Recent weeks have been reminiscent of the 2013-2014 Bitcoin explosion for many Bitcoin enthusiasts. Though it’s nothing like going from under $200 to over $1000 in just 2 months, the steady climb back to $1000+ has been encouraging. For many regular people around the world who have yet to use Bitcoin, recent weeks have been a swift introduction. In India alone, major Bitcoin exchanges such as Zebpay and Unocoin have reported a surge in user registration and trading volume since November, at least doubling registration and trading volume from previous months.
This is all coming off the heals of Indian Prime Minister Narendra Modi’s November 8th decision to withdraw all 500 – 1000 rupee notes from the Indian economy. With 86% of India’s in-circulation cash being made worthless overnight, it’s not surprising that people are quickly looking for alternatives to spend and store their hard-earned money.
In a recent article on the topic of India’s economy and Bitcoin, Forbes tells us that, “with India’s recent demonetization, the volume of bitcoins being traded there has substantially increased to nearly two times its prior levels”. Furthermore, “Data from the ministry of electronics and information technology shows that the number of daily transactions through e-wallet services . . . has shot up from 1.7 million — recorded on November 8 when demonetization was announced — to 6.3 million as of December 7.” That number has continued to rise into the new year, with no signs of slowing down!
Today however, Thursday, January 5th, the stability of Bitcoin was called into question when we got a bit of a surprise from CoinDesk’s Bitcoin Price Index (BPI). Bitcoin dropped by nearly $200 in just 1 hour, though it quickly began to recover. However, volatility such as this is part of the reason Bitcoin has struggled historically to go mainstream with consumers and investors.
CoinDesk released a statement regarding the unexpected dip in the BTC trading price. “Today’s price move raises the question of whether the rally that began last month will continue into the new year – or if we’re in for a repeat of 2013-2014, when bitcoin peaked and quickly fell.”
CoinDesk offered some additional perspective from Chinese bitcoin exchange Huobi, stating that “current trading volume is 37x of that in 2013 and bitcoin price fluctuates 15.95%, which is much more stable than the year 2013.” The Huobi rep goes on to explain that “in 2013, when the price was 8,000 yuan (around $1100), the weekly trading volume was 393,000 BTC, with an amplitude of the week up to 103%. The trading volume was very small. Today, bitcoin [prices] broke 8,000 yuan with 735m BTC trading volume, which is expected to double in a week.”
With all this excitement about Bitcoin, it’s easy to forget that there are plenty of other ways to spend, store and transfer money online. Digital wallets, phone apps and various UPIs have seen growth explosions in India since November 8th, and they’re following a global trend that has money going digital more and more each day.
It was just over 10 years ago when online payment processors started popping up – SolidTrust Pay among the very first. In that time, we’ve watched online shopping and eCommerce go from boutique websites facilitating some small number of specialized or custom items, to a full-on emporium; the internet has rapidly become the world’s most popular bazaar. It’s important though to take a step back and realize that we are only right around the middle of this development, with plenty of change yet to come. It’s perfectly reasonable to predict that by the end of all this, the internet could be the only bazaar left.
Below we’re going to look at some of the trends and possible changes you can expect, whether you’re an online merchant or shopper. But first, we want to talk briefly about Bitcoin and where it fits into all of this. Many of our users will be familiar with Bitcoin, but for those who aren’t it’s simply a form of digital currency known as a cryptocurrency. Cryptocurrencies use cryptography to remain anonymous and secure; Bitcoin in particular uses a decentralized system to thwart corruption and certain types of fraud, as well as to maintain anonymity. The reason Bitcoin is important to this discussion is because it’s really the model for future digital currencies, or at least its model (the blockchain) will be the model for future digital currencies, having proven both secure and successful in most aspects. Future currencies will aim to operate like Bitcoin, using systems similar to the blockchain.
So, what constitutes Digital Currency?
Technically most money that is not physical is digital – so even the money stored on the computers at the bank is considered digital currency. However, that’s not quite what we mean when we talk about digital currency. A better example would be Russia’s Yandex.Money, a digital currency and payment processor which emerged in 2002, and has since been 75% purchased by Sberbank, which is in turn owned by Russia’s central bank. Yandex.Money is basically an eWallet where you can deposit funds and receive an amount of digital currency to spend online, and that’s basically what a digital currency is. The difference is that Yandex.Money is rapidly changing from a random digital currency to a national Russian currency, which leads us to our next point.
The Change is already here!
As noted recently by PayPal in their 10-year anniversary blog, “a couple of years ago, roughly 50% of money being exchanged was in the form of either cash or cheques. Today, that number has dropped to 40% and by the end of 2017, it’s predicted to drop even further to 25%. We are witnessing an obvious trend – physical money is digitizing.”
It’s not just online, but everywhere. People are using their debit/credit cards more than cash when they shop, and even Bitcoin is beginning to be accepted widely in ‘the real world’. Beyond 2017, there is no reason to assume this trend will slow down and by 2020 we might be operating almost entirely with digital currency instead of cash.
We mentioned above that Russia is already experimenting with their digital currency, Yandex.Money, but we didn’t mention that 24+ other governments around the world are doing the same thing. Canada, for example, ran simulations this year which explored the possibility of creating a version of its currency on the blockchain, and one third of Denmark already uses their smartphone to buy everything.
What does this mean for eCommerce?
As it’s getting easier to spend your digital currency in the real world, you might be wondering how this will affect eCommerce. You might even be worried that online shopping will decline in the face of Smart Cards and physical Amazon locations. In fact, many physical store locations are making great efforts to revitalize their models – doing things like offering yoga classes and wine menus to create a more fulfilling engagement and obviously increase their volume of customers. We’re here to tell you why, as an online merchant, you don’t need to worry about that – there is a reason they are making such an effort.
Causality is key. An important question to ask: is digital currency driving eCommerce, or is eCommerce driving digital currency? And the answer is undoubtedly neither/both. They are clearly evolving together, and in a non-zero-sum atmosphere, meaning that the success of one drives the success of the other, and vice-versa. We shop online more because it’s easier to do, but we’ve made it easier to do because of how much we love shopping online. It’s a two-way street, and with self-driving cars on the horizon we’re in for a much safer and more efficient experience on the road. Additionally, with new and exciting methods of delivery popping up in the form of drones and self-driving technology to accommodate the eCommerce trend, and to close the gap between purchase and delivery, we think it’s safe to say that the online shopping industry will not only continue to grow, but perhaps one day eclipse and even replace traditional purchase methods altogether.