October 27, 2020 | AtoZ Markets – Cryptocurrencies entered the public eye a few years ago when their value skyrocketed in only a few weeks. Bitcoin dominates the cryptocurrency market, with more than 60% of the market share. It is both the most valuable and popular coin out there.
While Bitcoin has been heavily criticized due to its high volatility, it has slowly stabilized and distinguishes itself as a great long term investment.
But is cryptocurrency right for small businesses? Owners should consider a few important factors before they decide to accept Bitcoin. We’re here to go over some basics of the original cryptocurrency and explain why small businesses should accept Bitcoin.
What is Bitcoin?
Bitcoin is a decentralized peer-to-peer network that facilitates global online payments. To put it another way, the “decentralized” part suggests that there’s no central bank or government that regulates it. Instead, buyers transfer funds directly to sellers, and the payments are processed directly on the blockchain, the network where bitcoins are stored.
Bitcoin and cryptocurrencies cut out the middleman, eliminating the need for banks in a transaction. Every user holds their coins through an encryption key, becoming independent from an organization to safeguard it or handle it.
Furthermore, Bitcoin cannot be copied and transactions are definitive, eliminating the possibility of falsification and chargeback fraud. Its digital format makes it easy to store and carry around, making for makes for faster, cheaper, easier exchanges of cash, from which many small businesses may benefit.
There are many reasons why small businesses should accept bitcoin, like increased security, lower fees, and attracting bitcoin users as customers. The fact that users can buy bitcoin instantly today increases the adoption rate day by day. Let’s have a more detailed view of these advantages.
Lowering the cost of operations
Small businesses are aware of how expensive credit card fees can be, especially on a daily basis. Additionally, banks charge additional handling costs for business bank accounts that can add up quickly.
There are droves of businesses joining crypto adoption nowadays just because of the reduced processing costs. Since the processing fees associated with accepting crypto payments are minimal, businesses get to generate more revenues.
Decreased volatility through merchant wallets
The main drawback for businesses to accept Bitcoin as a method of payment is the inherent volatility of cryptocurrencies. However, this problem can be solved through merchant wallets.
Volatility is muted by the merchants’ ability to convert their crypto funds directly into a fiat counterpart automatically during the transaction. Instead of holding their funds in crypto, businesses can choose to have their Bitcoin converted into US dollars, euros, or whichever local currency suits them best.
While there’s still a small risk of price fluctuation during the transfer, it’s certainly worth it for the increased customer reach Bitcoin provides.
The decentralized nature of Bitcoin enables small businesses to expand their offer to international buyers for whom their products and services were once inaccessible.
Retailers can become competitive in the internet economy, in regions where traditional banking transactions are impossible or incredibly expensive.
The same goes for purchasing goods internationally. If a business purchases supplies or materials from abroad, then bitcoin is a great solution for dealing with foreign transaction fees, exchange rates, or currencies.
No payment disputes or fraud
While bitcoin is fully digital, it works more similarly to cash than credit cards.
Any merchant that uses digital money services on a regular basis, knows the pain of a payment dispute. Similarly, credit card holders have sometimes up to 60 days to open a dispute, if, for example, they didn’t enjoy the service provided.
With Bitcoin, transactions are final, making fraudulent chargebacks impossible. This acts as a safeguard for merchants, in addition to the impossibility of duplicating or falsifying bitcoins.
While we previously mentioned that Bitcoin’s volatility can sometimes be a problem for small businesses, they can also benefit from it greatly.
For example, Bitcoin’s price has doubled in the last year only, making it one of the best investments as of late.
Let’s also mention that since its conception, its price has gone from $0.03 to currently over $12.000, a 40 million percent increase in just over a decade.
Comparing this to a savings account, where you could gain (at most) a couple of percent on a yearly basis, the risk just might be worth it.
Bitcoin can certainly help small businesses in a lot of ways by reducing costs, increasing revenue, and tightening transaction security.
Furthermore, the looming uncertainties about cryptocurrency regulation are slowly disappearing. The big disadvantage of volatility can also be circumvented by merchants through automatic conversion into traditional assets.
Small businesses should consider these advantages, but also be ready to adapt to periodic changes in price that might occur.
Think we missed something? Let us know in the comment section below.