Bitcoin takes a hit as gaming giant Steam revokes payment status

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What is the future for bitcoin? Image: Adrian Today/Shutterstock

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Steam is the largest online gaming shop on the planet, and bitcoin is no longer welcome there.

In a major setback for the mainstream adoption of cryptocurrency, Steam, owned by Valve Corp, has announced it is no longer dealing with bitcoin as a payment method on the site.

Describing the issue of allowing the payments as “untenable”, the company cited mounting fees and unpredictable price fluctuations as the two main reasons for its decision.

Steam had first started accepting the cryptocurrency last April. Originally envisioned as a decentralised payment system, bitcoin is now viewed by detractors as a bubble that is close to popping.

Steam has a near-monopoly on the PC gaming industry, and its revoking of bitcoin as a payment system could see the cryptocurrency take a knock.

Increased volatility

In a blogpost, Steam explained: “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.”

Steam said that transaction fees have leapt from 20 cents to approximately $20 in just one year.

The company explained that the fluctuations can cause major issues when it comes to rapidly changing fee amounts: “When checking out on Steam, a customer will transfer x amount of bitcoin for the cost of the game, plus y amount of bitcoin to cover the transaction fee charged by the bitcoin network.

“The value of bitcoin is only guaranteed for a certain period of time, so, if the transaction doesn’t complete within that window of time, then the amount of bitcoin needed to cover the transaction can change. The amount it can change has been increasing recently to a point where it can be significantly different.”

Steam could reconsider

Steam said it could reconsider its position on the cryptocurrency in future, but the issue at present is too difficult to resolve. In recent days, valuations have rocketed past $14,000, and there is talk of the introduction of bitcoin futures.

The Verge reported that the cryptocurrency phenomenon has seen a 933pc increase in value since January of this year.

Bitcoin is trying to ease the congestion using something called the Lightning Network, according to Bloomberg. This would move some transactions out of the blockchain so buyers and sellers can carry out their transactions privately, and later give details of the transaction to the public network. It is said that this could ease traffic on the blockchain, and cut down on the long processing times and hefty fees.

Opponents of the cryptocurrency as an investment include Stephen Roach, a Yale University senior fellow and former chief economist at Morgan Stanley. In an interview with CNBC, he described bitcoin as a “dangerous speculative bubble” and a “toxic concept for investors”.

Ellen Tannam is a writer covering all manner of business and tech subjects

editorial@siliconrepublic.com