This thing called Bitcoin has been around since 2009. New tech, (think smartphones) can take off, but others like mini-disc players (remember those, me either) get lost in translation.
But what about something that is stuck in between? Familiar enough to know its name, but not famous enough to know what it is? That’s Bitcoin.
Many people are only familiar with it in the context of paying ransom. That’s how we at VC3, Inc. see it used most frequently -- as a payout to hackers. But this up-and-coming digital currency is being used for much more.
Let’s explore if Bitcoin is right for your small business.
What is Bitcoin?
While we’re still waiting for flying cars, the future of money might be upon us. Bitcoin is cryptocurrency – it’s just like any other currency, the difference is that it’s digital information only. Think of it as computer code with monetary value.
How is the value assigned, you ask? The value is based on supply and demand – basically, the more people want it, the higher the price. If people lose interest and need falls, so does its value.
There are other cryptocurrencies on the market as well: Litecoin, Ethereum, Zcash, Dash, Ripple, and Montero are the most popular.
And while this kind of currency is still picking up steam, some heavy hitters now accepting it as payment. Companies like Overstock, DISH Network, Microsoft, Intuit, and PayPal all accept payments in bitcoin, and the list is growing. Not to mention there are about 120 Bitcoin ATMs around the US.
What Are the Advantages and Disadvantages of Accepting Bitcoin at My Small to Mid-Sized Business?
If you are considering Bitcoin, here are some of the top reasons companies are on board.
Advantages To Bitcoin
1. No Fees– Forget merchant transaction fees. Every time you run a credit card – Visa, MasterCard, etc. – there’s a 2-3 percent transaction fee. Bitcoin transactions typically don’t charge a transaction fee, and if they do, it’s usually only up to 1 percent. The reason: Bitcoin doesn’t require a bank to verify the transaction. Depending on how many transactions you process, you could save a considerable amount bypassing fees.
2. All Transactions are Final – Bitcoin is digital cash, not credit. That means there’s no way for customers to contest a purchase. If your industry tends to rate satisfaction based on personal taste, this might be a good way to keep your cash.
3. Global Currency – If you deal daily in export, this might be an excellent way to save. Bitcoin (and cryptocurrency in general) is not part of any government or company. Because of this, there are no border restrictions or fees.
4. No Clearance Holding Period – Unlike regular banks, no centralized institution checks for funds. You’ll never have to wait for your bank to process, the currency will hit your account automatically.
5. Investment – Many small businesses are buying into Bitcoin, much like you would a stock or bond… but keep in mind Bitcoin is less stable than currencies backed by gold or silver.
And of course, for all that is good, there are still some real challenges to Bitcoin and your business.
Disadvantages To Bitcoin
1. Stability - Or the lack thereof. Bitcoin at its highest point beat out gold for currency value, but it has no overseeing institution. There is nothing that functions as a moderator or anything that bring balance to things like interest rates.
2. Zero Regulation - Sure, there are some great aspects to Bitcoin’s decentralized operations, but lack of government also means bans. There are some pretty strict restrictions and, in some cases, bans on the use of Bitcoin worldwide.
3. It’s Volatile - With a currency in flux, it’s tough to plan your finances. Making projections on prices or taxes can be extremely difficult if the monetary value is continuously changing.
Bonus: This can be an advantage or disadvantage depending on which side of the transaction you’re on. Bitcoin is virtually untraceable. If you get hacked and have to pay a ransom to decrypt your files, there’s no way to track who you’re paying. Meaning the hackers can get away with it anonymously.
Businesses that decide to accept Bitcoin as currency have to bob and weave between the good and the bad. Can you see value in Bitcoin? Would accepting it really push your bottom line? If you are seriously considering Bitcoin, work closely with your IT department and CFO to tackle the challenges it could bring. Plan for scenarios outside of the norm, but also day-to-day trials. If big names like Microsoft can use it, maybe you can too.
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