In recent months discussions of Bitcoin have dominated much of the tech sphere, not only on
forums but also on the front pages of major tech journals. The sudden, drastic rise in Bitcoin’s
market value brought an influx of attention from groups outside of the usual tech-insider-
enthusiasts who frequent bitcoin trading hubs and Bitcoin market trackers. With the incredible
spike in value, financial experts, investors, and even amateur day traders looking for a pocket-
change gamble came flooding into Bitcoin exchanges.
At this point in time, many people new to the market were introduced to some of the other
popular cryptocurrencies, particularly Ethereum (also known as “Ether.”) Ethereum, therefore,
began to see a major surge in value alongside Bitcoin, almost tripling in value over the final
months of 2017. With many eCommerce stores already accepting Bitcoins for purchases on
their site, some companies began to appraise Ethereum for eCommerce potential. As the
cryptocurrency market rush slows down and values settle from the incredible peaks they
reached in late 2017, the time has come to weigh Ethereum for viability in eCommerce.
What Makes Ethereum Different From Other Currencies
While many new to the cryptocurrency markets might assume that Bitcoin and Ethereum are in direct competition, they were, in actuality, designed to do very different things. Both currencies are based on blockchain technology, but Ethereum implements newer concepts into its blockchain design, allowing more complex trades to be recorded in the blockchain. Ethereum was designed to facilitate the creation of “smart contracts” and DAOs, which is a very different function to Bitcoin, which was designed specifically to be analogous to common currencies.
Smart contracts are programs that can be stored on and run from the Ethereum blockchain itself, at the cost of Ethereum coin (Ether.) The processing behind the execution of smart contracts comes from “miners” who, much like with Bitcoin, devote their computers to processing the blockchain. DAO stands for “distributed autonomous organization,” which is a type of smart contract in which participants in the Ethereum economy can buy into, much like a company. Those who buy in are able to vote according to the shares of the DAO they run.
Ethereum, therefore, was designed primarily as a technology to facilitate open-source economic growth. However, anything can have value, and Ethereum was designed to be traded easily, so it has come into use as a formal currency recently.
Current Focus Complicates the Use of Ethereum for eCommerce
One of the reasons that Ethereum has struggled to break out of the niches of tech and open-
source communities is precisely because of the focus on building the Ethereum economy around the formation of contracts and organizations instead of focusing on facilitating transactions for goods. Ethereum’s sudden surge in popularity, though, could change things considerably.
A number of Fortune 500 companies have backed Ethereum for some time, investing in the development of the unique currency. With an influx of everyday investors, Ethereum has a real opportunity to break into more common use. While few stores selling physical products accept Ethereum as a payment option as of right now, many sites offering services and digital products do accept it, meaning the road has been paved for its use by consumers looking to get something tangible with their digital money.
Ethereum is in a strange place at the moment in regard to its application for the everyday eCommerce company. On one hand, its value has skyrocketed recently and increased very steadily overall since its public release. The recent buzz has ensured that there are lots of new users looking to make good use of their digital money as well as more opportunities for miners to earn Ethereum by contributing processing power.
On the other hand, the support for traditional transactions using Ethereum is lacking, especially in comparison to Bitcoin, which has no shortage of tools, plugins, and extensions to aid in simple transfer. The Ethereum Foundation also is focused primarily on Ethereum’s primary use as a development platform, so Ethereum’s ultimate value boils down to how much demand there is for space on the blockchain. The Ethereum Foundation has gone so far as to say that they don’t intend it to be used as a currency at all, though such statements have largely been ignored as is clear by the market activity around Ethereum.
Making the Choice for Your Store
Deciding whether you want to open your doors to accepting Ethereum as a payment option comes down to a matter of research and planning. If your store largely appeals to tech professionals or other tech-focused demographics, there might be a real market for you to tap into by accepting Ethereum. In addition, because many major cryptocurrency exchanges now trade in Ethereum, offloading Ethereum in exchange for local currency is quite simple.
However, the actual implementation of Ethereum is challenging and may require more investment than would be ideal for your company. Additionally, Ethereum’s strong focus on its original purpose could lead to volatility that may not be ideal as a risk unless the payoff is particularly lucrative. Understanding the potential for return on investment is key.
If you’re unsure about how to approach cryptocurrencies like Ethereum and Bitcoin, contact
www.nixa.ca today. Our professional team can help you decide on and design the solutions you need to succeed in today’s competitive eCommerce markets.