Experts agree that the future of cryptocurrencies will critically depend on whether they are accepted as a regular payment from leading online retailers. The signs for that are not bad.
For all the euphoria that cryptocurrencies have triggered in recent months, Bitcoin, Ethereum, Ripple and Co. have not yet arrived in the so-called real economy. Aside from some (sometimes shady) online retailers and some less permanent shops, cryptocurrencies are not accepted as a means of payment.
This is completely understandable if you look at the problems that cryptocurrencies would make today for a giant in the industry like Amazon. There is enormous volatility. Fluctuations of 20 – 30 percent have not been rare recently. The adoption would, therefore, involve a considerable risk for the retailer. Well, in the era of exchange-traded Bitcoin futures, hedging via the futures market would be possible. But it would be connected with transaction costs, which would increase the already high fees for Bitcoin.
But another point is actually much more important: the transaction speed. The Bitcoin Blockchain currently allows just seven transactions per second. For Ethereum, this value is about twice as high. Amazon reported 600 transactions per second last year at its peak. Even if only a small proportion of Amazon customers would pay with Bitcoin or Ethereum (and no other Bitcoin transactions would take place worldwide), the current state of the art would quickly lead to unreasonable waiting times.
But the masterminds of cryptocurrencies tell us that these are just teething troubles that will be resolved in the foreseeable future. Either through improvements in the Blockchain of existing currencies or through new, better performing coins. Ripple, for example, can today withstand already 1500 transactions per second and could meet the demands of Amazon. For experts, it is not a question of if but simply when the big retailers will accept payment in cryptocurrencies. That would be the final breakthrough. If, for example, Amazon accepted Bitcoin as a payment method, that would give a lot of credit to the digital currency.
We are not so far along but there is clear evidence that the big players are working on the issue. Amazon has, for example, secured some domains connected to cryptocurrency. Starbucks is said to want to accept cryptocurrencies soon.
Therefore, it is worth it to take a look at how paying with Bitcoin and Co. could look. A likely way is crypto-credit cards. In fact, these credit cards are available today already. Three providers of such cards stand out to us: The first is Monaco, a Swiss company that recently collected 25 million USD with its ICO.
Another one is TenX, from Singapore, who took in 80 million USD in total with their ICO. And, finally, savedroid, from Frankfurt, which is currently in the middle of their ICO and which has announced the launch of a crypto-credit card.
The crypto-credit cards can already be used today for online shopping – at least in theory. However, for each transaction, their users have to first convert the amount on the bill to a fiat currency, before they can pay. This makes the payment expensive and cumbersome – which means that there are few people shopping today with crypto-credit cards. But this problem will go away as soon as the big retailers accept payment in crypto. Then the starting signal will have been fired – for this new way of paying and for the acceptance of cryptos in the general population.
The author of the article is Tobias Zander, founder and CTO of Savedroid.
Featured image from Shutterstock.
Last modified: May 20, 2020 9:07 PM UTC