Blockchain. Cryptocurrency. Bitcoin. You've heard the names before, especially Bitcoin, and they usually conjure up images of wild price fluctuations and bubbles. And while the concepts and technology remain abstract for most people, cryptocurrency payments are gaining momentum and being embraced more and more in the mainstream. Case in point: Visa recently partnered with BlockFi
to market a Bitcoin rewards credit card. This article provides an overview of cryptocurrency in general and as well as its advantages and disadvantages for consumers and merchants.
What is Cryptocurrency?
Before we discuss the pros and cons of cryptocurrency, we should start with the basics! Blockchain
, which is commonly confused with cryptocurrency, is the technology platform that was introduced in 2008 and underpins cryptocurrencies. It's an open, decentralized ledger that efficiently records transactions between two parties. These transactions are verifiable and permanent. Blockchain's key advantage: eliminating the need for an intermediary, thereby enabling direct peer-to-peer transactions. Possible real-world applications include transferring funds, tracing and tracking inventory, and settling trades. Cryptocurrency
, on the other hand, is a medium of exchange that harnesses encryption to regulate its use. The most common cryptocurrencies today are Bitcoin
. Bitcoin is a decentralized (i.e., does not require a third party such as a bank) digital currency that uses blockchain to perform transactions on a peer-to-peer network, and Ethereum and others like XRP (Ripple) and Tether operate on the same principle.
Advantages of Cryptocurrency
Now that we're out of the weeds, let's go over some of the key benefits of cryptocurrencies over traditional or real currencies. Lower banking fees
: High fees, chargebacks, and other transaction costs have long been the bane of merchants, not to mention funding lags. With crypto, the fastest and cheapest transaction rate is $0.22, while credit card companies charge 13%. Likewise, payment is nearly instantaneous, so you won't be waiting days for funds to show up in your account. Simplified international payments:
Traditional wire transfers and foreign purchases are subject to high fees and foreign-exchange costs, as well as lengthy settlement times. Cryptocurrency payments, on the other hand, take place without institutional or government involvement, so the transactions are cheaper and faster. This is good news if you purchase supplies or materials abroad or if you're looking to drive international business. A growing user base
: According to some reports, crypto adoption in the U.S. stands at around 5% and is projected to reach 20-50% by 2030. Furthermore, according to one study
40% of customers who paid with crypto were new to the merchant, while the transaction values were double
. Likewise, as is the case with many emerging technologies, younger people are keen on Bitcoin and are the early adopters, so you'll be appealing to a broader swath of the population.
the Drawbacks of cryptocurrency! It's unregulated
. Although the encryption techniques used to create the monetary units and track the transfer of funds are rock-solid, the lack of government support is off-putting for many people. This lack of regulatory oversight and the allure of uncapped returns on investment have resulted in cryptocurrency scams. Slow adoption
. Even though investor interest in cryptocurrency like Bitcoin is skyrocketing and longer-term projections are favorable, general uptake is lagging. Many people perceive cryptocurrency as the domain of the underworld and, as a result, have been reluctant to seriously consider it as a viable payment option. Likewise, the technology is poorly understood, particularly by older demographics. Volatility
. You've likely heard about Bitcoin's meteoric rises and precipitous falls in value. That volatility is a big turn-off for many consumers and businesses, however. For those who can't handle the stomach-churning ups and downs, stablecoin
might be a better option.
How to Accept Crypto Payments
The first step to accepting crypto payments is to sign up with services like Bitpay
, which provide plug-ins that seamlessly integrate with ecommerce platforms. Customers can then complete the transaction, and the proceeds will be sent to your digital wallet or deposited in your local currency. It's that simple. For brick-and-mortar retailers, the process is a little different. The first step is to upgrade your POS machine with a cryptocurrency wallet program. Bitcoin transaction fees are usually modest, approximately 1% per transaction. When a customer asks to pay with Bitcoin, you simply key in the price and send the data. A QR code is then generated, which the customer scans to complete the transaction. And, of course, don't forget to post signage showing customers that you accept crypto payments.
These are early days yet (even though Bitcoin has been around since 2009), and mass adoption won't happen overnight. We're talking about a foundational change, not a disruptive one. Indeed, for most people, cryptocurrency remains abstract and lacks broad understanding and acceptance. But the same was true when credit cards appeared in the 1950s, and we all know how that ended. Even if accepting cryptocurrency at the top of your to-do list, it should at least be on your radar. If you're wondering about accepting cryptocurrency or have any other payments-related questions, get in touch
with Sekure today.