Cryptocurrencies like Bitcoin are seeing growing acceptance in the market. More and more businesses offer it as a form of payment. Banks, insurance firms, and investors are all beginning to embrace these alternative forms of payment.
While there are many options out there, Bitcoin is by far the most well-known and widely accepted. Since about 2009 — and, like other cryptocurrencies, it has been around the longest- relies on a decentralized peer-to-peer blockchain network to conduct transactions and validate virtual coins.
Bitcoin payments and other commercial uses have grown significantly in recent years. Coinbase Commerce, one popular platform for facilitating these payments, said it saw $135 million in payments in 2019, up 600 percent year over year. The total number of transactions through payment processors was estimated to be $4 billion that same year.
The benefits of offering Bitcoin
For SMBs, there are many benefits of offering Bitcoin as a form of payment. Businesses that accept Bitcoin don’t have the same chargebacks or transaction fees they might have for credit cards. The nature of the peer-to-peer payment system also allows for faster international transactions universally accepted in all countries.
On a more intangible level, Bitcoin is also seen as a “cooler” form of payment with younger generations — particularly millennials. Offering cryptocurrency as an option for payment could help your business stand out amongst that market.
Finally, Bitcoin can serve as a form of investment for the business. In the early months of 2020, Bitcoin prices have spiked, climbing 40 percent as of January. That rapidly rising value is a good ROI for any business that holds it (though it is important to note that the price continues to fluctuate). On top of that, it helps SMBs diversify their investments or even hedge against inflation – assuming the price of Bitcoin continues to rise.
What are the risks?
While there are some benefits to Bitcoin, there are also some significant potential risks to adopting it for an SMB. First, there is considerable market volatility, which means the value of the investment could evaporate overnight. Second, there are some potential security risks. There have been multiple hacks at some of the major cryptocurrency exchanges, which left many owners empty-handed with no way to trace their lost funds due to the anonymous nature of the currency. Finally, Bitcoin is often stored in a physical wallet, which can be stolen or locked forever if the password is forgotten.
It’s up to each SMB to determine their risk tolerance for emerging technologies like cryptocurrency. Doing some careful research to understand the risks and opportunities will be necessary for any business owner before taking the Bitcoin plunge.