins will ever be in circulation. In some ways, Bitcoin is analogous to gold in that it is a finite resource. Many people believe that Nakamoto designed Bitcoin in this manner on purpose in order to establish electronic money that would be inflation-proof.
However, Bitcoin is not the only sort of finite cryptocurrency. Litecoin (84 million), Stellar Lumens (50 billion), Ripple (100 billion), Dash (18.9 million), and IOTA (2.8 billion) are other cryptocurrencies having a limited supply. Other popular cryptocurrencies, in addition to Bitcoin, are Ethereum, Dogecoin, and Shiba Inu, all of which have been acclaimed and invested in by Tesla and SpaceX CEO Elon Musk.
Consumers utilize cryptocurrency all throughout the world, with varying degrees of adoption in different nations. For example, whereas only 6% of Americans have reported owning or utilizing cryptocurrency, 32% of Nigerians have. The reasons for this are consistent with markets with a high rate of mobile commerce and limited access to traditional banking systems. It stands to reason that accepting cryptocurrency as another form of payment can help e-commerce retailers uncover revenue sources in new regions.
It is believed that about 4% of the world's customers own bitcoin, and approximately 18,000 businesses accept cryptocurrency as payment. As public trust in cryptocurrencies rises, an increasing number of merchants are beginning to accept cryptocurrency as payment.
Microsoft was one of the first corporations to embrace cryptocurrencies, beginning in 2014 with the acceptance of Bitcoin in its online Xbox store. Overstock.com, a famous US shopping website, takes cryptocurrency as payment, as does US cell phone carrier AT&T.
Shopify, Whole Foods, Etsy, and even cosmetic retailer Lush, which was one of the first worldwide enterprises to adapt to this new form of payment, accept cryptocurrency in the United Kingdom. Amazon does not currently accept cryptocurrencies as payment, although it has recently proposed the introduction of its own proprietary coin.
How brands can accept cryptocurrency as payment
Although cryptocurrency may appear to be science fiction, it is extremely real and relatively simple to accept as a payment option by e-commerce retailers. It's not out of the question that Bitcoin will be added as a payment option alongside the standard Mastercard, Visa, Debit, and PayPal options currently available on most e-commerce websites.
The simplest approach for an e-commerce firm to start accepting crypto payments is to employ a cryptocurrency payment gateway such as COINQVEST.
When a user chooses crypto as a payment method, the price for each product is presented in fiat money (e.g., pounds sterling, dollars, etc.) and converted into an equal crypto value. The transaction is then safely handled through a payment gateway, just like any other payment, with the exception that the transaction is permanently recorded on the blockchain.
This means the money transaction has a historical record that will never be erased, as it is recorded in the ledger. Obviously, this can be advantageous for merchants and consumers who want to preserve long-term records without having to keep receipts. More on that later.
More realistically, when incorporating cryptocurrency and blockchain in e-commerce, online sellers will need to use a crypto-friendly payment gateway. Bitpay and COINQVEST are two popular crypto gateways. E-commerce businesses must ensure the gateway they select is compatible with the content management system they use to run their online store (e.g., WooCommerce, Magento, Shopify, etc.)
The Advantages of Accepting Cryptocurrency
Accepting cryptocurrency as payment for e-commerce transactions has a number of advantages. The four most notable benefits are as follows:
Cryptocurrency payments are impervious to chargebacks
Yes, that's correct! Chargebacks do not apply to cryptocurrency transactions. This is beneficial to e-commerce retailers because chargebacks drain money, can jeopardize a merchant's account, and take time and effort to rectify. Once the transaction proceeds, it cannot be reversed once it has been completed and registered in the blockchain.
Transaction fees for crypto payments are minimal
Although it sounds too good to be true, some cryptocurrencies charge minimal transaction fees. The cryptocurrency with the lowest transaction fees is Stellar Lumens (XLM). Developed in 2014, one of its core goals was to offer better processing speed and lower fees than the earliest blockchains, Bitcoin and Ethereum. So far, it hasn't derailed on that path.
Accepting cryptocurrency payments opens up new market opportunities
As the popularity of cryptocurrencies continues to grow, many people want ways to spend the digital currency they mined or profits from investing in the currencies. By accepting crypto payments, businesses can tap into this growing market and benefit from the increased demand.
Accepting crypto payments is a great way to attract more customers. Many people are interested in using Bitcoin and other cryptocurrencies and are more likely to make a purchase from a business that accepts them.
On the blockchain, transactions are securely recorded
As previously stated, the blockchain is a secure online ledger that records every transaction. Blockchain technology allows users to securely share and keep cryptocurrency. It records payment transactions in such a way that once a payment is made, an item in the blockchain is published.
The blockchain connects individual data, forming a list known as a chain. When a customer sends a crypto payment, an entry is made in the blockchain. Other computers in the network will verify that the crypto data has not already been spent (hence fortifying the digital currency against corruption). Data entered into the blockchain cannot be removed, modified, or corrupted because the network preserves a record of each transaction.
What to Look Out For When Using Cryptocurrency
While there aren't many drawbacks to adopting cryptocurrencies in e-commerce, there are a few to be aware of.
Volatility. Because Bitcoin is still in its early stages and is not governed by regular banking and government systems and regulations, it is prone to greater volatility. It may not be the best choice for risk-averse industry participants. That being said, it's crucial to remember that Bitcoin or crypto can always be converted to one's local fiat money, which means you can 'cash out' at any time to lessen or avoid market volatility.
The new frontier in online businesses is cryptocurrency and blockchain technologies.
Blockchain facilitates, accelerates, and secures transactions, making it suitable for e-commerce. Blockchain, by providing secure online transactions, can simplify business procedures while also providing a quick way for customers to pay. Ultimately, keeping up with emerging technologies and providing clients with more convenient payment options may be highly profitable for businesses.
Forward-thinking businesses are increasingly accepting cryptocurrencies as payment. Digital currencies and decentralized finance have upended the e-commerce, payments, and banking industries while also establishing themselves as a financial heavyweight in their own right. There can be many advantages to incorporating bitcoin for e-commerce firms wishing to take a forward-thinking strategy to payment choices.
About the author: Dominic Banguis is the Head of Marketing for COINQVEST, one of Europe's leading cryptocurrency payment gateways that allows enterprises to extend their payment infrastructure with cryptocurrency payment options. Implement enterprise-level API to add white-label checkout pages, tax compliant billing and invoicing, detailed transaction records, instant withdrawals, built-in exception handling, refunds and much more to existing payment rails.