You have heard the buzz about bitcoin (BTC) and you have questions. What is cryptocurrency? How do people use it? How many businesses are accepting bitcoins? How do I accept bitcoin payments? Let’s get some clarity on this cryptocurrency conundrum.
Bitcoin is a cryptocurrency—a decentralized, digital cash system which rewards participants who use their computers to contribute to its growth.
What are those contributions? Transactions. Whenever someone conducts a transaction with bitcoin (or another cryptocurrency), the computers working on bitcoin “mining” are tasked with validating the transactions.
Once these computers “agree” that the transaction is valid, it can be added to the global ledger of bitcoin transactions. This ledger is referred to as the “blockchain,” and it is the core of bitcoin’s functionality.
The blockchain is an encrypted, secure database that cannot be changed once transactions are added to it. Verified transactions are added to the database in “blocks” (groupings of many verified transactions), which are then “chained together” in a decentralized global database. This database contains the historic record of every bitcoin transaction that has ever happened.
You’ve probably heard the term “bitcoin mining” before reading this, but bitcoins aren’t actually mined—they’re generated as a reward for the computers who successfully validate and add blocks to the blockchain.
How did bitcoin become a valid currency? Someone took a small leap. According to Wikipedia, the first real-world bitcoin transaction consisted of 10,000 BTC and two pizzas. Since then, it’s been a magnificent snowball effect—coinmarketcap.com shows that bitcoin’s value has gone from $0.08 per coin in 2010 to $17,086.80 as of 12/20/2017.
So, are cryptocurrencies like bitcoin a legitimate payment method?
Yes. There are operational exchanges to quickly swap almost any cryptocurrency for your preferred fiat currency. Business owners stand to benefit from equipping their business to accept bitcoin payments or other cryptocurrencies, using exchange services like Coinbase.
What are the benefits of accepting bitcoin or other cryptocurrencies?
For business owners, accepting bitcoin allows you to:
- Reduce payment processing fees. Cryptocurrency has lower transaction fees than credit card processing companies, and transactions are permanent, so there is no risk of questionable chargebacks.
- Reach a new audience. Cryptocurrencies are global—using them opens you to the international marketplace.
- Keep transactions secure. Thanks to strong encryption, cryptocurrencies offer increased privacy and security of transactions, making it extremely difficult to hack your cryptocurrency wallet address.
- Diversify your assets. Diversification is easy with cryptocurrency—there are exchanges to help you transfer assets into cryptocurrency for holding purposes, and cryptocurrency portfolio management tools are starting to make strong headway in the marketplace.
And there are marketing benefits, too. Once your audience learns you accept cryptocurrency, it sets your business apart from competitors who do not. If you’re the first in your industry to start accepting cryptocurrency payments, it can increase awareness in your favor.
What are the risks to accepting bitcoin or other cryptocurrencies?
To quote Warren Buffet, “You can’t value bitcoin because it’s not a value-producing asset...it's a real bubble in that sort of thing.” It’s true that bitcoin is not something tangible that produces new value. However, fiat currencies like the U.S. dollar could be seen the same way, as they don’t have intrinsic value either. Yes, there is a risk of a bitcoin bubble burst—but with coin exchanges, your business can do a daily sweep of your crypto-earnings into the fiat currency of your choice. A few years ago, this wasn’t possible. Today, thanks to the rapid expansion and increased popularity of cryptocurrencies, there are many ways to mitigate the risk of rapidly fluctuating exchange rates.
Who accepts bitcoin or other cryptocurrency for payments?
Based on an article from entrepreneur.com, there are at least 80,000 businesses that are accepting some form of cryptocurrency for payments. That number is growing, and there are more than a handful of well-known businesses that now offer cryptocurrency payment methods (Overstock.com, Microsoft, Steam, Virgin Galactic, Wikipedia, Tesla, Mint, Square, Shopify, Newegg, Lionsgate Films, and more).
How do I accept bitcoin or other cryptocurrency as payment?
All you need is a digital wallet, a cryptocurrency exchange (like Coinbase) to swap cryptocurrency for your preferred fiat currency, a portfolio management tool (if you choose), and the time it takes to add the transaction option to your point-of-sale system.
Which cryptocurrencies are being accepted by businesses and why?
Most businesses that accept cryptocurrency are focused on bitcoins, but other “altcoins” (a general term for any non-bitcoin cryptocurrency) are making headway. Monero is one example of a cryptocurrency that has grown rapidly in the past few months, thanks to analysts suggesting it has the potential to overtake bitcoin due to its enhanced security and privacy.
Is your business ready to start accepting cryptocurrency as payment?
It depends on what types of payments you’ll be accepting. For large companies that do massive business deals (think hundreds of millions), the process they currently have won’t be improved by accepting cryptocurrency. But for a small business that wants to avoid credit card transaction fees, or a medium-sized business that does not like the slow speed of credit card transactions, or perhaps a company that would like to have more control over chargebacks from customers, these are legitimate cases to start accepting cryptocurrency. Cryptocurrency exchanges are helpful because they make it easy for your business to swap cryptocurrency for fiat currency without any additional risk.
What are your thoughts about cryptocurrencies? Share in the comment section, or contact us to discuss whether accepting cryptocurrency is right for your business.