The focus of this article is not how cryptocurrency came to be or how you can mine it, but rather the information you should take into consideration when determining if you will accept it as a payment method for your e-commerce store. There are a number of these currencies evolving. Some are gaining more popularity than others, but for the focus of this article we will look specifically at Bit Coin which seems to be the most widely used at the moment.
What is Bitcoin?
Bitcoin is a form of currency known as a cryptocurrency and is believed to be the first of its kind. A cryptocurrency is a digital asset or currency that is secured using cryptography. These types of currencies are organic in nature and are not issued by a central authority. The closest comparison is how Gold evolved as a form of currency. It is a finite resource and as the demand/value increases it becomes more feasible to mine at higher costs.
What is the value of Bitcoin?
There are a number of websites that track the historical value of bitcoin as it trades against other currencies. A few such websites are: coindesk, coinbase, and xe.
Here is a 10 year historical chart provided by XE. As of August 2017 the value of a single Bitcoin is over $4,000 US Dollars.
Who accepts Bitcoin?
You would be surprised at the number of businesses that now accept Bitcoin as a form of payment. In 2013 Bitcoin was used for the purchase of a Tesla Model S at Lamborghini dealership in Newport Beach, CA. At the time is appeared to be more of PR / Marketing strategy to get free publicity, but with the growing number of businesses accepting the currency its becoming commonplace.
Here is a short list of some businesses that now accept Bitcoin:
Inuit
PayPal
Will accepting Bitcoin increase my website checkout conversions?
At the moment there is no research which studies the impact on website conversions attributed to the acceptance of Bitcoin. While there is growing acceptance and increased usage of the currency, it is by no means mainstream and consumers seem to be unsure of how secure various wallets that would store their currency are. Since the currency cannot be traced to an individual, you might see conversion increases for websites that offer questionable or “black market” products/services. A good example of this was AlphaBay.
Is there any risk?
There are currently no government regulation. At the moment, the government doesn’t have a very clear stance on cryptocurrencies. We need to consider that Bitcoin is not taxed and is in direct competition with all government issued currencies. One might assume that Uncle Sam and other governments will eventually find away to tax income funneling through Bitcoin. After all it’s the perfect currency for money laundering and tax evasion. New York State Department of Financial Services finalized regulations in 2015 that would require companies dealing with the buying, selling, transfer or storage of bitcoins on transactions of $10,000 USD or more to record the identity of customers, have a compliance officer and maintain capital reserves.
An increasing number of competing currencies. Newer and more improves cryptocurrencies are being created regularly and offering faster transactions, more anonymity, and other benefits. These emerging currencies could take market share and decrease the value of Bitcoin.
The currency is incredibly volatile. The value of a bitcoin fluctuates based on the laws of supply and demand. The price is determined by what the market is willing to pay. Bitcoin’s can be significantly more volatile when compared to other currencies due to its small market size. Typical 30-day volatility is around 40 percent and a 90-day volatility is close to 70 percent.
There are no safety mechanisms. In simple terms, if you lose access to your digital currency wallet you lose your funds. There’s no bank, no government agency, no way to change the password, and no way to verify your identity and reclaim your account. A Bitcoin wallet service inputs.io was hacked twice and roughly 4,100 Bitcoins were stolen. This was done via a social engineering attack, gaining access to inputs.io’s systems. A leading Bitcoin exchange service, Mt. Gox, filed for bankruptcy protection after “losing” $468 million worth of Bitcoin.
Do I need a electronic wallet?
Bitcoins are stored in wallets and you need to choose a storage method in order to secure and spend them. There are desktop, mobile, online, hardware (Trezor, Ledger USB), and paper wallets. Wallets store the private keys that you need to access a bitcoin address and spend your funds. Some examples are: Bitcoin Core, BitGO, Keepkey, Trezor, Xapo, CoinBase, Wirex, and Armory.
How to I accept Bitcoin on my website?
Your easiest option is directly through your Payment Gateway. Stripe for example allows you to add Bitcoin as a payment method in their payment gateway. A separate integration is not required. You just need to make sure that your payment gateway integration software is current.
If your payment gateway doesn’t currently support Bitcoin, you can integrate with a service that processes the transactions and deposits the bitcoin into your wallet.
Here are a few, each of which have software available for Magento and WordPress integrations.
Bitpay
Wordpress: https://bitpay.com/integrations/wordpress
Magento: https://bitpay.com/integrations/magento
Coingate
Wordpress: https://wordpress.org/plugins/coingate-for-woocommerce/
Magento: https://www.magentocommerce.com/magento-connect/coingate-bitcoin-payment-method.html
ChainPay
Wordpress: https://wordpress.org/plugins/woocommerce-chainpay/
Magento: https://www.magentocommerce.com/magento-connect/chainpay.html
The research for this article was done by a staff writer for LDA Interactive, a Los Angeles based web design agency. Contact LDA at info@ldainteractive.com or call (213) 342-1770 for a website consultation from one of our specialists.