Here’s why scarcely any big online retailers accept Bitcoin
Bitcoin’s price has been booming in the last two years (with some recent hiccups). This must mean that the cryptocurrency is becoming ubiquitous at online retailers, right?
Wrong. According to a new Morgan Stanley report, via Bloomberg, only three out of 500 largest online merchants accept Bitcoin.
And it’s not growing either. That number is down from five retailers last year.
The report doesn’t say which three retailers accept Bitcoin, but it’s not very hard to guessone is likely Overstock, which has been strongly advocating Bitcoin since 2014. But the largest online storesAmazon, Wal-Mart, Applestill do not accept direct payments with any cryptocurrency.
This sounds counterintuitive. Bitcoin’s original promise is that of a decentralized currency and an automated payment system that’s fast, secure, and has ridiculously small fees. Its market cap grew from $4 to $40 billion in two years, which implies that retailers are coming on board. But they’re not, and they had several good reasons not to.
As pointed out in the Bloomberg article, the volatility of Bitcoin’s price does not suit retailers (or owners), nor do the rising transaction fees. The former is largely a result of all the speculative trading with Bitcoin, and the latter are caused by the limitations of Bitcoin’s blockchain, which can currently only process a low number of transactions, roughly 2-3 per second. Since miners (users who provide the computing power for the network) can choose which transactions to process, transactions with a higher cost now have a much better chance to go through.
This issue has turned into a raging debate that may be solved on August 1, when a big part of the Bitcoin community will attempt to adopt the proposed SegWit2x upgrade, which increases the size of blockchain blocks (from 1MB to 2MB) and increases the volume of transactions per block.
Ideally, this should make the Bitcoin payment network faster while also lowering the transaction fees. But not everyone is on board, and a failed adoption could result in a so called hard fork, which would split Bitcoin into two separate cryptocoins.
This is important, as it probably gives retailers (investors, too, but that’s another matter) pause before they decide to adopt Bitcoin. Just look at this notice from the Bitcoin foundation, warning that all retailers should stop accepting Bitcoin payments a day or two before August 1 due to the possible disappearance of Bitcoin and the likelihood of “significant price fluctuations.”
Other cryptocurrencies, such as Litecoin, are poised to take over in case Bitcoin fails. Litecoin has notably already adopted the similar SegWit upgrade and has no issues with scalability or rising transaction fees, but it’s less used than Bitcoin and even fewer online retailers accept it.
On the flip side, if SegWit2X adoption goes as planned and Bitcoin emerges faster and more future-proof, it could be an incentive for retailers to finally give the green light to Bitcoin payments.
Disclosure: The author of this text owns, or has recently owned, a number of cryptocurrencies, including BTC, LTC and ETH.