The popularity of cryptocurrencies is rapidly increasing. With some of the world’s largest brands, marketplaces, and payment processors announcing their support of cryptocurrency, this digital payment method is firmly on the radars of merchants worldwide. While not everyone believes the world is sufficiently prepared for bitcoin payments, it is becoming increasingly difficult to overlook the influence that cryptocurrency and the blockchain technology on which it is based might have on eCommerce.
Whether you’re an eCommerce retailer driven by curiosity, or you’re sold on the notion of crypto payments and looking into how to take them in your online shop, it’s critical to stay on top of how this trend is developing. After all, raising awareness and understanding today might pave the way for a significant possibility for your company in the future.
Don’t worry if you cannot comprehend the concept of cryptocurrencies and their coinage. We’ll start with the fundamentals: what precisely is a cryptocurrency, and what are the most common types? We’ll then look at the increasing popularity of cryptocurrency in the eCommerce business, as well as the pros and cons of using it. Finally, we’ll look at how retailers might accept cryptocurrency payments on their websites. Let’s roll!
What is cryptocurrency?
Fundamentally said, cryptocurrency is a type of digital payment utilizing advanced encryption that can be directly transacted for products and services among its users. It is seen as an asset with a changeable value rather than cash with a fixed value in investing circles.
Cryptocurrencies employ decentralized control, which means they really aren’t regulated by a single centralized authority (such as banks and other financial institutions), as traditional currencies are. Instead of a single server, transactions are validated by a decentralized network of thousands of computers. They utilize encryption techniques to manage and regulate their release.
Distributed ledger technology, or DLT, is used by all cryptocurrencies. It refers to shared databases where information about every transaction within a certain currency is kept.
Blockchain technology is the most widely used DLT. Groups of transaction information, known as blocks, are included in the database one by one, forming a linear chain of blocks visible to everybody. The blockchain does not allow for the editing or deletion of data.
Popular cryptocurrencies:
Today, more than 4,000 cryptocurrencies are expected to be available worldwide1, however, Bitcoin remains the most prominent in modern use and the biggest cryptocurrency. Because of its prominence, the terms « Bitcoin » and « cryptocurrency » have practically become interchangeable, with the two terms being used alternately.
Btc may continue to top the list, but here are a few other cryptocurrencies to be informed of:
Ethereum:
The 2nd largest cryptocurrency in terms of market capitalisation3, Ethereum is built on a payment mechanism that employs the Ether token. This is now a platform that employs sophisticated blockchain technology to create and host decentralized apps, rather than merely carrying out financial transactions.
Tether (USDT):
The price of Tether is set at $1 per coin. This is due to the fact that it is a stablecoin. Tether’s stablecoin is linked to the value of a certain asset, in this instance the US dollar. Tether is frequently used as a bridge currency when investors transfer from one cryptocurrency to another. They utilize Tether instead of returning to dollars.
USD Coin (USDC):
USD Coin, like Tether, is a stablecoin tied to the US dollar, which means its value should not vary. The currency’s creators claim that it is backed by completely reserved properties or assets with « equal fair worth, » which are stored in accounts at regulated US organizations.
The Advantages of Accepting Cryptocurrency on Your Ecommerce Store
It’s evident that cryptocurrency and the technology that powers it are rapidly gaining popularity in the eCommerce industry. But what are the advantages of accepting this type of payment on your website?
- Quick payments:
While traditional transactions can be time-consuming, blockchain technology enables faster, more direct transactions, which can help simplify your company’s financial flow. For customers, the prompt processing of cryptocurrencies means that purchases can be dispatched instantly, which is ideal for addressing shoppers’ growing demand for speedy delivery.
- Global expansion:
Accepting cryptocurrency transactions may broaden your target market and result in an increase in new consumer visits. Furthermore, there are advantages for businesses trying to grow internationally, since cryptocurrencies may make foreign transactions easier, cheaper, and quicker.
Enhanced security: Cryptocurrencies are extremely difficult to steal and counterfeit due to their intricate encryption, which reduces the risk of fraud in digital transactions.
- Lower fees:
3rd service fees for various cryptocurrencies have been drastically decreased, which is excellent news for eCommerce retailers and the additional transaction fees they frequently incur for credit cards and other payment methods. Lowering transaction costs can help your company become more lucrative.
- Cleaner data:
Blockchain technology has the potential to clean up both transactional and consumer data. This improved precision is critical for merchants’ marketing activities, opening the door for more effective targeting and reducing waste.
- Better user experience:
Accepting cryptocurrencies as a payment method on your eCommerce site gives your consumers more options at checkout. This flexibility allows consumers to pay how they wish, which improves the whole buying experience and helps to raise conversion rates and minimize cart abandonment.
Cryptocurrency Disadvantages in eCommerce:
Despite the emergence of cryptocurrencies in the online retail industry, not everyone feels they are ready for widespread adoption. It’s important to do your homework before diving into the realm of cryptocurrency.
Here, we look at the opposite side of crypto coins:
- Price volatility:
The value of cryptocurrencies may fluctuate dramatically, creating anxiety for both businesses and consumers. Returns might be especially difficult if the bitcoin value has changed from the time of purchase!
- Endless Alternatives:
Given hundreds of cryptocurrencies accessible and new coins developing on a daily basis, selecting a digital payment option to accept on your eCommerce website may be a minefield.
- Trust Issue:
Although use is increasing, the reputation of cryptocurrencies and the blockchain technology that powers them has been tainted in certain ways by bad connotations emphasized in the media. As a result, public trust in these digital payment mechanisms remains extremely low.
- Cashflow disruption:
Having incoming revenue in cryptocurrencies while your outbound payments (to employees and suppliers for instance) are in cash may cause issues.
Summary
Cryptocurrency might be the solution for eCommerce merchants trying to increase their market share while providing their consumers with a faster and more convenient option to pay for products and services. Although some individuals are skeptical about cryptocurrency’s general adoption and the influence it may have on eCommerce, signals from across the retail industry indicate rising acceptance and usage.
Regardless of whether you’re convinced about the idea of taking crypto payments on your eCommerce site just yet, staying up to speed on current cryptocurrency developments means you’ll be able to swiftly change your sales promotion strategies and keep up with competitors.