Bitcoin and other cryptocurrencies cost nothing to process, are resistant to fraud, and keep clients’ financial data safe. So why are not more online shoppers using them? And why are not more merchants accepting them?
The solution is volatility. Currencies such as the U.S. dollar, the British pound, and the European Union’s euro depend on stability. Folks know them and trust these monies to maintain their value.
A shopper with $2,000 in her bank account anticipates that $2,000 to have the same purchasing power tomorrow that it will now. If it costs $79.99 for a pair of jeans now, she expects to have the ability to buy the very same pants tomorrow with just about exactly the same amount of money. Similarly, it should cost about the same proportion of a bitcoin to purchase something now because it will tomorrow.
Rapid and radical changes in value make it relatively tough for both sellers and buyers. People like stability.
Speculation Makes Bitcoin Unstable
On August 24, 2017, the value of one bitcoin was hovering around $4,200 U.S., but a bit more than a month before, on July 16, 2017, the exact same bitcoin could have been worth $1,938.94. Bitcoin more than doubled its value in a matter of weeks.
Bitcoin prices change quickly. Thus it can be tough to trust it as a money.
In the event that you had a bitcoin on July 16 and used it to buy a diamond ring from Overstock.com, you would be feeling quite sick in August, once you could have purchased two rings to get just about exactly the exact same amount of currency.
Significant price changes such as these make bitcoin and other cryptocurrencies more of an asset than a real money, based on Jeffrey Dorfman, a professor of economics at University of Georgia.
Dorfman, writing in Forbes, stated,”the wild swingsup and down, at the value of bitcoin do not make it a plausible substitute money; they make it a speculative asset, a get-rich-quick scheme”
Many bitcoin holders do not use bitcoin as they would use a buck or their payment card. Instead, bitcoin is treated just like a stock or a commodity.
Small Percentage Of Shoppers Use Bitcoin
Given this level of uncertainty, it’s little wonder that only a small fraction of shoppers use bitcoin. In actuality, bitcoin holders — owners? — see the market and purchase or sell bitcoin to make a profit. That profit is then interpreted, if you will, into another currency.
Folks will do this type of bitcoin speculation much more often than they use bitcoin to purchase real goods or services.
This simple fact is reflected in data from Pew Research, which found, for instance, that while 48 percent of American adults know of bitcoin, only 1 percent have used it.
And that’s only 1 percent of Americans who’ve used bitcoin at all, including just hoarding it or making speculative purchases. A much smaller subset will likely have used this best known cryptocurrency to create a purchase.
Merchants Have Concerns, also
Instability is also problematic for sellers.
If a shopper moved to Overstock.com and purchased a diamond ring in July only to realize that she would have had two for the exact same price in August, she would be understandably upset. She might even be angry at Overstock, and her anger could be just 1 concern. By way of instance, what if bitcoin’s worth had gone another way and lost half of its worth?
If the company were saving payments as bitcoin, it could make plenty of additional margin as bitcoin climbed, but it would also have to accept plenty of danger, possibly suffering losses when bitcoin’s value dropped.
Merchants primarily need to concentrate on the business of selling goods, not necessarily speculating on cryptocurrency. If a vendor accepts bitcoin, it could be to attract a small audience of prospective clients, which is surely a fantastic thing. But the store may want to convert bitcoins to a more conventional currency rather quickly.
Cryptocurrencies Have Promise
Instability explains why shoppers and merchants aren’t necessarily enthusiastic about bitcoin, and it can explain why bitcoin hasn’t gone mainstream. But it doesn’t imply that cryptocurrencies such as bitcoin will not be a significant retail technology .
In actuality, bitcoin and similar digital currencies have many benefits.
- Low transaction fees. Bitcoin and other cryptocurrencies (for example, Ethereum, Ripple, and Dash, as examples) frequently have no related transaction fees or very low transaction fees in contrast to payment cards. A company doing $1 million in annual revenue might add $30,000 to the bottom line if it processed all transactions with bitcoin.
- Less fraud. In many ways cryptocurrencies are more like money then they’re just like a payment card, which makes them less vulnerable to fraud than a debit or charge card are. For merchants, bitcoin and similar monies should eliminate chargebacks.
- Personal safety. Cryptocurrencies, like money, are anonymous, which may give sellers and buyers additional protection from some sorts of cyber theft.