Last night, I was explaining to my brother how cryptocurrencies work. Over wings and ribs, I told him how currencies were created and how they were valued.
And he was questioning where exactly the value is. We eventually agreed on the point that the value is in the Steemit community. If they stop valuing the currency, it will decline.
Because there is no place to spend it or exchange it for goods (that I am aware of yet).
So you can’t take your Steem dollars and go purchase a new computer with it. You have to exchange it to a country’s currency and then make your purchase.
Steemit is kind of like an asset. You have to sell it before you can make purchases with it.
As soon as a currency is able to go mainstream and get accepted by stores then it would probably cause a huge increase in the currency valuation.
It would suddenly be infinitely more useful. If you could store your money in cryptocurrency and then make purchases with it instantly. Without a lot of hassle.
You just go to the online store, and during the checkout process you have the option to use a cryptocurrency. Like Paypal for cryptocurrencies.
I think that if a currency could achieve this payment status it would change everything.
In order for adoption to take place for stores, there would have to be some kind of advantage. And I am not talking about cutting down on their credit card fees. Cutting down on credit card fees would be nice, but most retailers would assume that having the cryptocurrency option would bring in enough extra customers.
This means that you would need to either:
Have a cryptocurrency store where people could make purchases with their cryptocurrencies
Only initially work with stores that the crypto-community would agree to support. So it would be an instant boost in sales for the store. If they could boost sales by 30% then adding a feature to accept these currencies would be a no-brainer.
And finally….
Stores don’t want cryptocurrencies. They need cold, hard cash. And the reason is that there is too much fluctuation in the value of the currency. It can drop 20% in a day. Stores can’t afford that risk. They need their reliable profit percentage or they could go bankrupt.
Above all, stores need to feel safe. They need to make more money. These are essential for the adoption of a payment with a currency.
If I was to start building a software to solve this company, here is how I would go about it.
- Set up an intermediate company that can receive and send payments. Essentially an escrow/transaction service.
- Create an API to allow Shopify to receive cryptocurrency payments. Essentially, bypass their checkout system completely if using cryptocurrency (from their cart page for those of you who know Shopify).
- After you click the button to pay with cryptocurrency, you are given a location/details to send the Steem currency to. It holds on this page while you send it.
- Instantly, the intermediate company receives the money, it transacts into $USD at the immediate rate and deposits the $USD into the Shopify store’s account.
The major issue here is that the intermediate company is being exposed to major risk if the currency changes price in that time period. It would probably blow up if the risk wasn’t taken care of.
One way to deal with this issue would be to temporarily charge the item’s price +30%. So if something cost $100, charge $130 worth of cryptocurrency. Then as soon as soon as the exchange is made into $USD for the $100, the remaining Steem balance is sent back to purchaser.
The end result is that you only pay exactly what the exchange rate is. And it removes the risk from the store, because they get paid in USD.
If this could be done, coupled with support from the Steem community, it could drive the adoption of Steem forward at a way, way higher rate.