Pioneers of blockchain ecommerce: Whither Overstock? Whither Shopify?
By Edward W. Mandel
We no longer need to be concerned whether or not a blockchain-based ecommerce platform can be successful. The model has been proven and now all we need to do is replicate the success that others have already had.
Hmmm, on second read, that sounds a little glib. Those of us on the IOU.io teamunderstand that analysis is harder than dreaming and execution is harder than analysis. Still, it’s good news that the dreams and the data are already in place, thanks to Overstock, Shopify and other innovators in this space. That these first movers are still moving inspires us.
Overstock overachieves
The first major retailer to accept bitcoin was US-based Overstock.com. That was barely four years ago.
“The largest company accepting Bitcoin then was a $800,000 a year restaurant diner in Western Australia,” CEO Patrick Byrne recalledto Business Insider. “We stepped up and started taking it — we were $1.4 billion. So I like to think we saved that community about five years in their adoption cycle.”
Thanks, Paddy. You helped pave the way. But if it wasn’t you it would’ve been someone else.
Even so, the list of who else it could’ve been is pretty short. It had to be someone who was a) thinking more than one season into the future and b) works in retail. The fact is that bitcoin was never a big part of Overstock’s revenue. It was something like 4% during the first month and has trended down to a rounding error.
Even so, Byrne is betting on blockchain rather than discount merchandise. He’s dumping the retail cash cow end of the business to go all in on tZero, the blockchain portion. He’s told the press he expects the spinoff of the old businessto be completed by February.
tZero, formerly called Medici Ventures, is wildly unprofitable. But it is visionary. Byrne sees promise in its developing portfolio of tools to enable security tokens which, to his thinking, aren’t just an admission that, yeah, what we in the crypto space have been pumping all this time were really a new class of securities. Rather, tZero is looking for ways to hybridize tokens with traditional fixed-income instruments.
But ultimately, what Byrne thinks is irrelevant. What’s important is what the market thinks. And the market thinks Byrne’s company is worth 23% moreas a pure-play blockchain company, Mish Talk reports.
What I’m wondering, though, is what tZero’s approach to the technology would be. Byrne isn’t just a crypto-enthusiast, he’s a bitcoin loyalist. It’s BTC alone among digital coins that you can spend on Overstock. And yet the kind of infrastructure the new company is developing are usually built on Ethereum, which can be used in a private blockchain, or such built-for-private platforms as those offered by R3 or Hyperledger. The result is bound to be either a broader palate for Byrne’s tastes in technology, or the co-opting of the Bitcoin blockchain to internal, proprietary purposes. We’ll see.
Shopify ’til you dropify
The other blockchain ecommerce pioneer, Canada’s Shopify, took a sharply different tack, and does not seem to be benefitting as much from its decision to embrace digital ledger technology.
And, just to correct Byrne for the record, Shopify did start accepting bitcoin three months before Overstock. Byrne’s point about order of magnitude is blunted by this, but he’s not altogether wrong. Shopify, still a private company at that point, had made $50 million in revenue the prior year, far less than Overstock.
Spitting contest aside, Shopify has given far more attention to the purchasing power of cryptocurrency than its enabling function. That’s remarkable considering Shopify’s more tech-y, back-office-y pedigree (its founders were ski shop dudes who didn’t like their shrink-wrapped ecommerce platform so they built their own). This emphasis on the transaction led Shopify to allow consumers to choose between payment processors. BitPay is lower-cost and more efficient, but Coinbase works with a broader range of wallets. Sorry, but that’s just a really wonky decision to foist on your consumers.
It’s also a choice that, no matter how much Shopify tries to push it, not many vendors are finding attractive. Bitcoin acceptance is something the platform’s sellers have to opt in for, and not many are heeding the company’s advicethat it’s “fast, easy, cost-effective and hassle-free”.
With bitcoin’s value at an ebb now, and public confidence along with it, it’s difficult to believe that any amount of happy talk is going to convince new vendors to accept it, or for a groundswell of consumers to trade fiat currency for it. With the on-and-off trade war, the on-and-off Brexit, Federal Reserve’s on-and-off money supply tightening, the Wall Street selloff and the inverting yield curve all looming, that could all change. Anything that destabilizes the dollar or any other reserve currency could cause a flight to crypto. But that doesn’t help retail. You never know if you’ll kick yourself for spending a mansion’s worth of money on a pizza or for selling a mansion for a pizza’s worth of money.
It is truly astonishing that so tech-savvy a company as Shopify hasn’t found a way to render blockchain technology more integral to their platform.
Is ecommerce beside the point?
Maybe that question should be considered heretical at IOU, but I’ll ask it anyway. Is ecommerce totally beside the point for cryptocurrency? Is it a use case at all?
The case can be made that no, it isn’t. Cryptocurrency is intended to maintain value over the course of a transfer of payment. And there are plenty of reasons to buy, hold and transfer cryptocurrencies based on that alone. But retail sales isn’t what it’s all about.
The guy who bought that first Papa John’s pizza for BTC 10,000 on May 22, 2010? Wouldn’t you hate to be him? Wouldn’t you also hate to be the guy who forgot to ask, “Do you want breadsticks with that?”
Our IOUX coinsare intended as utility tokens, not as securities of speculative value and certainly not as a currency to buy pizzas with. If you’re a vendor, IOUX can serve as a loyalty program that unites you with other vendors who serve the same customer base. If you’re a consumer, IOUX is your entre into a marketplace where you can share ratings with likeminded consumers who you can be assured aren’t trolls hired by shady merchandisers. The coin also serves as a benchmark of your own creditworthiness, but one that doesn’t cost you usurious interest rates every time you buy something without fiat cash in hand.
The only cryptocurrency that will trade hands on IOU is the one that you issue yourself. And enabling you to make these transactions based on your own market-determined terms is the real use case, and one the IOU team is proud to support.
Edward W. Mandel is a strategic advisor for IOU.io , he is an Ernst and Young Entrepreneur of the Year Finalist, Blockchain Enthusiast and visionary behind many successful organizations. An avid entrepreneur, Edward has a knack for designing distinctive business models complemented with superior technology to deliver unparalleled service and profitability. Edward also has been advising and consulting for various successful Blockchain technology and ICO projects and recently launched his own BQT.io P2P Hedge Exchange helping traders connect with each other to leverage their crypto assets.
IOU is a blockchain-based peer-to-peer platform designed to unify ecommerce transaction and customer retention processes, incorporating trade-able IOUs. It is currently raising capital through ICO. The platform can be found online at IOU.io and its community on Telegram at https://t.me/IOUCommunity.
