Crypto e-commerce is my favorite topic!! I’m going to attempt to convince you in the next 5 minutes that cryptocurrencies are going to do amazing things for e-commerce!
First, I’ll explain how cryptocurrencies enable whole new e-commerce markets that otherwise would not even exist.
And second I’ll tell you why cryptocurrencies are dramatically better technology than credit cards.
On point number one, crypto enables new markets, to explain this I’m going to use as an example one of my favorite crypto projects, Open Bazaar.
Open Bazaar is an open source project that creates a peer-to-peer marketplace. The joke is that Open Bazaar is what you would get if eBay and BitTorrent had a baby. Open Bazaar is like eBay only as a peer-to-peer protocol rather than a company.
Enabling e-Commerce that Would Have Never Happened Otherwise
Now when I ramble on to a friend about how great Open Bazaar is, I often hear, “ehh, I have an Amazon Prime account, what do I need that for?” And ya Amazon Prime is awesome, but you see crypto markets like Open Bazaar aren’t just about the e-commerce that’s currently happening, they are about enabling e-commerce that otherwise would never have happened.
For example, let’s suppose that you enjoy collecting artwork from around the world. So you’re looking for a new piece of art on the interwebs, and you find a fantastic piece of artwork made by an artist that lives in a village just outside of Port Moresby in Papua New Guinea. It’s offered for sale by a small businessman based in Port Moresby, and he has a website up that says hey, just send me a money wire, and I’ll ship this fantastic piece of art from the village down the road off to you.
Do you think you are going to do that? Probably not and that’s because you have no recourse if something goes wrong. What if the artwork never arrives? Or what if instead of a 4-foot wood carving you get a 1-foot plastic figurine? Who do you call? Are you going to fly to Papua New Guinea and take the guy to small claims court?
And for this reason there are millions, maybe billions, of people on the planet who we don’t do business with because we don’t share any third party intermediaries with them. You see when you buy something on eBay, you’re interacting with a stranger, but if something goes wrong, eBay will help you sort it out. We always have big third-party intermediaries in our transactions, whether that’s eBay or your our credit card company, or PayPal, etc.
A Global Distributed Small Claims Court?
But crypto projects like Open Bazaar change this. The Open Bazaar platform has dispute resolution systems built into it. Open bazaar has moderators who act as the intermediaries. But this isn’t one big intermediary, it’s an entire market for intermediaries. I like to think of it as Open Bazaar Creating a global distributed small claims court.
And how does this work? With multi-sig transactions. You see you can think of crypto-currency as “programmable money,” you can do things with it that is just not possible with regular cash.
And what this “multi-sig” functionality enables two parties to place funds into a kind of escrow where if there is a dispute the moderator and step in and make a decision.
So crypto-currency or programmable money enables features like multi-sig which allows escrow and dispute resolution services which enable you to transact with people that you’ve maybe have never even considered as possible business partners before.
This is just one of the ways that crypto can enable new markets
But if you’re not convinced yet by the awesome things crypto can do, then let’s look at it from another angle, and I’ll explain why our current e-commerce payment technology, credit cards, … I’ll be nice and just say, credit cards are outdated.
Credit cards are a 50-year-old technology what was built for in-person transactions. Credit cards are “pull” rather than “push.” What that means is that once someone has your credit card info, they can pull funds out of your account whenever they like.
While crypto is like cash, it’s a “push” system. Unless you’re being mugged, no one call pull the cash out of your wallet, you need to hand it over. And You don’t have to hand over control of all your funds to make a payment. The with crypto, the data that you give to a merchant to pay them in No WAY enables them to pull further funds from your account.
This is difference has big implications. There is a thing called PCI DSS, or “Payment Card Industry Data Security Standards.” You see when you are a merchant that accepts credit cards you wind up with a database full of credit card info that hackers would love to get their hands on. You have to put quite a lot of resources into protecting that data. And generally, that data creates such a prize for hackers that it’s only a matter of time before there will be a massive data theft.
In 2017, nearly 16 Billion USD was lost to online identity theft and credit card fraud in the US alone. This is a big problem.
Now crypto isn’t perfect, it comes with its own brand of concerns, but if we were all using crypto instead of credit cards, well PCI compliance, credit card fraud, the huge merchant server hacks… it would all go away!!
So, are you convinced now?
Cryptocurrencies are global technology. You can use it anywhere in the world. So it’s great for international commerce. You don’t have to deal with wire transfers fee and exchange rate fees, etc.
Cryptocurrencies are permissionless and censorship-resistant. If you have a business that’s not politically popular, like a marijuana dispensary, you might not be able to get a bank account, but you can still use crypto. The political approval of a banking CEO is not required to use crypto!
Crypto is pretty awesome for e-commerce, right?