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Cryptocurrencies in eCommerce

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Until a few years ago, cryptocurrency was relatively unheard of. Initially, people thought it was a fad, and virtual currency didn’t seem like something that people would take seriously. However, over the last few years, developments in the world of blockchain have proved that cryptocurrency is the future. It is becoming much more mainstream and breaking into e-commerce in a big way. Lots of retailers want to get in on the cryptocurrency movement but as yet don’t fully understand what it does. So, let’s have a look at the basics of cryptocurrency and how it is becoming popular in e-commerce.

Crypto Basics

Cryptocurrency works in the same way as any currency, but it is digital, which means there are no virtual coins or notes involved. It is also decentralised, which means there is no bank or government involvement. Transactions are carried out using encrypted data packages with something called blockchain technology. Unlike standard cash, it doesn’t have a single fixed value, and one of the reasons people are sceptical is because the value goes up and down depending on the market. However, this doesn’t mean it is not a safe way of doing business. Because the blockchain is an encrypted database, every transaction is available for everyone to see, and the information cannot ever be edited or deleted. It does take a while to understand exactly how it functions, but with more people signing up for e-commerce using cryptocurrency, it is safe to say the future is headed in that direction.

Different Cryptocurrencies

Cryptocurrency is a term used to describe the whole sector; however, we have several individual types. In fact, across the world, it is thought there are over 4000 cryptocurrencies in circulation on the Internet. The one you may have heard of because it is the most popular is Bitcoin, and actually this was the first. It was created back in 2009 by a group of people who wanted to decentralise the way finance was set up, and for the first couple of years, it was the only option. However, once it took off, other currencies joined the market, and now you also have Ethereum, which is the second largest of the digital currencies. You may also hear people talk about Litecoin, which was created by a Google engineer in 2011, and Ripple, which is also referred to as XRP.

Ecommerce and Crypto

Towards the end of March this year, PayPal, the most prominent payment provider on the Internet, created Checkout with Crypto, which only operates in the US at the moment but enables customers to make transactions with crypto coins. Because PayPal has such power, it seems inevitable that other companies will need to follow suit in order to keep up. The company has also said that expansion for customers based in Europe will come very soon because uptake has been widespread. Unsurprisingly, shortly after, eBay also acknowledged that cryptocurrency was potentially coming in the near future. Facebook, another influential platform and the most extensive social media network in the world, announced they would launch their own cryptocurrency Diem before the end of the year. The bigger plan will then be to allow digital payments on their site to carry out e-commerce transactions. Other big names embracing the technology are Expedia, the online travel agent, Lush the High Street beauty store, and Wake. They are another skincare brand that has already enabled their site to accept cryptocurrencies.

What Are the Benefits?

It seems all well and good for these giant players to accept cryptocurrency but just what are the benefits if you are a smaller retailer? Firstly, transactions are very fast. Blockchain offers direct transactions without intermediaries, which can make payments take hours, or days. It is actually a very secure way of taking payment because blockchain is an incredibly complex encryption system making it much harder for people to steal or create counterfeit currency. This is good news as digital transaction fraud with standard currency has been on the increase as cybercriminals have become cleverer. With blockchain, there are also lower fees, sometimes third-party payment methods such as PayPal will enforce fees on either buyers or sellers, and with cryptocurrency, this is not an issue. From a customer point of view, the amount of data of a personal nature that they have to hand over is also lower if they make a purchase using cryptocurrency. Finally, when it comes to your user experience, you want to offer the broadest possible choice of payment methods. Being flexible gives access to a broader customer base. It is also thought that accepting cryptocurrency has been shown to reduce cart abandonment.

Are There Any Downsides?

There are a few potential downsides, but it doesn’t seem to be enough to put people off. The volatile nature of the value of cryptocurrency is one potential issue. However, this only causes a problem when it comes to returns, significantly if your cryptocurrency value has fluctuated wildly since the time of purchase. You could potentially see customers trying to return something that was bought at a much lower value and expecting the current value to be returned to them. There are also some issues with which cryptocurrencies to accept. However, if you stick to the main ones like Bitcoin and Ethereum, you are probably safe, but keeping an open mind and being potentially able to amend which currency you accept is perhaps a good plan

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