"It has become untenable to support Bitcoin as a payment option."
Bitcoin is a fascinating, confounding, and beautifully efficient way for people to horde value. The one thing that’s long made it inconvenient for most people is that it’s a pain to spend. It’s all well and good if you’ve got a piece of digital currency worth more than $10,000, but how do you use it to buy groceries or video games?
Well, doing that just got a little more difficult. Mega-popular video game marketplace Steam announced today that it will no longer accept Bitcoin as payment. Steam boasts a user base in the tens of millions. The service adds new users at a rate of roughly 1.5 million a month and it’s a powerful market force in the digital distribution space. Steam added Bitcoin support in April of last year.
According to Valve, the company behind Steam, Bitcoin’s volatility makes it too unreliable to accept as payment. In under a year, Bitcoin went from being worth $700 per coin to more than $10,000, and the currency is susceptible to losing thousands of dollars in value overnight. That’s fine for investors, not so much for merchants.
“The degree of volatility has become extreme in the last few months, losing as much as 25% in value over a period of days,” Steam explained in a blog post on Wednesday. Basically, if someone pays a fraction of Bitcoin for a game, it might be worth $70 for a couple hours, but by the time the transaction actually makes it through the Bitcoin network, that same amount of Bitcoin could be worth much more—or much less.
Moreover, the Steam Team stated that the Bitcoin network’s high transaction fees make it a non-starter for video game payments.
“In the past few months we've seen an increase in the volatility in the value of Bitcoin and a significant increase in the fees to process transactions on the Bitcoin network,” the Steam Team wrote. “Transaction fees that are charged to the customer by the Bitcoin network have skyrocketed this year, topping out at close to $20 a transaction last week.”
Bitcoin’s high transaction fees and slow confirmation times have been a point of considerable debate and consternation in the Bitcoin community. A code fix called “segregated witness” was pushed through this year, but largely hasn’t taken effect due to low adoption.
The Steam Team said that customers used to pay 20 cents per Bitcoin transaction when it first gave the cryptocurrency a place on its platform last year. Now, that amount can be much more. That’s bad, but the volatility of the Bitcoin market is worse. The digital currency loses and gains value at such an incredible rate that it’s hard for most people to keep track of what’s going on. Right now, the coin is up in a big way but market watchers aren’t sure if it’ll stay there or crashand wipe out millions in user’s value.
When a user bought a game with Bitcoin, but the value dropped before the transaction could be confirmed, Steam had to either refund the user or ask to send over more Bitcoin to cover the balance, the company said. Either way, the purchaser has to pay Bitcoin fees twice. Too many Steam users got caught in this trap for Valve’s liking, watching their Bitcoin balance deplete as they tried to buy a video game.
"At this point, it has become untenable to support Bitcoin as a payment option,” Steam said. “We may re-evaluate whether Bitcoin makes sense for us and for the Steam community at a later date.”
It’s just another place Bitcoin users can’t go to easily spend their digital currency, as the go-to crypto continues to morph from an alternative vehicle for trade into a commodity hoarded by the wealthy.