Bitcoin Continues to Emerge as eCommerce Game-Changer

Digital currency is already transforming the eCommerce landscape in a powerful way. As prominent forms of virtual currency, such as Bitcoin, continue to gain momentum, the impact on the current system of fractional reserve banking could be revolutionary. Bitcoin has already demonstrated its relevance with companies such as Dell, DISH Network, Overstock, Lord & Taylor and as of last week Microsoft (for certain items related mostly towards Xbox products with a $1000 limit currently) all accepting it as a form of payment. The world’s largest eCommerce platform, Magento, currently offers a dozen Bitcoin extensions directly from their website, allowing any online retailer using their software the option of accepting Bitcoin as a form of payment.

The Bitcoin Model

Bitcoin was introduced in a 2008 white-paper by a man named Satoshi Nakamoto, who may or may not even exist. His digital currency is based off of an algorithm that limits the total number of Bitcoins that will ever exist to 21 million. This means Bitcoin operates as a deflation based currency rather than the inflation based model that all current debt based fractional reserve monetary systems operate under. The main idea behind Bitcoin is the elimination of any third party to verify and process electronic payments. Rather than expect and rely on a primary banking institution to maintain the validity of any online transaction to avoid fraud, Bitcoins use a complex system of encrypted math to verify transactions. Bitcoin thus exists as a peer-to-peer service that allows users to transfer funds back and forth directly without the necessity of any third party verification.
Instead of putting ones faith in a “trusted” banking institution, Bitcoin users rely on the infallible dynamics of complex mathematical equations to trace and record a transaction. Normal transactions involving a banking service must have the option to be reversed in case of fraud. Bitcoin transactions are designed to be “computationally impractical to reverse” as a way to protect from fraud. They are then verified using “cryptographic proof instead of trust.” The industry standard of financial security based on trusting banks is now replaced with the certainty of math. Human error will always exist inside of any financial institution; Bitcoin eliminates this risk.

Advantages of Bitcoin

 

 Instantaneous Transactions:

Bitcoin transactions require no financial institution third party to verify and clear payments. The process currently takes 10 minutes to confirm but there is no bank hold ever required. This allows retailers to avoid the time lapse waiting for banking confirmation before being able to ship their products.

International Transactions:

Bitcoin offers multiple international advantages that non-digital currencies cannot match. The necessity for stable financial institutions in order to conduct transactions in countries around the world is no longer a reality. The emergence of Bitcoin allows for business to be conducted worldwide without a reliance on any banking system. Digital currency acts as a peer-to-peer service allowing parties in developing nations without a stable economy to complete transactions without the risk of relying on local banks. Since Bitcoin is a worldwide currency it also eliminates the need to transfer money from one currency to another. This avoids conversion fees and any international or foreign business costs traditionally associated with global business practices. These factors make the concept of a global marketplace a looming reality without disadvantaging nations with weak financial structures and/or currencies.

 No More Banking Fees:

The same advantages Bitcoin offer for international business are also relevant in helping both consumers and merchants avoid all traditional fees associated with financial institutions and credit cards. Digital currency means the days of banks acting as middlemen to verify transactions are over. Merchants will no longer have to pay anything to credit card companies, a benefit to businesses large and small alike.

 Autonomy Over Finances:

            Digital currency allows for complete control of ones finances. Merchants are no longer at the mercy of banking regulations and can access and control their money based upon the best fit for their business. Bitcoin offers a financial freedom that banks (just solely based on their need to hold your money and oversee all transactions) can never offer.

 Bitcoin Wallets

            Bitcoins do not physically exist; they are a virtual currency. They are stored in digital wallets, which can exist both on and offline. There is no way to guarantee 100% security for anything, but there are ways to minimize risk to a negligible degree. As Bitcoin becomes more commonplace the features available to the public at reasonable prices continue to increase. Bitcoin users do not need to be technology savants in order to manage, process and safely store their Bitcoins. Purchasing a USB Bitcoin wallet is an easy solution. The recently released Ledger Wallet Nano is a perfect example of an affordable product that is secure, easy to use and readily available to anyone wishing to use Bitcoins as part of their daily life.

 The Future of Bitcoin

           As Bitcoin emerges further into the mainstream its long-term value is uncertain. It is by no means the only form of digital currency, only the most well known. It is unlikely another digital currency will be able to overtake the hefty advantage Bitcoin possesses due to their large market share and name recognition, however, the market is still in its infancy. Another digital currency could plausibly use the Bitcoin model as a starting point to build from, eventually evolving into a more efficient form of digital payment.
The concept behind encrypted peer-to-peer digital transfers is, perhaps, the most influential factor Bitcoin may bring to society. Encrypted transfers have implications that theoretically go beyond digital currency. Such a revolutionary concept has the capacity to impact many facets of everyday digital life from enhancing online voter security to replacing house and car keys with digital versions. Copyright infringement could be reduced or eliminated if files are encrypted and transferred directly from one party to another. The future for Bitcoin may look brighter than ever, yet it is the innovative process of direct peer-to-peer encrypted transfers that may hold the greatest potential in a fast evolving digital world.