A cryptocurrency primer for e-commerce.
Tesla announced today that it was buying $1.5 billion in Bitcoin and would soon accept the currency as payment for its vehicles. Both Bitcoin and Tesla seem to have realized some short-term financial benefit from this news (as Mr. Musk no doubt intended), but I’m sure it left a lot of folks scratching their heads. While Bitcoin has become a speculative financial instrument long unmoored from its original purpose, cryptocurrency in general is starting to tease around the margins of payment and commerce. If you’re selling things online, you might be wondering what all this means to you.
The short answer is not much, at least for now. You probably won’t accept cryptocurrency as a payment method anytime soon. Crypto has created enough of a stink that, for a time, there was a sense in the e-commerce world that it might muscle in as an entirely different way of paying for things, like PayPal or Venmo. But it’s worth remembering that those services, process innovations aside, are still moving dollars or Euros or pesos around. For better or worse, most of the world runs on fiat currency, which is a fancy way of saying money whose value is determined by governments (and no, I’m not going to talk about gold, so don’t even start with me).
So, what the heck is cryptocurrency, anyway? Put simply, cryptocurrency is both a currency and an anonymous ledger (the anonymous part is important, but hang on for a sec). A dollar bill is currency, and it’s often anonymous, in the sense that you don’t sign your name to it in order to pay someone else (like a check or a credit card receipt, which is really just an IOU for some amount of dollar bills). Ultimately, though, it’s cumbersome to conduct big business with hard currency. There just aren’t enough wheelbarrows around.
Also, unless you’re selling weed and don’t want the government to know what you’re up to, you need to keep track of all those dollars, whether in real or IOU form. That’s a ledger – just a list of transactions, one after the other. Hard cash businesses (at least aboveboard ones) have ledgers too, but most businesses operate astride a vast and complex set of IOUs and assurances that, somewhere, somehow, if they had to, they could walk into the bank and withdraw a wheelbarrow full of hard cash.
There are some persistently thorny issues with this arrangement, as you’ve probably seen. Middlemen of every stripe want to skim a penny here, a half penny there, for the privilege of moving your money around. Exchange rates fluctuate, so tomorrow your scratch might get you a few less potatoes from the fellow across the river than it did today. And you might indeed have some perfectly valid reasons to not want every prying eye ogling your ledger, yet still want to conduct business without paper or coin (this is one reason why cryptocurrency is starting to see adoption in the third world – many people have phones, but carrying cash can be risky).
Cryptocurrency attempts to remedy all this by establishing itself as an alternate currency (we won’t talk about value yet, which is, yeah, a thing) with some form of a ledger built in. In other words, the currency itself contains the ledger. This is often built on the foundational concept of the blockchain, a very fancy ledger where each transaction more or less verifies the previous one and the entire ledger is unalterable and encrypted. I’m simplifying a bit, but the concept is fairly straightforward, and once you grok its core purpose — the elimination of a central authority to validate transactions — it starts to make sense. When someone hands you a dollar bill (unlike a check, or a credit card), you don’t even need to think about calling someone to see if it’s real. Now, if that dollar bill could move through the internet and through any number of people and countries and still be what it started out as – an anonymous transmitter of value that no one in all the intervening steps could get their grubby hands on – you’d have what a lot of nerds consider to be an ideal currency.
(As an aside, some cryptocurrencies can be “mined”; that is, created out of thin air by computers. This was designed as a way of sharing the computing load of all the encryption the blockchain requires. The theory was that if you paid folks a tiny morsel of said currency to handle the distributed nature of validation and encryption, you could cover the computing costs of decentralization. Instead, because Bitcoin is so valuable, Bitcoin mining is now an absurd industry that uses roughly nine nuclear plants worth of energy every day to create currency. You might as well call it KiloWattCoin, since it’s turning electricity into money.)
But is crypto an ideal replacement for fiat currency? Not yet. It might be, eventually, in some form. A lot of insanely smart people are working to make this happen. It won’t be with Bitcoin itself, which, despite what Elon Musk may claim to the contrary, is no longer really a currency but a purely speculative financial instrument. This is where that pesky value problem comes in. If you don’t peg crypto to anything at all, its value is whatever everyone who holds it (or wants it) thinks it is. There’s nothing inherently wrong with that; currency is always no more than what everyone agrees it is (it’s just that in certain cases the chorus is anchored by some very deep voices, namely governments and their banks). Bitcoin isn’t pegged to anything and is about as predictable as a broken roulette wheel. It also has a pressing technical quandary: The transaction volume over time has created a near-unmanageable computational load. Turns out that hardening your ever-growing ledger with world-beating encryption has some undesirable side effects once you’re hundreds of millions of transactions down the chain.
