Bitcoin and Small Business: Is Cryptocurrency for You?
Depending on where you sit on the technological evolutionary chain, you might consider bitcoin and other cryptocurrencies to be a natural next step in the ever-changing world of business transactions…
…or you might be asking, “crypto-WHAT”?
Put simply, cryptocurrency is a digital form of money, with no banks, financial institutions or governments standing between you and your customers’ money. Bitcoin is one form of cryptocurrency, and the one most people hear about.
While you might not see it at your corner store (well, you won’t see it at all because it’s virtual), bitcoin has been making its way into the mainstream since about 2015, and today more than 100,000 businesses use it, including Microsoft, Amazon and Expedia. The nature of bitcoin means most businesses that do use it, use it to buy and sell goods online.
Is cryptocurrency a good idea for small businesses, and more important, your business?
Maybe. Its digital format makes cash exchanges easier and faster, and its elimination of the middleman (aka financial institutions) makes accepting customer payments less expensive. But like with most new(ish) technologies, digital currency has its pros and cons. Here are some to consider.
Pro: No fees. Bitcoin transactions typically cost between one per cent and zero. Bitcoin doesn’t require a bank to verify each transaction, so you don’t have to pay fees to financial institutions like you do with credit card transactions.
Con: It’s unregulated. Cryptocurrency is not regulated by any government or financial institution. Some see this as a benefit, but many see decentralization as a negative. While legal in Canada and the U.S., bitcoin is restricted or banned in some other countries.
Pro: It’s quick. Bitcoin transactions are processed much more quickly than credit card transactions. With its own underlying technology blockchain that verifies transactions, and not a centralized institution, you don’t have to wait nearly as long for money to show up in your bank account.
Con: Price volatility . Like gold and other finite currencies, the value of cryptocurrency can fluctuate, and individual cryptocurrencies can experience “flash crashes”. (Ethereum, another type of cryptocurrency, recently dropped from $319 to $0.10 per coin in a matter of seconds.) Fluctuating prices can create challenges for businesses, but those challenges can be mitigated if you convert your bitcoins into cash right away.
The emerging world of cryptocurrency is an involved and fascinating one, and it’s worth educating yourself about bitcoin and other options if you think cryptocurrency might be a good fit for your business and your customers. But in a nutshell, here are three simple steps:
Get a wallet. To accept bitcoin or any cryptocurrency, you need to open a wallet account -- similar to a bank account but specifically for cryptocurrency. Each wallet account includes a unique address that customers use to send cryptocurrency payments. Your business will have a private key, which allows you to log in to access your wallet.
Integrate cryptocurrency into your point of sale . Most merchant wallets will provide shopping cart and online payment plugins, checkout pages and more, so it makes it relatively easy to add cryptocurrency as a payment option. Businesses can add the wallet address to their invoices; for physical invoices, customers can either user their smartphone to send coins or manually type your address online. With a digital invoice, customers can simply click on your address link to pay.
Convert it or keep it. The wallet account can automatically convert cryptocurrency to cash or it can save it for future use. (Cryptocurrency goes up and down in value. I won’t get into that here, but you can read here to see how rapper 50 Cent made millions by “forgetting” he had accepted and amassed a lot of cryptocurrency).