Blockchain For The Average Joe

Imagine shopping for a new outfit, computer or groceries and paying for the purchase with bitcoin. Yes, in a real store. Why not? Love or hate blockchain, there’s no denying that digital currencies have grown in popularity, and there is certainly a market for cryptocurrency acceptance at physical retail points of sale (POS). In fact, a few companies are even supporting it already, including Ingenico. But is it enough of a market to bother developing a whole new POS network and terminal to support it?

David Lee, Camelgram CEO and founder, thinks so — although he admits the market is still fairly niche today, similar to early PCs. So far, said Lee, only the tech-minded are interested in blockchain adoption; it’s still too complex to be embraced by the average person. But he believes that, if using digital currencies in the real world becomes easy, people will embrace it, so that’s what he aims to do.

Blockchain adoption could start with people who already have cryptocurrency assets that are currently difficult to spend, before one day reaching the average consumer — perhaps through bundling with loyalty points programs, Lee suggested.

On the merchant side, Lee said those who are interested also need an easy entry point that doesn’t require them to navigate the weeds of how blockchain technology actually works. That’s why Camelgram’s POS terminal reads and changes the distributed ledger directly when customers pay with a digital currency. Lee hopes that it will give merchants a way to participate in the growth of digital assets without requiring them to learn all of blockchain’s complex functions.

Like many in the POS space, Lee wants to give consumers as many options as possible. After all, the customer is always right, so if he wants to pay with a digital asset, there should be a way for him to do that, Lee said — and it shouldn’t require merchants to become experts in every new form of payment, especially one as complicated as blockchain.

To maximize the efficiency of its POS terminal and network, Lee said that Camelgram is also piloting its own blockchain currency, POS, which is in the ICO (initial coin offering) phase until Nov. 6.

“As people experience crypto assets, they’ll enjoy it,” Lee said. “You can use your own money any time you want to — it’s freedom. People will adopt it.”

To Invest or Not to Invest

Cryptocurrency experts have mixed feelings.

Han Chang, co-founder of InvestmentZen, said, “I fully believe cryptocurrency is on the path to mainstream and, as such, there’s plenty of room for innovation in the world of POS. That said, I don’t think it’s fully understood by the vast majority of people and lawmakers, which means rolling out POS technology at this juncture could be premature.”

Chang said he holds positions in the digital currencies bitcoin and Ethereum and welcomes what Lee and Camelgram are trying to do. However, he fears the company could become a victim of its own success. If cryptocurrencies continue on their mainstream trajectory, he said, they will naturally become more regulated, and one new regulatory bill could cut the legs out from under a POS like Camelgram’s.

“We’ve already seen China significantly dial back progress,” Chang said. “It’s not far-fetched to think regulation could put a stop to the industry before it really takes off. I sincerely hope that’s not the case, but it’s certainly plausible. I’d be wary to adopt a crypto-POS system at the moment.”

Jad Mubaslat, founder and former CEO of BitQuick.co, a leading U.S.-based bitcoin trading platform that was acquired in June 2016, was also wary.

“Investors should approach this investment with caution, just like any other ICO,” Mubaslat said. “Camelgram’s success depends on it not only developing a POS that accepts cryptocurrencies, but also one that is competitive against established POS systems, and that the established POS systems won’t add cryptocurrency.”

His prediction? Most established retail systems haven’t added cryptocurrency support because people aren’t demanding it. Once that happens, he believes the existing systems will integrate it.

An Invitation for Criminals?

Chang felt that point of sale could become another entry point for con artists who tend to be attracted to cryptocurrency. But if you ask Jon Holmquist, marketing manager for the U.S. expansion of Japan’s largest bitcoin exchange bitFlyer and moonlighter at Bitcoin Black Friday, it’s just the opposite.

“Criminals have gotten caught for using bitcoin,” Holmquist said. “Every BTC payment you make is broadcast to the network, which means the entire world can see it, track it, store it, review it, for forever. If you want to use an untraceable currency for your illicit transactions, use cash.”

Mubaslat felt the same way. “The risk of criminal proceeds is no higher than that of cash,” he said.

Lee expects that accepting cryptocurrency for everyday transactions will encourage legal use of digital assets and help them break free of that reputation. For now, though, that reputation is still very much in force, and that’s something that may give some merchants pause, regardless of how true it holds.

“It is important to assess the direct impact that accepting cryptocurrency can have on a brand,” said Areiel Wolanow, managing director of the consultancy Finserv Experts. “Cryptocurrency has strong associations: not only with technology, but with rejection of authority and, in some cases, outright criminality. These associations will enhance some brands and harm others.”

Proceed with Caution

Besides reputation, Wolanow could think of a few major questions that any merchant or retailer would want to consider before investing in a cryptocurrency-enabled POS.

First, does it serve current or potential customers — do they have digital assets to spend? If so, will accepting them as payment generate new business in excess of the investment required?

Second, although processing cryptocurrency payments has a lower transaction fee than processing credit cards, converting digital assets back into traditional financial assets can get expensive. Is the projected increase in sales worth the erosion of the profit margin?

Finally, what mechanism does the merchant plan to use to accept cryptocurrencies — an exchange-hosted wallet, which is convenient but less secure; a hardware wallet, which is more secure but less convenient or a middle-of-the-road software wallet? What is the right balance of friction and security to make blockchain a benefit rather than a burden for both the merchant and the customer?

All that being said, while the industry experts may not be charging ahead with enthusiasm, they do see Camelgram’s efforts as viable.

“Bitcoin could really only handle so many transactions before SegWit (essentially an update to the network that just occurred to allow for faster payments),” Holmquist said. “I think at this point it would be possible to handle quite a fair amount of transactions over the bitcoin network, but quite frankly there aren’t going to be enough bitcoin consumers right now to even cause an issue.”

His conclusion? “This is viable at scale.”