Why and how entrepreneurs should use bitcoin
With the increasing options for digital payment channels, you may have already decided whether or not to add PayPal, Google Pay, Alipay or Apple Pay to your payment options. Some businesses have chosen to accept bitcoin payments as well, including both entrepreneurs and large corporations such as Microsoft. But how do you know if accepting bitcoin or other cryptocurrencies is the right choice for you?
Let’s look at several practical considerations you should take into account before hanging up a sign that says “Bitcoin Accepted Here”.
No more waiting for payments
The most compelling reason for accepting bitcoin is most likely the faster processing time for transactions compared to other electronic methods. Traditional payment options such as credit cards or newer options like PayPal typically involve a few days before the money you made is actually in your account — bank or otherwise.
There are many reasons why those transactions take that long to process, one of them being that a centralised institution needs to check every transaction and only after that is able to credit the accounts accordingly.
With bitcoin there is no centralised authority that slows things down, it’s the decentralised blockchain and miner network that processes transactions. Entrepreneurs that decide to accept bitcoins will see immediately that there is no more need to wait nearly as long to receive a payment. Bitcoin transactions typically take less than 1 hour — a fraction of the time it takes a credit card transaction to be processed completely.
Lower transaction fees
Besides longer waiting times, credit cards can be an expensive payment option for entrepreneurs due to merchant fees. These are the fees charged to vendors for processing credit card transactions and can be very costly for small businesses.
Bitcoin can be a solution to this as the transaction fees are typically lower than credit card transaction fees. That means you no longer sacrifice parts of your own revenue to the financial institution that processes your credit card sales.
However, this comes with a serious caveat.
Bitcoin fees are related to the price of bitcoin. During the height of the coin’s value, fees were close to $40. As of writing, fees are back to around $3 but if you decide to accept bitcoin it’s recommended that you keep a close eye on the current transaction fees.
Bitcoin supports the global entrepreneur
As an entrepreneur in today’s world, it’s more than likely your supply chain stretches across borders, your team is spread across continents, and your target market is global. That also means foreign exchange rates can seem like an unavoidable cost-centre, but it doesn’t need to be if you accept bitcoin.
Because bitcoin is a global currency, it doesn’t matter where you need to send a payment to or where your customers made a purchase. Bitcoin is borderless and therefore perfectly supports entrepreneurs that have a global business.
Reach new demographics
Entrepreneurs that use bitcoin will see an added benefit if the focus of their business is in emerging markets. Many citizens in developing countries do not have access to traditional banking services and consequently will also not have credit cards. However, what they often do have is an internet connection. Bitcoin allows entrepreneurs to still reach that market as anyone in the world can buy and spend bitcoin as long as they have internet.
Another aspect about reaching new demographics is maybe not as impactful but shouldn’t be ignored either. Accepting bitcoin positions your company as a modern, tech-savvy operation which will resonate with a younger and technology-focused audience. If your business is geared towards that market, accepting bitcoin payments could help attract a demographic that values the simplicity and anonymity of bitcoin.
The risks of using bitcoin
Before you decide to announce you are accepting bitcoin, you need to consider the 3 primary risks:
Security
Storing bitcoin, or any other type of cryptocurrency, requires you to take care of your own security. Keeping your bitcoin in a wallet provided to you by an exchange means you don’t fully control the funds as the exchange could freeze your assets. Worse yet, your coins could get stolen if the exchange is hacked. Storing your funds in a hot wallet owned by you independently is an improvement, but still leaves you vulnerable to hacks.
For these reasons, it’s advised that you keep the majority of your funds in cold wallets. Read our guide on advanced crypto security tips here.
Price volatility
The price of bitcoin has a tendency to fluctuate quite dramatically at times. As an entrepreneur, you need to be able to plan ahead which requires accurate estimations of cash flow and expenditures. Bitcoin may not be ideal if you cannot absorb the infamous price volatility of bitcoin.
Stablecoins offer all the same benefits as bitcoin we have discussed in this article, but do not fluctuate dramatically as the price is tied to the value of another asset like a national fiat currency. Read more about stablecoins here.
Regulations can be confusing
Depending on the jurisdiction you are based in as an entrepreneur, there may be regulatory restrictions on accepting bitcoin for tax reasons or KYC compliance. On the other hand, some jurisdictions have no regulatory guidance on accepting bitcoin at all — which doesn’t mean they never will. In any case, it is advised you look into what the restrictions are, if any, depending on where your business is located.
Bitcoin Accepted Here
To prepare your business for accepting bitcoin, you need a Point of Sale machine and/or a digital wallet.
The Point of Sale machine would make sense if you have a brick-and-mortar business, so that you can provide a seamless payment experience for your customers. In essence, the machine generates a QR code for the amount of the transaction which the customer then scans with a phone to sign off on a bitcoin payment. Most machines will, however, charge a minor fee for this service.
For entrepreneurs with a strictly online business, signing up for a payment service such as Bitpay enables you to accept crypto on your website. Bitpay for example has a plug-in that enables customers to pay using bitcoin, which is then transferred directly to a wallet you own.
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