Crypto has exploded in popularity in recent years, and that has only grown exponentially during the pandemic and retail investment craze. Bitcoin has pioneered this, and they are the original cryptocurrency and has continued to raise the bar for crypto standards. Not only is it a useful investment tool, but it can be used to perform everyday transactions, both small and large, as well.
But many businesses have started to investigate whether accepting crypto payments is worth the initial investment and the short and long-term risks? Of course, there are risks, as with any business activity, but crypto can magnify those risks in some cases. So let’s take a look at what accepting crypto payments can do for your business.
What Is Crypto?
The big question: what is cryptocurrency? Cryptocurrency is a decentralized, peer-to-peer network that facilitates both the production or “mining” of new crypto and the transaction functions, keeping an open-source ledger that can be independently verified.
This sounds complicated, but what it means is that no single party controls the currency. As a result, it can be publicly and anonymously verified without the need for any central processor or governing board. Instead, the production of any given crypto is generally a function of the mathematical equations hardcoded into the currency.
What Are The Benefits Of Crypto?
There are many benefits to accepting crypto payments for your business. Here are a few.
Wallet security is impossible to overcome with currently available technology. This makes crypto one of the most difficult to steal currencies, and documented occasions of theft are usually attributed to poor security or habits on the coin holder.
When properly implemented, cryptocurrency wallet encryption cannot be broken outside of quantum computing. But, this also makes wallet recovery incredibly easy when the seed phrase is kept safe. Often seed phrases are etched onto corrosion-proof metal and stored in a hidden location. Thus, even if a wallet file is stolen, it cannot be recovered by any normal means without the proper owner.
Blockchain technology is incredibly fast. Blockchain technology can accommodate hundreds of transactions per second. This high transaction speed can benefit those who deal with this, even small payments and large ones.
One of the drawbacks of the modern banking system is the lack of immediacy, which is a travesty with our current technology. Blockchain technology allows crypto transactions to enter the system and be verified and confirmed in moments.
Use crypto to pay for lunch quicker than the cashier can physically make change for a cash purchase and send the funds for a home down payment in less than a second, eliminating ACH or wire transfers that can take hours at best, days at worst.
Having a payment method that more people want to use means more people will spend at your site while using that payment method. If you have customer after customer telling you that they want to buy your goods using Bitcoin, or Ethereum, being unable to accept those currencies means you could be missing out on those sales.
Low Transaction Fees
One of the best things about the decentralization of crypto means you don’t have to pay outrageous fees to payment processors. The costs are built into the network and are often fractions of a cent for small transactions and a few pennies for even some of the largest. So accepting crypto can help your business cut down on the money spent on payment processing.
Are There Risks Associated With Accepting Crypto Payments?
There are a few risks, and they are not insignificant. Take a look.
This is the big one. While Bitcoin is the standard for crypto, even it suffers from intense volatility at times. For example, in the last 18 months, as of the time of writing, BTC has gone from $9k to $20k, then to $30k, to $60k, only to settle back in again near $47k. For small businesses, losing that percentage of equity in an asset can be devastating.
Recurring concerns are surrounding the regulatory industry and how they may or may not be willing or able to restrict or regulate crypto. For the time being, they treat crypto similarly to other capital gains, where they are heavily taxed if held for less than a year. As a result, some businesses could not afford to begin to accept crypto payments, only to have to sit on the assets for a year.