The Emergence Of Bitcoin Cash in eCommerce

Bitcoin cash (BCH) is finally making its way in ecommerce. The revolutionizing technology behind digital currencies is making it easier for consumers to make payments and transfer their funds across the globe. The whole transfer process is secure, instant, and doesn’t require the intervention of a financial institutions or banks. Among the cryptocurrencies, Bitcoin cash is the most common one used in eCommerce. Since its inception in January 2009, the use and valuation of Bitcoin decentralized virtual currency has grown dramatically. Some market analysts even see Bitcoin as a viable currency alternative.

Issues of traditional mobile payment systems

Using a traditional mobile payment system has some downsides, including:

• The possibility to input the wrong mobile number by mistake
• Theft
• Transfer charges

Digital currency brings improvements in mobile shopping experience

Using digital currency can dramatically improve the overall shopping experience. After purchasing bitcoins from an online exchange or brokerage, the customer assigns them to a wallet. When shopping, the customer holds the QR code reader over a particular store’s device after opening the mobile app of the wallet. The address of your bitcoin is unlocked by the embedded secret password and the bitcoin computer network is informed about the transfer that is happening to the shop’s address.  One of the advantages is that the entire process occurs only within a few seconds. The confirmation of the whole process takes less than 10 minutes, unlike the traditional systems that can take several days.

Bitcoin basics

Bitcoin is an online payment system that is open source software-based. A public ledger records Bitcoin payments using its own unit of account. Payments work without a single administrator or central repository, in a peer-to-peer manner. For this reason bitcoin is considered to be a decentralized virtual currency.

Ecommerce using bitcoin

Ecommerce purchase paths using bitcoin are divided in two basic methodologies:

• Purchase paths made without the use of a Bitcoin processor
• Purchase paths using a Bitcoin processor

Bitcoin processors

An abstraction layer into Bitcoin is offered by Bitcoin processors such as BitPay and Coinbase. A merchant who wants be paid in fiat currency while willing to accept bitcoin from consumers could integrate with a service like BitPay. Until the point of payment, the order flow is similar to a purchase with a credit card from the consumer’s point of view. The website generates a Bitcoin public address for the merchant at the point where the payment is to be made. A QR code may render this Bitcoin address. The order amount is displayed to the consumers after being converted to Bitcoin. Based upon industry real time analytics, the processor determines the price point to Bitcoin conversion rate. The consumer is using a Bitcoin wallet to pay for the order amount. When the payment has been completed, BitPay notifies the merchant’s website. Then it is signaled to initiate delivery to the consumer of the purchased goods.

Issues solved by Bitcoin

Consumers see their credit floor reduced or funds withdrawn from their account in case of usingcredit card payments for completing an ecommerce payment. The settlement process necessary in order to pay the merchant can take from one to several days. The merchant is technically forced to extend credit to the customer during the time that the funds are in transit. On the other side, for both parties Bitcoin payments are instantaneous and no settlement delays are involved. The merchant has immediate access to the funds disbursed by consumers. The Bitcoin transactions do not need any guarantor and a completed payment cannot be reversed by any party. This means, from a merchant’s point of view, no exposure to disputes for reverse payments.

• Merchant credit card acceptance

A merchant willing to accept credit cards needs an acquiring bank. The merchant’s payments are guaranteed by the acquiring bank. This relationship could be based on a so called “underwriting procedure.” In case that the merchant becomes insolvent and in the event of consumer disputes, the acquiring bank protects the payment. Startup businesses and merchants without a processing history, usually face difficulties during the underwriting process.

No centralized banking institution is involved with Bitcoin and the underwriting process is completely eliminated. Even those merchants that do not have a business history can immediately begin payment acceptance.

• Bitcoin security

Cyberattaks for Bitcoin primarily happen at the endpoints. A hacker cannot acquire useful information by observing transactions in flight. There are no attacks on the Bitcoin protocol, and there are various technologies used to secure bitcoin on hardware appliances.

Downsides of using Bitcoin in ecommerce

There are also certain downsides of using the Bitcoin cryptocurrency in ecommerce:

• Consumer protection

While it isnot expected that any governmental consumer agency will protect bitcoin purchases made by consumers and Bitcoin does not provide any protection for consumers, the higher reflected costs associated with credit card transactions are definitely not proportional to the protection offered. For repeat purchases from the same merchant and for low value transactions over the internet consumers may choose transactions using bitcoin. Trusted third parties could offer consumer insurance and broker bitcoin transactions.

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