E-commerce began as soon as the Internet became available for widespread use around the mid 1990s. Among the first to establish themselves was Amazon, which sold goods that retail outlets would traditionally carry, and eBay, which allowed users to sell new and used goods to each other via auctions.
Payments for goods sold through e-commerce sites include credit cards in the first instance, and later incorporated PayPal and even later, mobile wallets such as AliPay and GooglePay. Indeed, e-commerce provides a convenient way for consumers to obtain goods without having to leave the comfort of their homes. E-commerce websites saw a huge upsurge in sales especially during the Covid-19 global pandemic. People were either unable or unwilling to leave their homes due to the risk of infections, and thus preferred to buy things online instead.
As more and more organisations and individuals are embracing web3 now, it is opportune to ask: how is e-commerce going to be affected by web3? Here are some ways in which e-commerce would be enhanced:
E-commerce sites accepting cryptocurrency payments
Currently, the majority of transactions on e-commerce sites are using national currencies (known as “fiat” in web3 terminology). With more and more people buying cryptocurrencies, e-commerce platforms would also increasingly accept cryptocurrency payments. All it takes, from a technological point of view, is to integrate crypto wallets into their payment gateways similar to how NFT marketplaces integrate them. In fact, some major e-commerce sites are already doing this. BigCommerce, WooCommerce, and even Shopify already support cryptocurrency payments using crypto wallets like Coinbase, BitPay, GoCoin and CoinPayments.
There are several benefits of doing this:
- Firstly, under a fixed price model (such as if a T-shirt is listed at 0.01 ETH), it would help holders of cryptocurrency use up the cryptocurrencies they own when the market is bearish. That is to say, if they had purchased 0.01 ETH at $30, but the market is currently not in their favour and the 0.01 ETH they hold is now worth only $15, they can offload that currency by purchasing something from an e-commerce site. Because of the exchange rate, they would have effectively obtained that item for a cheaper price than what they would have paid if the cryptocurrency had a higher value. E-commerce sites can then hold on to those cryptocurrencies and wait for the bear to end, and cash the cryptocurrency into fiat for a profit.
- Secondly, under a flexible price model (such as if a T-shirt is listed at prevailing cryptocurrency market rates equivalent to its price in fiat), it would help holders of cryptocurrency in a bull market. That is to say, if they had purchased 0.01 ETH at $30 and it was now worth $60, consumers will be able to spend less ETH to obtain the item they want. That same T-shirt, which was worth 0.01 ETH, would now only cost 0.005 ETH.
Purchasing items using cryptocurrency would expand the use of cryptocurrency in the economy, putting more wealth into circulation.
Increased security of payments through blockchain technology
We all know that malwares and hacking can compromise the security of online transactions. The SSL/ TSL certificate on websites can only do so much to protect the financial data of the customers of e-commerce sites. Security issues still exist despite the encryption provided by SSL/ TSL certificates because the financial information resides on a single server.
The Smart Contract on blockchains can easily solve this problem. Smart Contracts are encrypted proofs of ownership that do not reside on a single server. Rather, these Smart Contracts are deployed on the ledgers of every customer who signs up for an account on the e-commerce site. Because of this distributed, decentralised nature, transactions recorded on blockchains are immutable (cannot be changed), traceable (the exchange of money for goods can be traced between all the digital wallets involved in the transaction) and transparent (anyone can check the record of transactions).
Through the use of crypto wallets, sensitive financial data such as credit card numbers can be hidden from public view, with only wallet addresses and transaction hashes being shown. Any suspicious activity involving a customer’s credit card can thus be traced and addressed quickly.
Using NFTs as tickets or store credits
NFTs are known as non-fungible tokens and they are an evolution of cryptocurrency. Ethereum was the first to deploy NFTs using their ERC-721 standard, effectively creating tokens that serve more as digital goods than cryptocurrency. Early NFTs were merely digital artworks that one could purchase. These include the early NFT projects such as Moonbirds, CryptoPunks and Bored Ape Yacht Club (BAYC). People who purchased these NFTs were initially web3 aficionados, keen on supporting the next developments in web3. With their increasing popularity, many others who weren’t initially web3 enthusiasts saw the investment potential in these NFTs and quickly bought them to see how they could profit from their increased demand.
More contemporary NFT projects have gone beyond the mere idea of a simple JPEG, PNG or GIF and have built elaborate ecosystems around their NFT projects. UFC Strike, the NFT arm of the Ultimate Fighting Championships regularly mint less popular cards for cheap, and then hold burn challenges where holders of these NFTs can burn their less popular cards in order to receive more popular cards of UFC champions. Other NFT projects have injected other forms of “utility” in their NFTs. Some projects package NFTs with physical goods, where the owner of the NFT is entitled to a physical good. Even Bored Ape Yacht Club has effectively used their NFTs as entry tickets to their annual Ape Fest where attendees can attend a lavish party.
E-commerce sites could also use NFTs creatively. One idea they could use is to use NFTs as tickets for digital goods they sell, such as pay-per view shows or streaming services (such as Amazon Prime). Currently, there is a black market for sharing passwords and account details. Friends do so to share the cost with each other. There are also those who make a living by buying accounts and passwords and selling them to others as non-approved third party resellers. NFTs, however, can solve this problem quite easily. The ownership of each NFT is tied to a customer’s digital wallet, with a unique digital wallet address. It is impossible to “share” NFTs across wallets. NFTs can only be transferred, meaning that there can only be one owner of one NFT at any one time. Because of this, using NFTs as tickets allows only the rightful owner of that NFT to access the digital good sold by the e-commerce sites. Ownership of NFTs can be verified using bots specifically created to check the transaction hashes on blockchains.
E-commerce sites could also use NFTs as store credits. This is similar to how Pinktada uses NFTs for travel accommodations. It converts each night of room reservations into a token (Room-Night Token, or RNT) that can be easily swapped or sold based on the live market price up to 2 days before check in, giving travellers flexibility in their bookings. These RNTs can be swapped for a different Pinktada booking or sold back for PinkCash up to 2 days before check in. Guests can swap their bookings for any available room on Pinktada, including another hotel or destination. They will receive swap credit based on the current market value. This idea could easily be applied to store credits, reducing the need for refunds and enabling easy “change of mind” requests.
