Bitcoin capitalises on Black Friday and Cyber Monday shopping frenzy
Following its success during the Black Friday and Cyber Monday shopping frenzy this year, alternative currency Bitcoin is gaining popularity and could be poised for major growth in 2015. But the currency still has a long way to go before it catches up with rivals such as PayPal, Visa and MasterCard.
Founded in 2009 by developer Satoshi Nakamoto (a pseudonym), Bitcoin is a peer to peer digital currency. Transaction figures released by Bitcoin payments specialist Bitnet suggest that $296 million was spent globally across the bitcoin network on 28 November and 1 December. This makes Bitcoin the ninth largest payments network worldwide for the period, as consumers sought to benefit from discounts offered by 400 retailers for payments in Bitcoin.
Bitcoin has proved controversial due to scandals such as the collapse of Bitcoin exchange Mount Gox last year, which resulted in the loss of $460 million, and its use on illegal website the Silk Road, which was seized by US enforcement agencies and shut down in August last year. But according to Tobias Schreyer, co-founder at retail cooperative the PPRO Group, the more robust standards enforced by newer Bitcoin exchanges CoinBase and BitPay mean that next year could see the virtual currency break out into the mainstream.
“The key breakthrough is that the anonymity of Bitcoin is gone,” Schreyer told Banking Technology. “CoinBase and BitPay require both the merchant and the customer to fully register before you can transact. Identification of users, together with analysis of the BlockChain that can go back to every transaction, opens up the whole market. This is a major step forward.”
The main selling point of Bitcoin is that as a virtual currency, it is not controlled by a government, but is instead decentralised, entirely digital and based on a finite supply of Bitcoins, which are ‘mined’ by using computing power. One of the key principles is to avoid inflation, which tends to erode away the value of savings over time.
CoinBase and BitPay are both located in the US, where both organisations are currently working with US regulators. It is this engagement with mainstream regulators that helps to give the new venues – and the currency itself – the legitimacy needed to win over big business. Schreyer believes that the low cost to merchants of accepting a Bitcoin payment, combined with the financial incentives that some Bitcoin exchanges are offering, may be enough to sway many in the coming months.
“Like all other payment networks, Bitcoin saw a surge in volume over Black Friday and Cyber Monday, with higher than usual payment totals over the two days,” said Akif Khan, vice president of solutions strategy at Bitnet. “The Bitcoin network handled $296 million in two days – that’s impressive when taking into account the currency is only five years old and is still growing with respect to merchant and consumer adoption.”
In total, UK consumers spent £810 million on Black Friday and £720 million on Cyber Monday. Of this, Visa claimed £518 million for Black Friday, while PayPal claims that £1 of every £6 spent globally on e-commerce is accounted for by its own network. Black Friday figures for MasterCard were not yet available, but the company reported in October that it had processed $2.4 trillion in payments in the first nine months of 2014, equivalent to $260 billion a month on average or approximately $60 billion per weekend.