29-10-2021 | Ecommerce

Cryptocurrency 101 For eCommerce Merchants

Numerous investors, companies and startups have joined the cryptocurrency bandwagon in recent years.

What is cryptocurrency? And what does this mean for eCommerce merchants and consumers? In this blog post, we’ll tell you everything you need to know about the basics of cryptocurrency.

What is blockchain technology?

A blockchain is a computer file for data storage.

In technical terms, it is an open digital ledger or database that facilitates the process of tracking assets and recording transactions in a network of computer systems.

Every block in the chain records transactions. When a transaction takes place within the blockchain, a record of this transaction is placed on the participants’ ledger.

The data contained on a blockchain is distributed and duplicated across computers, making it decentralised.

What is bitcoin?

Bitcoin is a decentralised digital currency.

It enables users to anonymously transfer bitcoins across the world with no exchange rates or banking intermediaries to slow down the process and take their own cut.

Bitcoin is a popular type of cryptocurrency, but it’s not the only one. There are many other cryptocurrency networks powered by blockchain technology.

What are the pros and cons of bitcoin?

Here are some of the advantages and disadvantages of bitcoin technology.

Pros

  1. Potential for high returns: According to the S&P 500 index, cryptocurrencies experienced an annualised growth rate of 14.5%. As cryptocurrency becomes more widespread, wise investors could reap a lot of benefits.
  2. Creating a universal digital currency: Cryptocurrencies allow for the creation of a universal digital currency. This will have a huge impact on the developing world, especially for people without access to banks and a stable native currency.
  3. Faster and cheaper transactions: Bitcoins do not rely on banking intermediaries. As such, users can avoid paying for transaction fees and exchange rates which slow down the payment process and make it more expensive.
  4. More international transactions: Digital currencies enable merchants to transact with international consumers with ease. You’ll no longer be limited by your bank’s capabilities when processing payments in a specific country or location.

Cons

  1. High volatility: Cryptocurrency adoption is still in its early stage so it is highly volatile. Its price and value can increase or decrease based on unpredictable market forces.

What are altcoins?

Much like bitcoin, altcoin is also a type of cryptocurrency.

Bitcoin’s popularity is attributed to the fact that it is the first crypto currency. In later years, alternative cryptocurrencies or altcoins were developed for the blockchain. The first altcoin called “Namecoin” was developed in 2011, and it was made based on the Bitcoin code.

Following that, several hundreds of altcoins have been developed for the blockchain. Each altcoin usually has its own mechanism and rules.

What cryptocurrency means for the future for retailers?

Cryptocurrency enables retailers to expand their customer base.

In the future, it may enable merchants to sell without adjusting for currencies and fiats based on a consumer’s country of origin or location. Because it is based in the blockchain, cryptocurrencies have enhanced security which reduces the potential for fraud.

More importantly, cryptocurrencies enable faster bank transactions. There’s no need to wait for a payment to be processed, you can receive payment and ship orders as soon as possible.

Hopefully, this introduction will pique your interest in the world of blockchain and cryptocurrencies.

Chris Thomas