5 Changes Cryptocurrency Brings for E-commerce Sites

The development team at Switchbox just crossed a significant milestone: our first e-commerce site with cryptocurrency as the only currency. When our client first brought this idea to us we were excited but admittedly were not sure how cryptocurrency would change the standard e-commerce model . If anyone else is considering doing this I hope this article gives you a few ideas and makes your implementation a little smoother.

Change 1: No Fear of Fraud Chargebacks

A lot of our e-commerce clients don’t realize that when someone uses their credit card to purchase something the money isn’t guaranteed to the seller immediately. For instance, I use my Visa to buy a shirt online. The seller mails it to me. I call my credit card company a week later and report my card was stolen. The seller get’s a charge back (i.e. the money is pulled back from their account) but the shirt was still shipped. The seller has not money and no shirt. With cryptocurrency this is impossible. Once our client get’s money sent to them the purchaser can do absolutely nothing to pull it back..

Change 2: No Reoccurring Charges

For a long time credit cards have provided a mechanism to setup reoccurring billing and many of our clients depend on this mechanism. With cryptocurrency there is no way to ask someone’s bank to send you money. I assume digital wallets will make a way to setup reoccurring payments but for now that is not standard. This forces users to remember to send payment monthly and I’m sure will result in lots of accidentally missed payments and canceled accounts. Effectively setting up a care free monthly billing is not possible at this time.

Change 3: No Bank Confirmation as Address/Age Confirmation

A lot of our e-commerce clients make an assumption that if you have been able to obtain a credit card then it is reasonable to send a product to you. For instance if you sell basic chemicals (bleach, ammonia, etc.) that are legal to ship to anyone but you as a business don’t want to ship them to a minor how do you reasonably validate age? Typically, you assume that if someone has a credit card then they must be old enough to purchase your products. (FYI: This is a very bad business practice but it is commonly used). With cryptocurrency there is absolutely not banking required. Anyone of any age in any country can obtain a digital wallet.

Change 4: No Preauthorization or Fund Holds

Another feature e-commerce sites have taken for granted is the preauthorization or fund hold feature that credit card companies allow. If you don’t know what these are a preauthorization is a way to ask the credit card company if the card is valid and if the user has enough credit to authorize a payment. A fund hold is the essentially the same but the credit card company actually prevents the user from spending the money until the hold is released.

Why does this matter? Imagine you make custom t-shirts and a user places an order for $500 worth of shirts. You are not supposed to bill the user until the shirts are actually made (I’m not an attorney but we’ve had this issue come up several times and I believe it is a law). You have a problem, if it takes you 5 days to make the shirts and then you bill the card but the person has maxed out their account you now have $500 worth of shirts you need to throw away. Credit cards have solved that problem, cryptocurrency has not.

Change 5: Volatility

The rising and falling price of various cryptocurrencies has been in the news lately. Unlike traditional currently you have no idea what a Bitcoin will actually be worth tomorrow. This brings up two issues. The first is how do you price your products? Today an item might be 5 Ethereum and tomorrow it might be 10 Ethereum. You can solve that with real time pricing based on an exchange you trust but what about refunds? Do you refund based on the original purchase price or based on today’s value of the purchase price?


If you are starting up a new e-commerce site I would strongly recommend sticking with the well used and proven model, i.e. credit cards, for now. Cryptocurrency is not for the faint of heart but as with all things new in technology there is a lot of money to be made for the early adopters. If you don’t believe me just remember that in 1995 Newsweek published an article “Hype alert: Why cyberspace isn’t, and will never be, nirvana” which made fun of the idea that we would ever buy books or newspapers over the internet. Good thing didn’t listen to that advice. 🙂

About the Author: Joel Stephens is a co-founder of Switchbox, Inc. a custom web application development company.