Cryptocurrency and e-commerce: The major issues and a possible solution

Cryptocurrency and e-commerce: The major issues and a possible solution

Bitcoin

2021 has been something if you’ve been following crypto and invested in it. What seemed like a utopia a decade earlier is now making international headlines, offering consumers and investors a new means to transfer cash and invest in a digital asset which might be the currency of tomorrow. While the technology is promising, there are pitfalls.

Both Bitcoin and Ethereum hit their highest levels earlier this year. This did not happen by accident as both these cryptocurrencies offered users multiple benefits. However, the most important ones were sending payments with the help of intermediary institutions.

With cryptocurrencies being on everyone’s mind, something appears to not be right with using them as a means of transferring cash digitally. This does not mean crypto will not be a problem solver, especially considering the growth in the e-commerce sector.

Paypal helped revolutionize e-commerce on eBay, allowing a digital medium of money transfer in exchange for a commodity or a service to be bought from an online store. Blockchain technology promises to revolutionize e-commerce once again.

Issues with cryptocurrency

With that being said, currently, there is a major problem with cryptocurrencies for both the seller and a buyer. Crypto is highly speculative, which has a clear impact on its prices. It fluctuates wildly many times in a day, unlike fiat currency, and thus is a reason that cannot be relied upon by the end-user.

There are currently two main issues with cryptocurrency, thus rendering it hard to use everyday people. These issues include:

Unnecessary risk for buyer and seller

Both businesses and consumers don’t want any unnecessary risk while transacting and doing business with the help of cryptocurrencies. The highly volatile nature of cryptocurrency is putting them at increased risk. At the moment, few companies are accepting cryptocurrency as payment.

Tesla was one of them until Elon Musk stopped accepting Bitcoin due to concerns about its environmental impact. He has since said that Tesla will once again accept Bitcoin once it transitions to cleaner sources of energy.

Problematic to transact with

Being an unstable asset hinders how the derivatives, prediction markets, and blockchain loans are restricted as they require long-term stability for their success. The volatile nature of crypto cannot deliver this.

Domination of Bitcoin

While the crypto space and cryptocurrencies keep evolving and keep inviting innovation within them, which is generally there to solve peer-to-peer transactions and electricity usage during the mining process, the prices of alt-coins and other crypto tokens have been largely defined by the success of Bitcoin.

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Generally, as Bitcoin goes up, others follow; the same happens when Bitcoin goes down. This trend has a serious repercussion on the crypto space, which currently houses over 4,000+ coins. Clearly, this domination is not a problem for Bitcoin bulls, but its high transaction fees (Ethereum has this issue too) are a big problem for everyday commerce.

What’s the solution?

Thus, with these three main issues present within the crypto space and cryptocurrencies, it is difficult for people to use them daily. Mainly because the end-user expects them to be aware of the value of their money and its worth as their livelihood and their security is dependent on it. This is what cryptocurrency is failing to provide its end user with.

Stablecoins – which we discuss in greater depth in the article What are stablecoins and are they the future of cryptocurrency? – are a possible solution to the volatility.

This article is for informational and entertainment purposes only. It is not financial advice. Cryptocurrencies are high-risk and volatile investments. Consult a financial advisor and tax professional before trading.

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Image Credit: Francis Storr, Flickr


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