Hundreds of online retailers have adopted bitcoin as a means of payment, Overstock.com being the first legitimate online retailer to join the bitcoin revolution. Bitcoin remains to be the most anonymous way to pay for anything online.
Blockchain, the underlying technology behind bitcoin, is witnessing record growth.
Reports reveal that global blockchain distributed ledger market accounted for $228 million in 2016, and is anticipated to reach $5,430 million by 2023, growing at a CAGR of 57.6 percent from 2017 to 2023.
What is blocking retailers
However, retail leaders are still cautious about implementing the blockchain technology, wondering if they should make that leap. This is because of limited supply visibility, the demand for sustainable products, and product authenticity, CNBC reports. There is no guarantee if the products have been counterfeited, and this could decrease the sales and increase questions about brand value.
Cryptocurrencies are subject to too much manipulation to serve as mediums of exchange globally, says the latest report from Bank for International Settlements.
Further, the fact that the decentralized ledger records every transaction and stores them on the network will result in congestion in Internet traffic. This means that blockchain when used in retail would break the internet because the size of ledgers would swell with every transaction.
The BIS report 2018 explains this scenario, “To live up to their promise of decentralized trust, it requires each and every user to download and verify the history of all transactions made. With every transaction adding a few hundred bytes, the ledger grows substantially over time. For example, at the time of writing, the Bitcoin blockchain was growing at around 50 GB per year and stood at roughly 170 GB.”
Every Bitcoin client stores his entire transaction history amounting to 100GB. The more transactions processed on the Bitcoin network, the faster the size grows. That’s the full capacity of a laptop’s or smartphone’s storage.
The energy issues associated with bitcoin are another major concern. According to the Bitcoin Energy Consumption Index (BECI) maintained by Digiconomist, every individual Bitcoin transaction eats up 275 kWh of electricity, and the overall consumption is comparatively higher than the per capita power consumption of 159 individual countries.
One main reason for this is keeping a real-time ledger for this system and every time it creates a new node, it communicates with each and every other node at the same time, thus using up as much power.
The BIS report further states, “But the underlying economic problems go well beyond the energy issue. They relate to the signature property of money: to promote “network externalities” among users and thereby serve as a coordination device for economic activity.”
The shortcomings of cryptocurrencies in this respect lie in three areas: scalability, stability of value and trust in the finality of payments.
Another is the expensive custom equipment used and the security requirements of having to wait 50 minutes more after each new record or transaction because the records regularly roll back. Besides, Bitcoin also has transaction costs after claiming to be free for the first few years of its existence.
The process of settling a transaction on the blockchain requires all the nodes in the network to come to an agreement that the transaction is valid. This is a far slower process than having a bank verify the same transaction. So the issues with cryptocurrencies also arise from their unstable value, the absence of a central issuer and lack of stability guarantee.
Where retailers are investing
Global retailers will invest in Artificial Intelligence (AI), computer vision and robotics to provide frictionless customer experiences, streamline processes, and increase diminishing product margins, according to ABI Research.
Brick and mortar retailers will spend $34 billion on AI technologies in 2025 against $4 billion in 2018.
Computer vision will account for 29 percent of this spending due to the technology’s ability to facilitate real-time inventory status reports, advanced customer analytics, and checkout-free retail models.
ABI Research forecasts that over 44,000 checkout-free stores will be deployed by 2023, with the Asia-Pacific home to the clear majority of these retail outlets.
By 2025, 167,000 robots will be in operation in physical retail stores globally – mainly used to monitor shelves. These robots, offered by companies such as Simbe Robotics and Bossanova, will see deployment in large format stores in regions with high labor costs and strong robotics initiatives, such as North America, Europe, and East Asia.