As ecommerce gains in global influence, many companies are implementing new strategies to keep up with the demand of customers. Whether its optimizing for mobile, reducing site latency or having design that mimics the mood of their ideal consumer, ecommerce trends are far and varied. Though you can easily justify updating your site in those ways, would you change how you accept currency? Are you on board with the BitCoin?
First off though; what is a BitCoin? It’s a currency that was created in 2009 by someone using the alias Satoshi Nakamoto. It requires no personal information and no transaction fees, thus eliminating the “middle man,” the bank. They can be sent via desktops or mobile devices, similar to sending cash digitally. While the prospect of trading without forfeiting your personal details or extra dollars sounds enticing, there are some unanswered questions that remain, and they can pose fundamental issues.
For starters, placing a ceiling or a floor on a currency that is not backed by tangible value (i.e. gold) is difficult to maneuver. According to New York Times columnist Paul Krugman, “It remains completely unclear why BitCoin should be a stable store of value.” He states that Brad DeLong explains it best in this excerpt:
Underpinning the value of gold is that if all else fails you can use it to make pretty things. Underpinning the value of the dollar is a combination of (a) the fact that you can use them to pay your taxes to the U.S. government, and (b) that the Federal Reserve is a potential dollar sink and has promised to buy them back and extinguish them if their real value starts to sink at (much) more than 2%/year (yes, I know).
Placing a ceiling on the value of gold is mining technology, and the prospect that if its price gets out of whack for long on the upside a great deal more of it will be created. Placing a ceiling on the value of the dollar is the Federal Reserve’s role as actual dollar source, and its commitment not to allow deflation to happen.
Placing a ceiling on the value of bitcoins is computer technology and the form of the hash function… until the limit of 21 million bitcoins is reached. Placing a floor on the value of bitcoins is… what, exactly?
What does this mean? In layman’s terms, the BitCoin is difficult to pin down like other currency. You can’t define the “floor” or “ceiling” of BitCoin like you could gold. If gold lost its monetary value, it can still be turned into jewelry, which would add some value back to it (albeit, much less, and in a different industry). The ceiling and floor of currency keeps it in a sort of homeostasis – prices don’t vary too much, and not too quickly. BitCoin lacks these parameters that can control is economic growth. There is no tangible value backing BitCoin. Word of mouth support is great – but it won’t pay people back if the currency fails and they want to cash in stocks.
Then there is, of course, the other side of the currency fence that is jubilant over the introduction of this online trading currency. Fred Ehrsam, co-founder of Coinbase, an international digital wallet that allows you to securely buy, use, and accept BitCoin currency, is obviously on board the BitCoin train. He sees vast growth for the BitCoin’s value. As he puts it:
If 1.00 bitcoin is currently used for 10 transactions a year with an average value of $100, the bitcoin network is three percent cheaper than the average next best alternative, and this dynamic is maintained for 10 years, multiplying these arbitrary sample inputs values 1.00 bitcoin at $300. This does not require bitcoin to replace existing local currencies.
His rebuttal to Krugman’s humorously titled “BitCoin Is Evil” was equally good humored – he responded with “BitCoin Is Good,” and provided his part of the discussion with an air of certainty and ease. His tone suggests that he is definitely not worried about the cloudy future of the BitCoin. And maybe he shouldn’t be. Shopify announced on July 15th that they are now integrated with CoinBase, allowing their customers to accept payment through a variety of methods. Coinbase offers a two-click checkout, which does make it easier for customers to get what they want, when they want it. But will that convenience make up for any uncertainty with the new currency?
As far as we see it, the future of the BitCoin is still undecided. But if our trusted partners at Shopify are jumping on board, the rest of ecommerce may not be too far off.