Bitcoin payments will face big challenges heading to brick-and-mortar (but it’ll get there)

brickmortar29 Jan 2014 / Venture Beat – Recent developments associated with Bitcoin, its silver-like sister Litecoin, and other crypto-currencies forced many merchants to start thinking seriously about accepting these digital alternatives to cash and plastic cards. In fact, some businesses already accept Bitcoin. E-commerce merchants were first to accept Bitcoin; however, just as life once emerged from the ocean to the land, Bitcoin is slowly but surely creeping out of its virtual cradle to the real world of brick-and-mortar merchants.

The benefits of crypto-currency for consumers are well known. They provide:

  • Limited anonymity, or pseudonymity — your wallet is anonymous, but its address and transaction records are kept public and can be flagged and traced
  • Independence from traditional financial institutions — unless you need to exchange your Bitcoins and get back your dollars
  • Decentralization — nobody controls the “main switch” or “emergency brake,” unless the open source client software is compromised
  • Fast, reliable, and cheap money transfer between any locations in the world (no objections here).

There are also some downsides. Unlike credit cards, Bitcoin transaction fees are paid by senders. Fraudulent transactions cannot be disputed or reversed. Bitcoin wallets can be hacked. But the million-dollar (oh, I’m sorry — thousand-Bitcoin) question is, can Bitcoin technology meet the picky requirements and withstand the tough conditions of real retailers?

An uncertain mechanism of calculating the transaction fee is one of the factors that could negatively affect mainstream acceptance of crypto-currencies. In the world of traditional retail payments, buyers do not deal with transaction fees at all: They’re handled by the seller. Even though the average fee for a Bitcoin transaction (0.0001 BTC) is much lower than credit or debit card processing fees (up to 3%), the average buyer may ask, why should I use Bitcoins if I can pay by credit card and spend less? This is especially important for micropayments, where the amount of the fee is comparable to the transaction amount….. Read more

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