By Idris Ayinde
Business should begin thinking of how payment would be in the coming years. Cryptocurrency (or crypto-currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies are a kind of alternative currency and digital currency (of which virtual currency is a subset). Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems.
There are various types of Cryptocurrency such as Bitcoin, Litecoin, Namecoin, Swiftcoin, Bytecoin, and Peercoin among others. The popularly used cryptocurrency is the Bitcoin. Active since 2009, Bitcoin is considered the first decentralized cryptocurrency. Since the release of Bitcoin, over 4,000 altcoins (alternative variants of Bitcoin, or other cryptocurrencies) have been created.
Despite numerous debate on whether businesses should adopt cryptocurrency or not and the rejection of the currency by governmental bodies, cryptocurrency still remains traded in the market. Some notable organisations such as Overstock announced in August 2017, their acceptance of cryptocurrencies as a form of payment for goods they sell. They will take not only Bitcoin, but Ethereum, Litecoin, Dash, and Monero as well. Even the Tech Giant, Microsoft began accepting Bitcoin cryptocurrency back in December of 2014. Same are the companies such as Subway, PayPal, Shopify, Pizzaforcoins. Apart from organizations adopting the digital currency, many individuals have begun to invest in the digital currency; people like Warren Buffet, Roger Ver, and Marc Andressen are some of the notable figures to have invested in the digital currency.
With the emerging technology, future start-up owners and entrepreneurs need to understand the effect of this technology on their business with its advantage. Some of the advantages of Cyptocurrency is the fact that there is ‘no processing fees’. Almost all forms of digital payments have a processing fee. This is because there is typically an intermediary that facilitates the payment and takes a cut. For example, when you accept credit cards as a small business, you’re typically charged 2% – 3% by your credit card processing company. This is also the case with companies such as Stripe or PayPal. Cryptocurrency, on the other hand, doesn’t have any processing fees because there is no intermediary. Cryptocurrencies use decentralized ledgers and act as a peer-to-peer digital currency, meaning that you don’t have to pay anyone to facilitate the transactions. This means that you can either save more money or pass on your savings to your customers with lower budget. This means transactions with cryptocurrency means bye-bye to maintenance card billing and SMS alert charges.
Unlike with credit card transactions, all cryptocurrency transactions are final. This means that there is no way for a consumer to dispute a charge and negate a sale. Merchants are therefore able to better control their return policies and it removes the risk of chargebacks and other things that might eat into your revenues. This also helps with customer fraud, such as when fake credit cards or bills are used or when a customer fraudulently disputes a valid transaction.
Also, Cryptocurrency transactions happen in near real-time. For example, it takes Bitcoin miners roughly 10 minutes to verify and facilitate a transaction from one person’s wallet to another. There are even cryptocurrencies like Litecoin and Ethereum that verify transactions in as little as 20 seconds. This means that coins are deposited into your merchant wallet in 10 minutes or less. This is faster than the 2 – 3 days it takes for a credit card transaction to clear. However, merchant wallets typically convert coins to cash automatically, sending the equivalent currency to a business’s bank account via ACH within 2 – 3 days. This means that while you can receive coins quickly, the time it takes to actually receive the cash is the same.
Finally, consumers and small businesses can purchase cryptocurrencies using cash on open exchanges found on Coindesk, Coinbase, and Bitpay at stated exchange rates. They can then use cryptocurrencies to buy goods/services at participating businesses that have wallets to accept cryptocurrency payments.