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The cheque’s in the network

A view to the future on a brief history of online shopping

In the earliest days of eCommerce on the Internet, even predating the world wide web, if you saw something you wanted listed in an online store (which all too often was a static price list shared amongst usenet and bulletin boards), you made your payment by dutifully walking to the nearest postbox to mail your cheque, postal order or cash. How times soon changed. After the meteoric rise of the world wide web and the connection of the first card payment providers, it became possible to make rudimentary payments using your credit or debit card without having to even bother with the postbox. How the world cheered as it seemed that we had achieved the pinnacle of perfection in terms of speed and convenience with online payments. With such an ability now commonplace, it seemed as though there was nothing better to be achieved and so things continued on this path quite uneventfully for some time. The online home shopping revolution had begun.

Enter Elon

In 1998 a group of entrepreneurs including Elon Musk, nowadays better known of SpaceX fame who is the head of the first private company to launch a commercial spacecraft in to orbit, attempted to disrupt the status quo with a new method of payment. Initially viewed with lots of suspicion and claims by many that it was a temporary fad that was dangerous and would not last, their new payment platform has clearly stood the test of time. Nowadays every online consumer knows that PayPal lets you make online transactions without using cards or returning to the faithful postbox. Where others had tried and failed, including Beanz and Flooz, PayPal had managed to succeed. It did so in big part because of the faith and trust both consumers and sellers had in the platform and the large company backing it, eBay.

Taking us to the present day there are now several contenders similar to PayPal, including Google Wallet, Amazon Payments and Western Union to name a few; all of them are large players and for the most part are successful because their payment platforms are trusted. Most eCommerce sites, from the smallest to the largest, rely on a payment provider or a set of payment providers that will accept multiple methods of payment, including not only the familiar credit and debit cards, but a combination of some or all of these new cardless payment methods like PayPal. Once again many people started to get used to this new way of paying and began to relax in the belief that we had now, finally, reached the pinnacle of perfection with online payments. Things have been this way for a few years and it seemed the online payment processing industry had settled down. And until very recently so it appeared…

The next contender

Lurking in very dark place on the internet is an eCommerce site of somewhat dubious nature. Calling it an eCommerce site hardly does it justice. In fact it’s more like a Arabic bazaar, a souk, a hustling bustling crammed market place filled with scents and spices, textiles, hookah smoking dodgy characters, bargains to be had, snake charmers, knockoffs and counterfeits, pick pockets and even magic carpets. This bazaar is the 21st century place where anything can be bought and sold regardless of its legitimacy or legality. This bazaar is quite aptly called The Silk Road. Whilst it doesn’t so much specialise in spices and textiles, you are certain to find it does specialise in drugs of all descriptions, radar jamming electronics, forbidden books, dangerous and restricted chemicals, counterfeit jewellery and everything of similar ilk that isn’t available on your local High Street.

The Silk Road is hugely successful despite attempts by every major world government trying to close it down, and its success is down to one very simple reason. Unlike the early days of the internet when buying your online wares, you need not visit the postbox to mail cash covered in your fingerprints; nor do you even have to expose your identity by paying with a credit or debit card. You don’t even have to trust PayPal won’t pass your identity on to law enforcement and close down your account after detecting such dubious payments. The Silk Road succeeds for one reason in particular – it pioneered a new disruptive technology to enable peer-to-peer anonymous payments.

With this distributed payment system, there is no central authority to hand out funds, to manage and authenticate payments, there is no corporation which can be bent to the will of any government to cease operation and expose those involved. The origin of this payment system is somewhat of a mystery – the name of the author of the technology behind it, Satoshi Nakamoto, is an anagram and nothing is known about the author or their motives. However, today this payment system is now the biggest alternative payment system in the world by a very large margin.

From fake pearls to real pizza

With an estimated current worth of over $500,000,000 US, nobody can argue that the Bitcoin online virtual currency isn’t the next serious disruptive technology to the online payment processing industry. There are some who think that the 500-million-Dollar estimation is far too low. Because of sites likes The Silk Road, this new currency has grown from nothing when it was first created in 2009 to worth at least half a billion US Dollars in just 4 years — and there seems to be nothing stopping this train from gathering momentum. In the last couple of years, Bitcoin has left the dark recesses of the Internet to enter more mainstream use at various respectable eCommerce sites. It’s now even possible to buy pizza and pay with Bitcoin. There are many sites online that allow you to buy and sell Gold and other precious metals for Bitcoin. There is even news just this week that a Canadian man has put his home on the open market and requested payment in Bitcoin.

Since PayPal closed down the Wikileaks account from accepting donations, they switched to accepting Bitcoin and it’s now what keeps Wikileaks afloat. The Internet Archive followed suit and now allows donation to be made with Bitcoin. A financial institution in France has been officially certified to permit them to trade as a Bitcoin bank, and you can send and receive Bitcoin payments to any other international bank account through this provider as if you were using any other currency, like Euros or Yen.

It seems there is no stopping the immense rise of Bitcoin as the primary alternative payment method online, now for legitimate purchases rather than the dubious origins it came from. There are several appealing factors which are driving the adoption of this new currency when compared to payment processors like PayPal which may be responsible for this uptake. Firstly, all transactions are anonymous in terms of both the buyer and the seller. It is possible to make a transaction without either party revealing their identity. Also because Bitcoin is a distributed peer-to-peer currency there is no central office which takes a fee or cut of any transactions. There are no charges of fees to pay for making or receiving Bitcoin payments. Thirdly as it’s a virtual currency which is truly global, it levels the playing field with regards to what you have to declare in terms of assets. You cannot be taxed on your Bitcoin and as all the currency you hold is encrypted by its very design, there is no way you can be forced to reveal your balance or have your money forcibly stolen, by a thief or by a government. Let us not forget also this week that we learnt the EU wanted 40% of all the money held in Cypriot savers accounts and as banks were forced to close, people lost access to their money and could not transfer it out of the country. Bitcoin in its very design prevents this from happening.

From the Silk Road to the Road Ahead

It’s hard to say where Bitcoin will go in the future. Whilst it’s clear that it has left its darker origins at places like The Silk Road and has entered mainstream eCommerce, its decentralised and community consensus-led nature make it difficult to predict where Bitcoin is going and what it may become along the way. Some predict it could become the biggest global currency; others predict it will stop growing in value within a few years. In part it will become what you and I choose for it to become.

Either way, one thing is for sure — the Bitcoin train is getting bigger and faster and there seems to be no immediate end to its phenomenal growth over the last few years. As PayPal icons were once viewed with suspicion on the checkout page so now are the Bitcoin icons springing up at various eTailers. Who knows, in a couple of years Bitcoin payments may be treated as a regular and normal part of eCommerce and we settle down again believing that we’ve finally reached the pinnacle of perfection in online payments; whilst we wait for the next big disruptive technology to come along.

If you would like to discuss your existing ecommerce site or would like some fresh and innovative ideas from a dynamic agency on building a new ecommerce site then you’ve found the right people. Please contact us today and we will be happy to see how we can help.