The first significant revolution in trade and commerce began with the invention of currency. The second came with the Internet and the gradual expansion of the industry that we now know as e-commerce. The third revolution was the creation of cryptocurrencies, which were envisioned to be a global currency that would connect the world. While the utility of crypto is now being realized, it’s still far from reaching the adoption levels it should. Why was this revolution not given the credit it deserves? Cryptocurrencies as a payment mechanism still required time until they were ready for the mainstream market.
Bitcoin (BTC), the world’s first decentralized currency, began its journey by being a novelty for tech enthusiasts. Even 10,000 BTC barely got two pizzas for a programmer in 2010. A few years later, however, Bitcoin was all that anyone could talk about.
With big companies like Microsoft and PayPal accepting the digital coin all the way back in 2014, small businesses had to decide whether they could similarly accept this new digital currency. Unlike fiat dollars wherein the value is determined by the government, Bitcoin and other cryptocurrencies are decentralized, meaning they do not have an inherent government-issued value. So, could merchants really depend on it?
Due to the nature of their creation, cryptocurrencies derive their value based on their demand from users. The more a particular cryptocurrency is sought after, the higher the value it tends to possess. It is exactly this feature that leads to cryptocurrencies obtaining their value – and is the main factor behind their apparent price volatility.
For a long time, crypto’s lack of a fixed value hindered its widespread use as merchants did not want to incur the price volatility, which translated to different deposit amounts from customers. A merchant could get $4.97 or $5.03 after selling a $5 item due to the changing crypto-to-fiat exchange rate value of cryptocurrencies. This carried the possibility of lowered revenue, difficulties in accommodating variable pricing of goods, and uncertainty when it came to receiving fixed deposits. It was clear that a solution was required that could ensure retailers always received their $5 in crypto after a customer checks out.
Realizing a solution was needed to increase crypto adoption, major crypto payment companies have now released the necessary technology to enable fixed deposits in merchant accounts. This includes one of our latest feature enhancement at RocketFuel Blockchain, which we call Price Settlement Guarantee.
This is achieved by locking in the crypto-to-fiat conversion rate during the checkout process, which ensures that the merchant always receives the listed amount and does not have to deal with variable deposit amounts.
By addressing this pain point, crypto payment processors have given merchants the perfect opportunity to expand their businesses into accepting payments in crypto. Not to mention, this allows merchants to get in on an additional revenue stream garnering massive amounts of attention from consumers, according to data released from Visa. More than $1 billion worth of crypto was spent by consumers globally on goods and services in the first six months of 2021.
Another significant step towards mainstream adoption is giving merchants the option to accept payments in crypto or fiat — again, something many crypto payment processors are currently able to do. This ensures that while customers have the option of paying via cryptocurrencies, merchants can choose to have this converted in real-time to fiat currency without worrying about receiving decreased settlements. This enables merchants to have the flexibility of choosing their settlement method while not having to give up on an additional revenue stream from crypto-hungry customers.
The credit card industry’s credibility is dwindling due to consistent issues of fraud, data breaches, and high fees. It’s clear merchants are looking for a new way of transacting that guarantees lower fees and more convenience. With more shoppers shifting to digital forms of payments, retailers have everything to gain by embracing cryptocurrencies.
Peter Jensen is CEO of RocketFuel, a global payments processing company.