13 Jan Even as value dips, could Bitcoin change the way we shop?
Since its inception, Bitcoin has generated a huge amount of conversation. On Tuesday, chatter increased as Bitcoin briefly traded below $225; reactions ranged from (more) claims to Bitcoin’s imminent demise, to enthusiasts’ seemingly unshakeable confidence in its future value.
Despite the hubbub that routinely surrounds the digital currency, the press and attention have not translated into a huge number of actual users. Bitcoin as a theory is appealing for eCommerce – perhaps ideal, one day – because it doesn’t incur bank fees or governmental regulation. On the other hand, its price is volatile and not readily accepted by merchants – though this might be changing, as California now officially recognizes Bitcoin as “lawful money.” But is Bitcoin fated to become the shopping standard?
Some physical stores now accept Bitcoin, including CVS and Home Depot.
For shoppers that trust it, Bitcoin is easy to use. You buy the currency from an exchange and then store it in a digital wallet. Whenever you want to buy something at a participating retailer, you can buy online or by scanning a code with a mobile app for iOS and Android or online. Other perks include low transfer costs and no signup criteria.
For retailers, Bitcoin dispenses with the transaction fees that accompany other types of transactions. That doesn’t mean that companies are signing on in droves, of course, but many are tempted by the allure of the Bitcoin system. Currently, some giant online retailers like Amazon and Overstock.com do offer Bitcoin payment options, as well as some physical shops like CVS.
Another benefit to Bitcoin is the comparative ease of purchasing internationally and participating in a global exchange. Bitcoin is a viable way to give users easier access to a global marketplace. What’s more, there are possible social and economic benefits, as well; for example, if Bitcoin eventually proves less volatile than a national currency, the system could help impoverished countries improve their economies.
On the other hand, constant price fluctuation remains a massive challenge to Bitcoin’s viability as currency. As it stands now, Bitcoin doesn’t loan or borrow money because there’s no way to predict the currency’s future valuation. For example, just over a year ago, Bitcoin was valued at over $1,150, a far cry from Tuesday’s sub-$250 value. There are significant changes even week to week: in November of last year, values changed from $330 one week to $420 the next.
Bitcoin value fluctuations from early 2014 to now. (Graph credit: CNBC)
At the moment, Bitcoin is untested and unproven, but it may yet become a dominant alternative to traditional commerce options. When Congress approves Bitcoin or regulators accept it as a reliable currency, retailers and shoppers will likely gain more faith in the system. As Bitcoin increases its number of users and transactions, the system’s volatility will decrease as well.
One thing is certain: Bitcoin could very well change the way we shop by opening the doors to global commerce, uninhibited by fees and the challenges that come with international transactions. Thanks to the Internet, the world is already interconnected; Bitcoin would be the perfect currency to facilitate the next step.
This possibility comes with a major caveat, however: it is still too early (and Bitcoin is too volatile) to tell. The idea of Bitcoin right now is stronger than the actual asset – this week, anyway. But who knows; next week might be a totally different story.