Steam, considered the largest digital distribution platform for PC gaming, has stopped accepting Bitcoin as a payment system.
|High volatility and fees make bitcoin unacceptable as money|
Steam's owner Valve announced today that it would stop accepting bitcoin as a method of payment.Valve said its decision was due to the "high fees and volatility" of bitcoin.In a blog post Valve claimed that bitcoin transaction fees had gone up from $0.20 when they initially began to accept bitcoin to almost $20 dollars per transaction last week. The gamers paying in bitcoin have to make up for these fees.One might think that since the value of bitcoin is often going up quickly Steam could make money on the transaction but Steam has to refund the difference which involves more transaction fees that the gamer must pay.Steam points out the transaction fees are now so high that it makes no sense for the firm to refund money when the value paid is greater than the present value of bitcoin and the same is true of a situation where the customer paid too little in bitcoin. To add the additional amount in bitcoin involves large transaction fees that the customer must pay.Steam says it may reconsider its decision in the future should the price of bitcoin become more stable. For now, it is still dealing with customers who have underpayed or still owe transaction fees.Who are Steam and Valve?Steam is considered the largest digital platform for PC gaming. It is estimated to have 75 percent of the market in 2013 by Screen Digest. By late 2017 Steam had over 150 million registered accounts. In 2015 Steam sold roughly $3.5 billion in games together with third party vendors.Steam is owned by Valve corporation a U.S. video game developer and digital distribution company based in Bellevue Washington State. It was founded in 1996 by former Microsoft employees. Steam was launched in 20004. By 2011 after issuing many critically acclaimed games that were also commercial successes, it became the most profitable company per employee in the U.S.No doubt other important firms that accept bitcoin will follow suit as transaction fees increase considerably and the volatility problem make it difficult to use bitcoin instead of fiat money in financial transactions.Could competitive coins displace bitcoin as a form of money?Dozens of companies accept bitcoin in payment. Many are listed at this site. However, as bitcoin's price continues to be highly volatile and transaction fees increase, some competing coins could become more widely used.One possible competitor is litecoin, but bitcoin cash is another possible contender. Bitcoin cash uses blocks that are 8 times larger than those of bitcoin making its transactions much faster.LitecoinThere are a few companies that accept litecoin in payment, but bitcoin has far more places that accept it and even has its own ATMs. Some of the advantages of litecoin for transactions are explained by its founder in the appended video. He sees litecoin being used for small transactions as it is faster than bitcoin while bitcoin although slower and with higher transaction fees is more secure and would be used for large transactions.If you look at the recent trades section in the Canadian Quadrigacx exchange you will see many of the trades are in the low hundreds or even below a hundred in Canadian dollars, in a number of cases. There are very few trades in the thousands and I did not see one that even reached the price of a single bitcoin. As it is now, bitcoin is being traded often in rather small amounts in many instances. These could represent cases where bitcoin is being used for payments.The processing time in litecoin exchanges is a block every two and a half minutes. In contrast bitcoin only processes a block every ten minutes. Litecoin's number of coins will total 84 million coins, whereas bitcoins' cap is just 21 million. It makes sense for more companies to accept litecoin in payment rather than bitcoin. However, in the cryptocurrency world common sense may not play much of a meaningful role.The price of litecoin as I write this is $96.97 a bit down from a recent high. However, on Sept. 18 it was just around $52 dollars and this time last year it was a mere $3.69. Coin Market Cap gives a historical chart of the price of litecoin in U.S. dollars, as well as showing its price relative to that of bitcoin. In relation to bitcoin's price, litecoin's recent price is in decline.
Previously published in Digital Journal