There is a lot of talk about the pros and cons of Bitcoin as a currency and speculative talk from an investment angle however there is not as much analysis on how Bitcoin actually benefits its users as a unit of currency and system of exchange. This skews the perceptions and understanding of the practical aspects of Bitcoin and neglects to address how Bitcoin eCommerce can actually benefit both merchants and consumers.
When considering whether Bitcoin will ultimately be successful you need to first understand its use cases and competitive advantages against other methods of exchange. What follows are 10 ways that Bitcoin eCommerce can change the way we trade online and start to explore new opportunities online.
It Opens the Door for Programmatic Money and Future Innovation
Traditional banks have been key players in our financial systems for a very long time and as such will have significant legacy systems within their infrastructure. Bitcoin is a born digital currency that is practically its own API that will allow for and streamline programmatic transactions in seconds and minutes, that would require the interaction of multiple financial institutions and several days to process, let alone finalise in the current system.
Opening Up Opportunity For New Types of Business
In the current payments system you need the support of several financial institutions which are typically risk averse when it comes to their customers activity. This can be a good thing as it helps protect against fraud and other illegitimate activities but this cautiousness can also prevent many legitimate businesses from ever getting access to bank accounts and paynent systems without proving themselves first, which of course they often can't of they don't have the facilities to process payments.
Puts Service at the Heart of Financial Instituions
Right now some payments systems act more as a tax on payments rather than adding value. Whilst some of the most popular processors offer benefits such as consumer protections and innovative technology for merchants this is not always the case. Bitcoin puts control of the flow back in the hands of merchants and consumers which means the value added service will need to be a core component of all payment processors.
Unlocks Opportunities for New Global Trade Routes
Traditionally there have been barriers to trade such as payment processors not being active in certain countries, local currency not being accepted at exchanges, risk averse financial institutions and of course fraud. Bitcoin removes the intermediaries and allows for direct trade between trusted parties in distant countries and can limit the risk of a payment not reaching its destination or suddenly being reversed and held in an unauthorised escrow.
Allows for Private Cash-Like Transactions Online
Privacy minded consumers or those trading in more sensitive be less inclined to link their personal bank account or financial details to a payment even though they would happily make a purchase or deposit online. In these cases they can simply register a new Bitcoin address that is good only for that transaction and make a deposit or make an in person purchase deposit of Bitcoin to spend at a later date. An added benefit to this type of transaction is that if the company the purchase is made from is ever hacked the consumers financial details remain safe.
Consumers Have Guaranteed and Accountable Access to Their Funds
Ever wondered if a credit card transaction has hit your account yet or gone to manage your finances only to find your banking site is down for maintenance? These are the kind of concerns that face consumers every day and can act as a barrier to purchase online. With Bitcoin you have an instant view of your finances in your local wallet and for it is highly unlikely that every node verifying the Bitcoin network will be “down for maintenance” at the same time. The wallet balance a consumer sees is the balance they have and there is no possibility of unexpected charges or downtime.
Payments are Pinged Instantly and Completely Finalised Within Minutes
This leaves the merchant secure in the fact that they have definitely received payment after approximately 6 confirmations in the Bitcoin network and as all payments are final this means the product can be released to the consumer instantly with no fear of recourse meaning consumers can get access to their goods without waiting days for certain payment systems to verify their transaction.
Bitcoins are Divisible to 8 Decimal Places Allowing for New Monetisation Models
In a digital world where distribution channels are racing towards zero for many products Bitcoin opens the door to scalable micro-transactions in a way that has previously been all but impossible. Whilst these micro-transactions can increase network, Bitcoin mining capabilities are already increasing at an amazing rate and when coupled with the programming possibilities of a truly digital currency innovation within this area is inevitable.
Escrow Can Be Established Without Trust for High Value and Service Transactions
On many sites selling services and high value products escrow services are almost essential for enabling trade and with Bitcoin rather than trusting a third (and potentially biased) party you can create multi-signature transactions that guarantee the funds are available and will only release the funding upon mutual agreement that the transaction should be settled from both of the parties involved.
Companies and Charities Can Choose to Make their Transactions Public
With more organisations than ever pushing for ultimate transparency it is important to note that Bitcoin transactions don't have to be anonymous. For charities, crowdfunders and various other transparency minded business entities, Bitcoin offers a fully transparent way to publish and verify a transaction address which can then act as a log of accountability for the funds they receive as well as generate an air of social proof as other see the number of transactions being deposited in the account.
Hopefully this article has gone some way to show there is a lot more opportunity for Bitcoin as means of exchange beyond a purely speculative currency. What the killer app will be that finally brings Bitcoin and cryptocurrency to the mainstream is yet to be seen, but the Bitcoin eCommerce opportunities are already starting to reveal themselves for the more adventurous entrepreneurs to take advantage of.
As I had a bunch of NFC tags laying around the house that allow for scanning data just by hovering your mobile device over them I decided to have some fun with them. The first proof of concept was with a simple NFC keychain that I programmed to hold a public bitcoin address so that people could scan to make a payment.
