But what about the modern shopper or the modern retailer? Could crypto be the future of online retail, or is it just a passing fad? Should your brand start accepting the elusive and complex currency?
Let’s rewind and start with the basics.
What is Cryptocurrency?
A cryptocurrency is an online data string that denotes a unit of currency. It is encrypted for security and monitored and organised by a blockchain, a peer-to-peer network of buyers and sellers. This also serves as a backlog of transactions.
With us so far?
Here’s a quick rundown of cryptocurrency, or crypto’s main features:
Cryptocurrency has no physical tokens the way that, for example, British pound sterling comes in notes and coins. Instead, it only exists on computer networks.
Cryptocurrencies are decentralised, not issued by governments or other financial institutions, unlike physical currencies.
Rather than their exchange and value being monitored by requirements set out by banks or governments, they are peer-to-peer, meaning they are only passed between individuals, each of whom is in charge of their currency.
While there are multiple cryptocurrencies, they are not each affiliated with a particular country. Instead, they are global and have the same value in every country simultaneously.
This means they can be used and traded freely between countries and across borders without worrying about details and restrictions like exchange rates.
Crypto translates from the Latin for hidden, making cryptocurrency, ‘hidden money’.
Cryptocurrency is ‘encrypted’, meaning real names aren’t used for accounts to protect the user’s privacy. Instead, each user is given codes attached to their currency.
Because crypto is decentralised, users don’t have to trust individuals in the system in order for it to work.
Think of it this way, when you put your pounds in the bank, you trust everyone working at the bank, the bank bosses, and the government to look after your money, follow the rules and treat you fairly. When you buy a product online with pounds, you trust the seller, the payment system, and your bank to ensure you receive the product and your money makes its way to the right place.
When it comes to cryptocurrency, users can send each other money online without the need for trust in each other or any other third parties. Every transaction is recorded on a shared database called a blockchain. Every new transaction is verified across the system by ‘nodes’. Once transactions are added, they are permanently recorded and cannot be changed, keeping a comprehensive record that protects the privacy and interests of users. Essentially, cryptocurrency is digital money that can be sent from anywhere, to anywhere, without the third party intervention of a bank or any sacrifice of personal information. In an online world where digital privacy is becoming more and more of a concern, you can see why cryptocurrencies might have a draw for consumers.
A List of Digital Currencies
There are many different types of cryptocurrency, some more popular than others. Bitcoin is the most popular for its security, relative promptness, and low cost to transfer. It has even attracted some online retailers to accept it as payment and is a favourite of merchants and consumers alike.
Other popular front-runners include Ethereum, Decentraland, Terra, Solana, Tether, and the much memed-about Dogecoin. Although this is far from a comprehensive list of virtual currencies, currently, Bitcoin is the only cryptocurrency being accepted by some online retailers. Some people believe this makes it the best cryptocurrency to invest in, but it depends on whom you ask.
How Can I Shop Online With Cryptocurrency?
Anyone who owns Bitcoin can use it once they’ve set up a crypto wallet to store their funds. These are available on several online platforms, both for free and for a fee. These wallets are designed for convenience to the user and are compatible with smartphones and desktops. It’s important to choose a reliable and secure Bitcoin wallet for your purchases, as you will need to provide a few personal details.
eCommerce platforms that accept Bitcoin as a payment method usually have a ‘Pay with Bitcoin” button that automatically directs customers to make payments at the checkout. This will display the price in Bitcoin and allow you to make payment from your crypto wallet.
Another option is to pay with a cryptocurrency debit card. These work just like a regular debit card, and many are developed in partnership with Visa or Mastercard, so they can be used pretty much anywhere cards are accepted as a payment method. They can be topped up using an app or website that loads your currency onto the card.
Where Can I Shop Online With Cryptocurrency?
While the list of retailers that accept direct cryptocurrency payments is still limited, confidence in its legitimacy is growing. Here are a few that are early to the game.
Any merchant operating via Shopify has the ability to accept Bitcoin as a payment method on their site.
The US supermarket retailer began accepting cryptocurrency payments in 2019, in-store, making it one of the first big retailers to do so.
Microsoft has accepted Bitcoin since 2014 when it began recognising it as a payment method for games, apps, and other digital content. Bitcoin can be redeemed as credit on any Microsoft account, then used on its platforms, including Xbox.
Lush partnered with Bitpay.com in 2017 to allow Bitcoin payments for website orders. It now accepts crypto payments directly.
Independent sellers on Etsy have the opportunity to accept crypto payments in their individual shops, although Etsy itself doesn’t have a platform for Bitcoin acceptance sitewide.
Customers can purchase Amazon vouchers through the company Bitrefill, which allows them to use digital currencies as a payment method on the online giant’s goods. While Amazon doesn’t directly accept crypto payments, it is rumoured that they are currently laying the groundwork to launch their very own cryptocurrency.
If you’re not sure if the retailer you want to shop with accepts crypto, use sites like Coinmap to find out.
What Are The Limitations Of Paying With Crypto?
So far, crypto sounds great, right? Don’t get carried away; there are a few catches for both consumers and retailers.
“enabling customers to pay with cryptocurrencies would be expensive, extremely niche, and significantly slower than the current payment options.”
Cryptocurrency prices are far from stable, meaning they are prone to volatile shifts that make purchasing with it feel like a significant risk.
For context, when Bitcoin was first conceptualised in the summer of 2010, it was worth very little. One man, Laszlo Hanyecz, decided to take advantage of his investment and spent some of his Bitcoin on pizza. Fast forward to today, and Laszlo spent the equivalent of 3.8 billion dollars on fast food. That’s one embarrassingly expensive takeaway.
Virtual coin is also subject to many fees at different stages of ownership and trade. To buy crypto, you must pay an exchange; to turn it into physical (or fiat) currency using a cryptocurrency converter, you must pay a fee. You even have to pay fees to keep your crypto as crypto, called “gas fees”. These constantly vary, with entire websites dedicated to tracking them.
Is Crypto The Future?
The number of retailers currently accepting crypto payments may be small, but it is growing. The rise of third-party payment processing systems like Bitpay and Cryptopay indicates that interest is rising even more.
Currently, crypto doesn’t feel entirely accessible to the everyday consumer. It will take much familiarising and trust-building for those who are not financial or investment experts to invest and feel comfortable using cryptocurrencies for their purchases. This is where a strong marketing strategy steps in.
With new types of cryptocurrency launching all the time, will you consider shopping with Bitcoin? Or would you set up your online store to accept cryptocurrency payments?
While you still may be a long way from discovering the best crypto coin to mine or the most profitable Bitcoin mining pool, you know a thing or two about the use of cryptocurrency in eCommerce.