The ongoing buzz around cryptocurrencies and what they could do for businesses in the future is one that doesn’t look to be dying down any time soon, creating wealth to businesses adopting it, as well as those who are in the forefront of the cryptocurrency revolution, such as The Winklevoss brothers and the others in the Bitcoin Millionaire club. One of the hot topics in the discussion currently, however, is whether or not small businesses should start to accept cryptocurrencies as payments in the near future. Here, we’re exploring exactly that.
An Introduction To Cryptocurrencies
By definition, a cryptocurrency is a digital currency that relies on encryption techniques to regulate and verify transactions, transfers and the generation of new ‘coins’. This means that the currency should be decentralised, operating entirely separate to any companies, institutions or banks which not only increases security and reduced risk of fraud, but also provide a fast, efficient and low-cost method of payments and transactions.
The most well-known cryptocurrency is, of course, Bitcoin, though with the btc price consistently fluctuating, some businesses are opting for the likes of Ethereum and Litecoin as additional or alternative cryptocurrencies.
Cryptocurrencies have their benefits for small businesses or the topic likely would never have come up, but what are they, exactly? Here are just a few:
1. Faster Payments
We all know the pain of waiting 3-5 business days for payments to go through and small businesses in particular know this more than most. Small companies, especially those just starting up, can rely heavily on their income and this wait has the potential to leave them out of pocket when they need it most. Cryptocurrencies, on the other hand, offer near-instantaneous transactions that can be finalised and verified in a matter of minutes.
Fraud and hacking are rife amongst smaller businesses, especially when they don’t have the funds to invest in extensive security measures to protect data and transactions. However, the decentralised and encrypted nature of cryptocurrencies means that hacking is pretty much impossible.
Most cryptocurrencies work off a technology called the Blockchain, which acts not only as a digital ledger of all transactions, but is also hosted across ‘nodes’ which can consist of thousands of computers or more. To hack into the system, a hacker would need to decrypt and hack the entire network to bring it down. Small businesses wanting to protect their assets could greatly benefit from this kind of security.
3. Increased International Sales
The decentralised nature of cryptocurrencies means that it is, by default, a global currency. By offering customers the opportunity to pay with cryptocurrencies, small businesses could open themselves up to a wider and more receptive audience across the globe and not just in their country of operation. What’s more, they can accept payments without needing to account for foreign exchange fees, saving both the company and the customer money.
Like with most new technologies, cryptocurrencies do come with their risks, especially where small business activity is concerned and they are as follows:
1. Price Fluctuations
Most cryptocurrencies are still in their infancy and due to the fact that they are generally user-controlled, the price is prone to fluctuations. With more people using a cryptocurrency at any one time, the more likely it becomes that the price will fluctuate, and this can depend on what is being spent, stored and used for transactions across the entire blockchain network. Small businesses that are relying on a steady income could avoid cryptocurrencies for this reason, and understandably so. For some, the risk isn’t worth the benefits, though this can entirely depend on the industry that the small business is operating within.
2. Regulatory Uncertainty
Once again, the new nature of most cryptocurrencies means that there is uncertainty as far as regulation is concerned. There are countless governments across the world talking about cryptocurrencies, but very few have actually taken any action to regulate or ban them and it’s the uncertainty as to whether or not regulation could be introduced in the future that makes it so difficult for small businesses to be willing to take the risk.
Cryptocurrencies hold incredible potential for the future, but the uncertainty around whether or not they’ll reach it can make it a risky venture. However, those willing to take the risk could benefit from improved payments, increased company reach and much more, so the question around whether or not small businesses should adopt cryptocurrencies truly remains an open one – what do you think?