March 10, 2022 | 5-minute read (887 words)
Cryptocurrency is becoming more widely accepted, with almost one-third of small business executives and senior leaders reporting their companies accepted cryptocurrencies in an analysis by online invoicing firm Skynova.
There continues to be a flurry of activity in the sector, such as the debut of crypto payment processing platform Data Mynt, which aims to give retailers and enterprises a simple way to adopt crypto. Colorado has become the first state to begin accepting tax payments in cryptocurrency, and eBay is expected to announce whether it will begin accepting crypto payments.
But what exactly is cryptocurrency, and what logistics should entrepreneurs considering accepting cyrpto payments know?
What is cryptocurrency?
Cryptocurrency is a digital currency that lets users transmit money to one another via encryption over the internet. It is decentralized and relies on peer-to-peer technology. Cryptocurrency cannot be backed or regulated by any government or central bank. Without using a third-party payment processor, buyers send crypto directly to merchants.
Cryptocurrency is based on blockchain technology, a digital ledger that anonymously and publicly records all transactions. A customized digital key allows anybody to contribute transactions to the blockchain.
How do cryptocurrencies work?
A variety of digital currencies are exchanged daily. Bitcoin is the most popular of numerous blockchain-based currencies. Other cryptocurrency examples include ethereum, litecoin, zcash, XRP and stellar lumens.
If you operate a cafe, restaurant or brick-and-mortar retail shop, you most likely already have a point of payment system at the cash register. A Bitcoin wallet application may be used to update the latest POS devices. Simply enter the price and transmit the information to accept Bitcoin payment. The consumer can then scan the QR code to finish the transaction. Most online wallets charge a percentage of each transaction, and some wallet programs will even print a receipt if necessary.
A POS machine isn't even required for e-commerce transactions. You only need to install a cryptocurrency app on your tablet, smartphone or tablet. Transfers usually entail scanning a QR code, typing a code string or bumping two devices together.
QR codes can play an important role in facilitating cryptocurrency payments for entrepreneurs. By including a QR code on their invoices or payment pages, entrepreneurs can make it easier for customers to initiate cryptocurrency transactions using their mobile devices. QR codes can be scanned with a smartphone camera, allowing customers to quickly and easily enter the payment amount and complete the transaction.
Digital wallets are electronic wallets that store bitcoin and keep track of its value. They check transactions and the number of coins in storage simultaneously. There are two types of cryptocurrency storage: hot and cold. A hot wallet is linked with the internet, whereas a cold wallet is connected to a storage device like a USB drive.
A hot wallet is necessary to trade with bitcoin. But, because online cryptocurrency storage can be vulnerable to hackers, crypto experts advocate shifting cryptocurrency money to cold storage for security.
Coinbase and Coinkite are two well-known wallet programs. These wallets are compatible with existing point-of-sale devices, may be used online and can print receipts.
The official bitcoin app for Windows is Siacoin Wallet. It was designed for high-security transactions, such as those involving investments. MyEtherWallet supports both Windows and Mac operating systems. This online wallet tool can generate downloadable records and establishes a wallet without requiring an account.
The pros of accepting cryptocurrency
Smaller transaction fees:
Small companies are typically charged between 25 and 30 cents plus 2% to 4% of the overall transaction for each credit card swipe. However, receiving digital currencies in your wallet or through third-party wallets like MyEtherWallet or Coinbase determines transaction costs for cryptocurrency payments. The cost is considerably reduced because no mediator collects fees to facilitate the trade.
Due to the decentralized structure of bitcoin, merchants are protected against fraudulent chargebacks. Because no third-party can reverse the charges, bitcoin transactions are final, just like cash. Chargebacks are not possible with blockchain technology since it is based on a peer-to-peer network. Only the merchant (you) has the authority to cancel a transaction if a customer requests a refund.
Cryptocurrency can expand into new markets throughout the globe.
Catering to customer needs:
More and more people are investing in and using cryptocurrency as a legitimate way to pay for things. Customers will be able to pay in another method, while their information will be protected and secure.
Now, the cons:
Accepting cryptocurrencies necessitates the creation of a digital wallet on a cryptocurrency exchange. For some small business owners, it may be technically challenging.
: One of the biggest hazards of adopting digital currencies is price volatility, which causes the value of cryptocurrencies to be very volatile. Bitcoin, for example, was worth pennies when it first came out. At the time of publication, one Bitcoin was worth more than $39,000.
Security of cryptocurrency transactions
: Even though cryptocurrency transactions reduce cyber threats such as stolen credit card details, the currency is not entirely secure. Additionally, cryptocurrencies are unbacked and uninsurable.
Since cryptocurrencies are so new, there is a lot of uncertainty about how the government will iron out the wrinkles in its regulations. As a result, if you want to take cryptocurrencies for your business, you should be ready to adjust and pivot to changes in rules regularly.