Bitcoin and other digital currencies are making a lot of retail news lately, but are they here to stay or a passing fad?
In 2013, I wrote a column with the headline, Does Retail Need Bitcoin? Bitcoin is a nearly-anonymous, decentralized, peer-to-peer online currency which is based on blockchain technology. Blockchain serves as a real-time, single ledger verifying all transactions conducted on the blockchain network.
In the eight years since that column was published, bitcoin has slowly grown as an accepted form of retail payment by retailers including Newegg, Camping World, and Sheetz.
However, the future of bitcoin (and other decentralized, peer-to-peer digital currencies) as a mainstream form of retail payment is still uncertain. Here are three X factors retailers need to consider when determining whether they want to join the bitcoin revolution.
Safety first – or is it?
Bitcoin can be stolen but cannot be counterfeited (it essentially consists of a series of complex math problems), which certainly holds appeal for retailers. However, a number of global bitcoin exchanges have been hacked and lost user bitcoins over the years. Since bitcoins are not endorsed by any major government except El Salvador, there is no guaranteed restitution for lost or stolen bitcoin funds.
In addition, the recent U.S. government hack of a digital bitcoin wallet owned by a ransomware syndicate demonstrates the potential vulnerability of bitcoin payments.
Following in the footsteps of giants
Retail is very much a “fast follower” industry. Once an established leader deploys a new technology, its adoption rate typically (but not always – check the history of RFID) jumps. In the case of bitcoin, the jury is still out as to if or when the big players will start accepting bitcoin.
Amazon recently shook up the worlds of retail and bitcoin with a job posting for the new position of Digital Currency and Blockchain Product Lead. Subsequent media reports of Amazon planning to accept bitcoin payments by the end of 2021 and possibly developing its own proprietary bitcoin currency by 2022 further stirred the pot.
However, Amazon then publicly denied it had any concrete plans for bitcoin, but said it is simply exploring possibilities. Meanwhile, leading electric auto brand Tesla has vacillated on accepting bitcoin following a major corporate investment in February 2021, and Facebook has been discussing its own possible entry into the bitcoin space since 2019.
As mentioned above, bitcoin is decentralized. That means its value is not tied to any specific asset reserve or government backing, unlike national currencies such as the U.S. dollar, or regional currencies such as the euro. Other than consumer perception, the only firm framework governing the cryptocurrency’s value is the fact a maximum of 21 million bitcoins can be digitally mined.
Although more than 18 million bitcoins have already been mined, it is estimated the remaining supply will not be exhausted for over 100 years. Still, the sharp fluctuations of bitcoin value in response to developments such as Amazon denying rumors it would accept bitcoin payments, or Tesla owner Elon Musk tweeting various comments about its worth (or lack thereof), suggest that stability could be an issue.