Bitcoin is thankfully off the table as far as a normal transactional currency you need to think about. Stripe, one of the biggest payment technology companies, dropped support for Bitcoin a few years ago; their explanation as to why is a model of economical economic prose, and well worth reading if you want to understand a little bit more about why Bitcoin is viewed primarily as an asset rather than a means of exchange.
The cryptocurrencies I vote Most Likely to Succeed will likely matriculate from the school of “stablecoin”, which I suppose is what happens when you fix what ain’t broke then have to break it again. Stablecoins are cryptocurrencies that are pegged to some real-world value, like dollars or Euros or gold or silver or even, in a delightfully recursive loop, other cryptocurrencies. Stablecoins take the “good” part of crypto – anonymized, electronic, borderless cash – and remove the crappy parts, like crazy volatility and onerous ledger maintenance. Stablecoins are making inroads in third-world cash economies where the adoption of inexpensive mobile phones has outpaced all the payment infrastructure and credit issuance that we take for granted. It’s possible at some point in the next ten years we’ll see one or more stablecoins make their way into global commerce.
Of course, the final hurdle for worldwide cryptocurrency adoption is the bogeyman it was partly created to avoid: The tax man. Anonymous, distributed transactions are anathema to regulation, taxation and half the other things that make most governments run. Government may not be able to stop the tide of cryptocurrency, but it’s absolutely going to be a giant pain in the ass about it. What else is new?
California’s new Consumer Privacy Act, a law very similar to Europe’s GDPR, is coming next year, and if you sell anything in California, it may affect you. Before we go into the details, please note that we are not attorneys or accountants and nothing here should be construed as legal or financial advice. That said, we can glean a few things from the law that might affect your online business. The law is based on four essential principles:
- Informing visitors of the data you collect
- Giving visitors the ability to be “forgotten”, e.g. removed from your records
- Allowing visitors to opt out of having their personal data sold to third parties
- Ensuring that customers who opt out of data collection get the same price for good and services as customers who opt in
Of the four, the first two will be the most common requirement for distributors in this industry. You may have already seen the overlays and popups informing you of data collection policies on sites you visit; this has become a common practice since many US businesses sell to E.U. customers. This can be added easily to any storeBlox CS company store or site.
The second requirement is twofold: First, you have to give a user a contact email or other method to communicate with you that they want any personal data you have about them deleted and forgotten. Second, you have to actually do the deletion, which might sound easier than it is. Most companies keep customer information on multiple systems, e.g. not just the website but also internal order processing, accounting or CRM systems. You have to get rid of the personal data everywhere.
The right to be forgotten also stipulates that you quickly “quarantine” a customer’s personal information as soon as they request removal, presumably to protect the data while you work to delete it, which might take longer. This may be tricky for those companies that have customer data on disparate systems, so we suggest you do a full technology audit so you understand which systems need to be touched when a customer requests that they be forgotten.
Like GDPR, CCPA compliance can be interpreted in a variety of ways as there are very few specific technological rules or requirements. We don’t feel that most companies in this industry will need to worry about selling personal data to third parties or charging a different price for opt-in vs opt-out, so those shouldn’t be a problem for you.
While CCPA doesn’t have a lot of specifics about technological requirements, it’s worth noting that if your online store takes credit cards and you have passed a PCI compliance test, then you are likely most of the way to making “best efforts” to secure user information. The payment card industry has been ahead of the curve on securing personal data for many years, because breaches of cardholder data can mean thousands of fraudulent transactions.
Also like GDPR, we think CCPA compliance will be a malleable thing as the law goes into effect. That doesn’t mean you should slack on getting your data policies in order, but you should be prepared for some of this to change over time. We’ll keep you up to date as the law approaches at the beginning of 2020. And as always, if you have any questions or need to implement any of the above, just give us a shout and we’ll get you taken care of.
storeBlox CS has always lead the way in flexibility with third-party tools like analytics and advertising networks. Through custom code injection – or embedded code – you can plug just about anything into your store for tracking, slicing, dicing or whatever you desire.
Until now, there were only one or two places that you couldn’t drop a code snippet into your store, but we’ve fixed that. For those of you who need to drop in things like chat software that require special positioning in the code, storeBlox now has you covered with every possible insertion point.
If you’re looking for live chat options, there are quite a few of them out there, from Olark to Intercom to Freshchat. Any of them can easily be enabled on your store with these new embed options. Don’t want to mess with it yourself? Just give us a shout and we’ll be happy to take care of it for you!
The latest release of storeBlox includes numerous bug fixes and improvements, including:
- Color and size are now available in the Transaction Detail Report
- Numerous improvements to order display and listing
- To help with thorny freight calculation issues that sometimes occur with third-party shipping quotes, we’ve added additional logging to quickly triangulate the source of the problem.