Most merchants taking Bitcoin benefit little from this additional payment option. Their customers that pay Bitcoin benefit even less so when customer protection doesn’t exist.
However, as a “bitcoiner” and “gamer,” I believe Steam’s acceptance of Bitcoin payments creates additional value for both Valve (Company that created Steam) and players in new ways.
Background
Steam sells digital assets, in the form of game licenses and in-game items. The in-game item economy is particularly interesting. Players can sell in-game items on Steam’s marketplace for Steam credits, on external marketplaces for cash, or gift them to friends. Occasionally, these items fetch extremely high prices. It goes without saying that instantly delivered, valuable, transferable digital assets attract credit card thieves. Steam has openly admitted their battle with credit card fraud. The following post was created directly in response to players’ outrage on transfer restrictions in-game items had. These restrictions made items far less liquid, and thus less valuable.
In 2014, the percentage of compendium purchases that turned out to be fraudulent became very significant and we also saw a massive growth in scam-related support requests from users that didn’t receive their items or had their accounts stolen. Additionally, credit card fraud can become a big problem for us because if our fraud rates climb too high, we will no longer be allowed to accept credit card payments at all.
Valve Benefits
- Direct Benefit — Valve’s main obvious benefit is irreversible payments. Suppose fraud rate is 5% and Bitcoin volume 2%. This nets Valve a 0.1% increase to revenue, nothing to write home about.
- Indirect Benefit — Creating a “Bitcoin preferred” incentive structure for players may lead to long-term benefits, especially if Bitcoin volume grows to a significant portion of their revenue.
Player Benefits
- Bitcoin Incentives — If Valve offered Bitcoin incentives such as “immediate liquidity” on purchases made with Bitcoin, those customers receive an in-game item that is effectively more valuable than their credit card purchased counterparts.
- Intersecting Communities — The gaming community isn’t one that’s completely oblivious to Bitcoin. Afterall, they of all communities understand that value of digital assets. It’s not inconceivable that as Bitcoin purchased items are perceived as more valuable, more and more players begin paying with it.
- Price Arbitrages — Steam often price games differently in different regions. Players paying in Bitcoin can easily take advantage of these prices arbitrages to get the best deal.
- Simplicity — It’s actually simpler to pay with Bitcoin than entering credit card numbers, especially on small, one-off transactions casual players want.
Providing many of these benefits to players can lead to revenue growth for Valve. But bulk of this revenue comes NOT from direct benefit of reduced fraud rates, but from indirect benefits of providing more value to players.
Steam + Bitcoin was exciting, which led me to discover that Purse Instant can offers Steam gift cards at a 5% discount. (Disclaimer: I am a co-founder at Purse.) I will certainly try out the direct Steam integration once it’s active.
