Despite meeting criticism and scepticism since 2009, cryptocurrency is starting to be recognised as a valid payment method in the commercial sector. Cryptocurrencies offer people a secure means of paying for goods and storing their assets. At the beginning of 2021, there were around 4000 cryptocurrencies in existence. There is clear merit in adopting cryptocurrency within your business.
However, you should understand the whole picture before jumping onboard. If you’re curious about using cryptocurrency, you can carry on reading to find out more.
Cryptocurrency: What Is It?
Let’s start with the basics. We’ve spoken about cryptocurrency, but what is it? In simple terms, cryptocurrency refers to digital assets used to buy, sell, invest, and trade. The concept behind any cryptocurrency is blockchain technology, which is what keeps it decentralised and secure. On a blockchain network, there is no one machine or server with authority. Instead, everyone in the chain can access the blockchain. When a transaction is made, a new encrypted block is created and added to a ledger. When a change is made, everyone in the blockchain network can view the change. Therefore, cryptocurrencies are near impossible to forge or hack.
When a payment is made using cryptocurrency, it needs to be validated before it’s encrypted and added to the ledger. To do this, digital miners work hard to verify the legitimacy of transactions. Once a group have transactions that have been confirmed, they become a block and are sealed into the chain.
When miners complete work, they are compensated with cryptocurrency. Typically, verification of transactions requires solving mathematical equations using supercomputers. This process is called hashing, which makes it possible for peer-to-peer transactions to take place without the need for a middle man.
Once cryptocurrency has been received, keys are stored in a wallet and can be used to buy physical goods, trade, sell, or invest in other coins. Our favourite wallet and crypto trading site is Paxful.com, which allows you to trade across their enormous peer-to-peer network. You can use real currency or existing cryptocurrency to buy Ethereum coins quickly from other users like you. All you need to do is sign up, define your search, and browse peer offers.
Advantages of Taking Crypto Payments
Being a business owner, your primary aim is to reach as many people as possible and turn a profit. By using cryptocurrency, you can reach a global market, process instant payments, and ensure security. These aren’t the only benefits of adopting crypto payment methods – we explore below.
Open the Market
Technology is a global business, so for tech firms specifically, accepting cryptocurrency can break down conversion barriers and open up a worldwide market. For example, if you provide SaaS but only accept local currency, you may deter foreign buyers. This is because they will be susceptible to exchange rates and fees charged by banks. Therefore, by using cryptocurrency, you offer a global payment option that isn’t subject to handling fees.
Reduction of Transaction Fees
Typically, small businesses are charged around 4% to any credit card transaction. Although this may seem small, it all adds up and can cost a fortune. Alternatively, if you opt to use cryptocurrency, you are looking to pay significantly less. Predicting how much you will pay is difficult because it depends on whether you receive it into a personal wallet or a third-party wallet. Taking in funds through a personal wallet is cheaper, but it’s not as easy to manage as a third party. Whichever option you choose, you will cut out the middle man and pay less in fees.
No Merchant Chargebacks
The way cryptocurrency works, there is no way a third party can undo a transaction. Therefore, as a business, you will be protected from any fraudulent activities. By using blockchain, any transaction you make is between yourself and the customer. Therefore, if a customer needs a refund, you are the only person that can send the fees back.
This is great for you, but it can be a deterrent for potential customers. The right to a refund is what gives consumers the confidence to make a purchase. Therefore, as a business, you will need to create a clear and binding refund policy that includes the taking of payments as cryptocurrency.
Meet Rising Demand
Cryptocurrency is experiencing an eruption in value, especially on the back of the first Bitcoin EFT on the New York stock market. Alongside the value surge, thousands more people are investing in Bitcoin all the time – and they want to spend it. As a business owner, if you accept cryptocurrency as a payment method, you are opening your doors to a wider market. Further, for those with security concerns, you will fulfil a need.
Although accepting cryptocurrencies has its advantages, you need to be prepared to learn about the technical side. You will need to track the crypto market, learn how to manage a wallet, and how to keep your public and private keys safe.
A Note on Disadvantages
For all of the cryptocurrency advantages, there are a few hefty disadvantages. In particular, you will need to convert crypto takings into cash assets to coincide with the volatile value changes. If you convert at the wrong time, you can end up losing money. When tracking the market, you should focus on Bitcoin because the other cryptocurrencies will follow its trend.
Alongside volatility, you will need to consider security. Currently, although blockchain technology is secure, customers are susceptible to digital theft. There is no way you can offer a 100% guarantee for consumer wallet safety. However, you can offset the threat by taking out cryptocurrency risk insurance. Further, you should back up all your data and ensure your keys are safe. A crypto wallet without a key doesn’t belong to you.
The Take Home
Cryptocurrency, especially Bitcoin, is slowly becoming an accepted payment option. As a business, accepting crypto payments will fill a gap in demand, open your market up globally, significantly reduce transaction fees, and prevent fraudulent chargebacks. However, there are security concerns to contend with and issues with market volatility. Before you choose to adopt Bitcoin, ensure you fully understand the technical side of it.