This article intends to be the first of a multi part series explaining some of the key concepts I believe will help shape the future of eCommerce. If you have no idea what a cryptocurrency is, then read the pretext first. If you already know a bit about cryptocurrencies, feel free to skip straight to the next section.
The Pretext
What is a cryptocurrency? A simple explanation is, 'a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.' The first and largest cryptocurrency measured by market cap is Bitcoin, which was launched in 2011 and now has a market cap of over 12.5 million USD (as of the date this article was published).
What ultimately makes cryptocurrencies different, is that they operate on a peer to peer (P2P) network instead of involving a central organisation (like a bank). In theory, this means that individuals have more control of their money, transaction fees are minimised, and fraud is less prevalent as security is increased.
A new type of eCommerce marketplace
As an eCommerce merchant, you can say goodbye to expensive middleman fees from marketplaces like eBay and Etsy. With the introduction of a radically new type of marketplace that focuses on using cryptocurrencies as the main form of payment, the need for a middleman to process payments is removed entirely. These types of marketplaces work on the principle that no central entity (company) hold controls over the merchant store data. This allows no restrictions on what can be offered and bought, but also makes it hard to stop a malicious store from selling products and services that are considered illegal.
So is this new type of marketplace a good thing or a bad thing? And can we find ways to regulate the nature of products or services traded on a crypto-based eCommerce store? While regulations surrounding cryptocurrencies are generally still being refined, we could imagine that regulation for eCommerce stores accepting cryptocurrencies as payments will also take some time to perfect. Watch this space...
Fraud prevention
With the increase of concerns over credit card fraud online, many eCommerce merchants are restricting their store capabilities due to a lack of information on how secure payments can be managed. Such fraud is more common in global transactions, and so many online stores do not accept international payments (transfer fees for payments are usually also more expensive across borders). With a digital currency such as Bitcoin, the transfer cannot be undone once it has been made. This eliminates the risk of fraud for merchants and thus allows them to sell worldwide with confidence.
Programmable money and smart contracts
Cryptocurrencies enable new possibilities that are simply not possible with existing monetary systems - from automated land title escrow, to intelligent machines, to machine payment contracts. The realm of cryptocurrency possibilities seems almost limitless, with many features still yet to be imagined. At this point in time however this area of development is still very much in an experimental phase, and currently only proof of concepts exists at best.
Want to read more content like this? Subscribe to our newsletter using the form below to receive more content straight to your inbox.
