Although some of us have heard of cryptocurrency, it’s not quite mainstream yet. However, the number of businesses accepting cryptocurrency as an online payment method is growing. Earlier this year, there were 68 million wallet users worldwide. A wallet is like a digital wallet or bank account where users store their data.
The growing number of users signifies how we are slowly transitioning to adapting to cryptocurrency, not only for investment. But, as a payment option too.
But what is a cryptocurrency, and why do we encourage businesses to start adopting it as an option for payment?
What is a Cryptocurrency?
Cryptocurrency is best described as a peer-to-peer electronic cash system. The P2P technology is decentralized in nature. It means that there is no middleman involved in any transaction. Therefore, there are no bank authorities or governments to control or manipulate it.
When funds are transferred, there is no third party to process the payments. Instead, it is distributed online via blockchain technology, which acts as a public ledger. Every member can see every account balance.
Unlike money transfers from banks, cryptocurrencies are far more secure and equipped with sophisticated encryption technology. Most people prefer using it as a form of payment, as it is a safe way to do business.
The Rise of Cryptocurrency
Because of the Covid-19 pandemic, businesses are quick to adapt to ways that help them meet growing technology and consumer demands. A cryptocurrency is a tool that is convenient and safer as compared to other forms of transaction.
Corporations such as Tesla, MasterCard, and AT&T have made efforts to accept cryptocurrency as a form of payment for the goods and services they provide.
PayPal’s president and CEO, Dan Shulman, said in a press release that the digital form of currency is inevitable. It provides plenty of advantages, such as fast and safe transactions.
“The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access; efficiency, speed and resilience of the payments system; and the ability for governments to disburse funds to citizens quickly.”
As new technology emerges to provide solutions to build a more connected world, businesses should shift to these changes to reach more customers and thrive.
The rise in cryptocurrency as a form of payment option has made business owners question if they too should make it a part of their model or not.
Different Forms of Cryptocurrencies
As of 2021, there are more than 4000 cryptocurrencies. That’s a 90% increase from 2013. It’s easy to make digital currencies. Therefore, no wonder we can see new ones popping up all the time. However, not all of them last for a variety of reasons.
So, if you are thinking of accepting digital currencies as a payment option, you need to consider what cryptocurrencies are mostly used and dominate the market.
- Bitcoin (BTC) is the first and most widely used digital currency. However, BTC’s price is higher even though it’s mostly used by individuals. As of today, it’s more or less around $39,000.
- Ethereum is the market’s second most valuable cryptocurrency. Ethereum has a similar blockchain technology to BTC and is managed by an open network of users. However, its smart contracts and decentralized apps make it unique from BTC.
- Litecoin: It’s similar to bitcoin but has a faster processing speed and a larger supply of currency.
- Polkadot: With its unique proof-of-stake coin, it provides compatibility with other blockchains. It allows all blockchains to work together on one roof.
- Bitcoin Cash (BCH): Similar to bitcoin but with lower transaction fees than BTC.
Advantages of Accepting Cryptocurrencies as Payment
- Lower Transaction Fees
Unlike credit and debit cards, cryptocurrencies offer lower transaction fees. Credit and debit cards can cost up to a 3% transaction fee plus hidden charges. Meanwhile, cryptocurrencies can offer up to a 1% transaction fee with no other charges.
Cryptocurrencies are cheaper as there is no need for a middle-man to process the payment.
- Fraud Protection
As businesses and consumers transition to online transactions and adapt to digital transformation, cyber-attacks have increased too. Organizations must follow a cybersecurity checklist or use antivirus software to avoid data breaches or other attacks.
Accepting cryptocurrency as a form of payment provides both the seller and the buyer with a layer of protection that’s not easy to penetrate. The blockchain technology utilized by cryptocurrencies is complex and difficult to hack.
Furthermore, there is no need to send personal financial information.
- Flexible Payment
Accepting cryptocurrency as a form of payment provides options for your customers and a layer of protection. Furthermore, foreign payments are acceptable and easier with no expensive transaction fees.
- Faster Transaction
When accepting credit and debit cards, payment transactions take time. Also, money transfers through a bank can take time, sometimes even days. But with cryptocurrency, it only takes seconds to minutes.
Disadvantages of Cryptocurrency for Businesses
- Complicated Learning Curve
Since cryptocurrency payment is relatively new and complex, business owners require time to learn about it. Therefore, it prohibits small businesses from using this technology. Unlike large corporations, who can hire an expert to set up a wallet and manage the transaction, small businesses will need some time to learn about it.
- Unpredictable Market
Cryptocurrency is unstable. The price is highly volatile. It will often fluctuate, so it’s difficult to predict the market and the value of it. A small business owner should find a way to immediately exchange digital currency for cash while its value is high.
- Security Issues
Cryptocurrency, despite the use of blockchain technology, is not 100% safe. Unlike conventional payments, when an account gets hacked, there are insurance companies to cover the loss. For cryptocurrency, once someone accesses your wallet, there’s little chance to retrieve it, and there is no insurance to protect it.
How to Accept Cryptocurrency as Payment?
Learn About the Law
Before accepting cryptocurrency payments, find out local and federal laws about cryptocurrencies. After learning about the regulations, you can now proceed to create your cryptocurrency wallet.
Create a Wallet for Your Business
If you want to accept digital currencies, creating a wallet is the first thing to do.
You can choose what form of cryptocurrency you would like to receive.
There are plenty of cryptocurrency wallets available to store your customers’ payments. Here are some, to name a few:
Wallets can be stored on the desktop, online, on mobile phones, or on physical hardware. For businesses that deal with a large amount of cryptocurrency, physical hardware is best recommended.
When you finally have your wallet, you will receive a public address, QR code, and private key.
Integrate It to Your Website
After creating a wallet, you can start accepting payments by integrating cryptocurrency into your website. There are various ways you can accept cryptocurrency as payment.
- Manual Payment
Integrate your QR code or public address on your website so your customers can effortlessly deposit the cryptocurrency.
- Add a “Pay with Crypto Button”
Add a button for customers to be informed that you accept cryptocurrency as a form of payment.
- Use a Service Provider
A service provider can simplify the process of accepting cryptocurrencies. It takes some of the seller’s stress away. However, an additional expense is present.
As cryptocurrency is moving towards the mainstream, it is more likely to be adopted by businesses. Maybe when they become one of the most common payment options, cryptocurrencies will be regulated by certain laws in the future. For now, check out if your business needs to start accepting digital currencies to help you reach more customers worldwide.