Valve started accepting Bitcoin payments on Steam in April 2016 but yesterday the online distribution platform announced they will no longer support the cryptocurrency. There are two factors to blame here.
First up, Steam blames the big jump in fees to process transactions on the Bitcoin network. The company says the processing fee for a transaction was about 20 cents in April 2016, but last week it jumped to as high as $20. Transaction processing is also too slow.
Additionally, Steam no longer wants Bitcoin because the cryptocurrency is way too volatile. These days, the virtual coin can fluctuate as much in two hours as it was worth at the start of this year, so that's far from ideal of you're running a business.
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. For example, 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 (compared to roughly $0.20 when we initially enabled Bitcoin). Unfortunately, Valve has no control over the amount of the fee. These fees result in unreasonably high costs for purchasing games when paying with Bitcoin. The high transaction fees cause even greater problems when the value of Bitcoin itself drops dramatically.
Historically, the value of Bitcoin has been volatile, but the degree of volatility has become extreme in the last few months, losing as much as 25% in value over a period of days. This creates a problem for customers trying to purchase games with Bitcoin. 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.
The normal resolution for this is to either refund the original payment to the user, or ask the user to transfer additional funds to cover the remaining balance. In both these cases, the user is hit with the Bitcoin network transaction fee again. This year, we’ve seen increasing number of customers get into this state. With the transaction fee being so high right now, it is not feasible to refund or ask the customer to transfer the missing balance (which itself runs the risk of underpayment again, depending on how much the value of Bitcoin changes while the Bitcoin network processes the additional transfer).
As such, the Steam team decided to drop Bitcoin support as it no longer makes sense to accept these payments. Bitcoin hit a lot of new highs recently, as I'm writing this the cryptocurrency is worth $14,673.54.