Online retail platform Shopify now accepts transactions in stablecoins.
In a groundbreaking move, Shopify, Coinbase, and Stripe have joined forces to facilitate stablecoin payments through a smart contract-based protocol. The new partnership aims to streamline digital commerce by using USD Coin (USDC) for transactions, offering several advantages over traditional card payment processes.
Key Differences and Advantages
The new stablecoin payment system promises cost efficiency, speed, security, inclusivity, and scalability.
Cost Efficiency
By bypassing intermediaries like banks and avoiding currency conversion fees for cross-border transactions, stablecoin payments can significantly reduce or eliminate high transaction fees associated with traditional card payments.
Speed and Settlement
Thanks to blockchain technology, transactions are settled instantly, providing quick access to funds for merchants. This is a marked contrast to traditional card payments, which can take days due to batch processing and bank verification.
Security and Transparency
Transactions are recorded on a blockchain, ensuring transparency and security. Smart contracts automate the payment process, reducing the risk of disputes and fraud.
Inclusivity and Accessibility
Stablecoin payments can provide access to financial services for underserved populations or regions where traditional banking infrastructure is lacking.
Technology and Scalability
The use of smart contracts and blockchain technology allows for scalability and flexibility in transaction processing, making the system adaptable to emerging technologies and payment trends.
Conclusion
The Shopify-Coinbase-Stripe partnership's use of stablecoin payments offers several advantages over traditional card payment processes. However, it also introduces dependencies on blockchain infrastructure and stablecoin stability, which can be subject to market volatility.
As the financial landscape continues to evolve, this partnership is well-positioned to define the future of digital commerce by integrating Web3 technologies into mainstream payment systems. The new protocol addresses the issue of high fees associated with crypto payments, potentially facilitating mainstream adoption.
The collaboration between Shopify and Coinbase positions Shopify for cross-border payments with no foreign transaction or exchange fees, with the merchant receiving their local currency by default. To get a currency other than the one received by the merchant, a foreign currency transaction would be necessary, presumably processed by Stripe.
Current usage of e-commerce stablecoin payments has not exceeded 1% of e-commerce transactions in any country, including those with high crypto adoption like India, Nigeria, the Philippines, and Turkey. Ledger Insights plans to publish a series of articles exploring the e-commerce potential of stablecoins next week.
Shopify was one of the members of the Facebook-founded Libra stablecoin initiative alongside Stripe. The partnership caters to existing crypto users at this stage as Shopify initially only accepts USDC on Coinbase's platform, Base. The collaboration involves joint work on a smart contract or "e-commerce payment protocol" that mimics the two-step card process of authorize and capture.
The operator role in the new protocol is a payment service provider controlled smart contract that can release escrowed funds to merchants, addressing the fee problem of blockchain gas charges falling on customers. The protocol prevents issues when items sell out between checkout and fulfillment by locking stablecoin funds into escrow. The new feature does not require action from merchants unless they prefer receiving payouts in USDC stablecoin instead of their local currency.
USDC issuance on Base amounts to $3.6 billion or around 6% of the total stablecoin's value across all blockchains. The partnership is a significant step towards mainstream adoption of stablecoins in e-commerce, potentially reshaping the digital commerce landscape.
The collaboration between Shopify, Coinbase, and Stripe emphasizes the use of stablecoins and blockchain technology for e-commerce payments, aiming to provide insights into cost-efficient, speedy, secure, inclusive, and scalable digital transactions. The new protocol, facilitated through smart contracts, addresses concerns of high transaction fees and challenging gas charges by implementing an operator-controlled escrow system.
The unique inclusion of stablecoins within e-commerce transactions offers potential advantages over traditional card payment processes, positioning this partnership to influence the future of digital commerce by integrating Web3 technologies into mainstream systems, as well as addressing the issue of high fees associated with crypto payments, thereby potentially facilitating mainstream adoption.
