How To Use Cryptocurrency In E-commerce Industry
Cryptocurrencies have once again taken a front seat in our everyday lives. Since the beginning of the year, Bitcoin is all over the news, having tripled its value since its 2017 all-time highs.
As a result, people are getting increasingly interested in these types of assets and purchase bitcoin for the profit potential it offers. However, profit is far from being the only benefit of cryptocurrencies.
Bitcoin, for instance, is a great store of value and a flexible alternative to commodities for hedging against inflation. But maybe the most important aspect of cryptocurrency is its ability to provide us with a borderless means of payment.
Crypto is a cheaper, safer, and more efficient way of making online transactions than traditional methods. It also requires no intermediaries such as banks, increasing the trust between the consumer and the merchant.
As such, you might be interested in how to incorporate this type of asset as a method of payment for e-commerce. This article will help you do exactly that.
To this end, we will explore all of the options on how to use cryptocurrency in e-commerce and lay down the pros and cons of each method. This way, you will be able to decide what suits you best.
Accepting crypto through a private wallet
The first and most simple method to accepting cryptocurrencies for your e-commerce is through a crypto wallet.
Cryptocurrency wallets are software solutions that allow you to access and spend your coins. The advantage of using such a wallet is that you remain in total control of your funds at all times.
This means that there’s no bank or other intermediary that can deny access to your money. It’s available 24/7, and you are the only custodian of your funds.
All you need to do is to decide which coins you wish to accept and open an address for every one of them. Then, simply share your public address whenever a customer wishes to make a purchase.
That being said there are a few drawbacks to using a private crypto wallet:
- Unless you are exclusively accepting stable-coins, you remain exposed to the volatility of the crypto market. Cryptocurrencies are known to be volatile assets, and their value can quickly drop even while the transaction is completing. Consequently, you could lose out on the profits of your sale, depending on the price of bitcoin at that moment.
- Some popular coins like Bitcoin and Ethereum are inherently slow, requiring more than 30 minutes for a transaction to complete.
- Depending on the saturation of the network, the transaction fees might become quite expensive.
- Linking a crypto wallet to accounting and invoicing software can be challenging. This means that you might be left doing your books by hand.
So, while accepting crypto might seem complicated and somewhat costly, worth noting is that most of these disadvantages have their solution.
Peer-2-peer focused cryptos
There are cryptocurrency coins that are specifically designed to be lightweight, fast, and cheap to use for daily payments. Initially, this was the goal of Bitcoin, but the original cryptocurrency has morphed into a store of value instead.
Alternative cryptocurrencies like Litecoin and Bitcoin Cash are better suited for microtransactions, providing a faster network and low fees.
Layer 2 solutions
Another solution to slow transactions and high fees are Layer 2 solutions such as the Lightning Network.
Lightning Network allows the merchant to accept Bitcoin while at the same time using fast and cheap transfers. This is done by opening a trading channel between peers on a separate blockchain, and transactions are made off-chain, almost instantly.
Only once both users decide to close the channel, the transactions are recorded on the main Bitcoin blockchain.
Payment gateways are third-party solutions that act as an intermediary between the customer and the merchant.
Usually, they allow the customer to pay in crypto while the merchant can choose between accepting crypto or FIAT.
This way, the customer has the option to spend their cryptocurrencies for goods and services, while the merchant can avoid entering the crypto ecosystem altogether. Crypto payment gateways are usually integrated within popular e-commerce platforms such as Shopify and Magento.
One major drawback of payment gateways is the dependence on a 3rd party for your crypto transactions.
Finally, a more recent option for merchants to accept cryptocurrencies is the crypto checkout method which was integrated into the PayPal wallet in March 2021.
Every merchant that accepts PayPal as a payment method can now accept cryptocurrencies from PayPal users.
While convenient, there’s still little information on how withdrawals will work.
Cryptocurrencies are entering the mainstream, and merchants that accept them as a payment method can access a wider and global customer base. Thankfully, there are various methods of using crypto in e-commerce, as we depicted in this short post.