Bitcoin is all the hype lately — even garnering a spot on Bloomberg TV, where the host’s Bitcoin was promptly stolen because he showed his QR code with his private key. And this really emphasizes one of the reasons why Bitcoin won’t be used for mainstream eCommerce anytime soon — it’s too technical and difficult to use. Mmost people don’t use PGP for encrypting their email for similar reasons — too many steps, too difficult and not enough direct impact.
Bitcoin has other problems, namely that it’s value fluctuates based on it’s own market value. So neither the buyer or the seller of goods using Bitcoin can nail down the value in terms of their own real world currency. For example, let’s say you decide to buy a piece of software from me for 5 Bitcoins. At the time of the transaction, Bitcoins are worth $2 USD each, so is appears that the value to both of us at the time of the transaction was $10 USD. But you put your USD into Bitcoin when it was $1 USD per, and so it really only cost you $5 USD. Meanwhile, I go to exchange my Bitcoin back into USD so I can pay my employees and it’s value has dropped again to $1 USD per Bitcoin, so now I only get $5 USD when I was counting on $10USD. Because both of us have to pay for most other things using real world currencies, it becomes difficult to plan for the price of goods purchased or sold using Bitcoin. Real world currencies fluctuate constantly too, but systems have been put into place that basically freeze the price at the time of a transaction (at least if it happens digitally).
Probably most damning is the technical requirements for setting up Bitcoin. While they do make the process pretty simple to get started, the steps required to make each transaction, as well as to keep your Bitcoin wallet secure, can be overwhelming for a non-technical user. Until this becomes almost transparent, it is simply too much of a hassle for most non-technical users to even try.
Lack of understanding is going to be a even bigger challenge. Most people can understand that a service like Paypal will transfer funds around (even making conversions between currencies). The fact that Bitcoin has it’s own marketplace that is unregulated makes it difficult for people to understand how that’s safer (unless they’re anti-regulation). While banks and other savings institutions certainly have their problems, there are also years of regulations and safeguards put into place that make them relatively safe for storing and transferring wealth — the same can be said generally about most exchanges.
Bitcoin is a fascinating experiment, but I believe it has some giant challenges ahead of it to be adapted as a payment option for mainstream eCommerce.