Bitcoin (BTC) has exploded this year. Having begun the year surpassing its then all time high of $20,000, which was a shock to many, it has continued to climb in value to a new high of $61,000. I mean, apart from transfer fees of sports players over the past few years, I don’t think we’ve ever seen anything take off like this in such a short period of time. But, I suppose that’s what happens when Elon Musk’s Tesla invests $1.5bn into the cryptocurrency.
But what are the reasons for businesses like Tesla to get involved in cryptocurrencies like Bitcoin? What are the benefits and the risks of using it, accepting it and investing in it? Well, we’re going to take a little look into that right now, listing 9 Pros and Cons for Small Businesses accepting Bitcoin.
Security – 1 Pro, 2 Cons
When it comes to security, we’ve worked out you’ve got a pro and two cons, but the 1st con is actually an offset of the pro being so good. I’ll explain why now. The way many cryptocurrencies work is via Blockchain. Blockchain technology is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. This means your money is going to be super secure, and no one is going to be able to come in and rob you like they could with cold hard cash. Nor will they be able to hack your account.
The con comes in here too though. Because it’s that secure, it’s not like being able to go to your bank to request a password reset if you forget it. If you lose your login details and you don’t have your back up security phrase stored somewhere safe, you’re not getting back into your account. And if someone ever did manage to get you back in through hacking, then the whole cryptocurrency would be compromised and the value would likely collapse overnight.
The second con, is that unlike traditional currencies which are regulated and supported by the world’s governments, no one regulates cryptocurrencies. Government’s don’t trust it, it’s not insured against and whilst it is secure, if anything happens, you’re not covered. If a currency like the US Dollar or pound Sterling was to collapse, Governments will put things into place that will rectify this or keep their citizens safe by putting into place different financial solutions, much like they have during the COVID-19 pandemic to keep people safe even when out of work.
Comparison to Traditional Banking – 1 Pro, 1 Con
As a Small Business, no matter if you go to a traditional bank or use a service like PayPal, there are plenty of fees to pay. Transaction fees, account maintenance fees, overdraft fees, there is a long list of fees, you get the jist. But with Bitcoin, and other cryptocurrencies, it’s very different. It operates more like stocks and shares, in that you may pay a charge to buy and sell Bitcoin, but you aren’t charged for transactions, or to maintain your wallet.
The con comes in terms of scalability. Whilst Bitcoin is extremely accessible, which we’ll cover in the next section, the number of transactions made compared to traditional banking systems operated by VISA and Mastercard is nowhere near in comparison, and this is down to infrastructure. This will likely change as cryptocurrencies grow and more people become invested in them, but for the time being, it’d be impossible to roll out in the same way so things tend to operate on smaller scales.
Accessibility – 2 Pros
Whilst the infrastructure is nowhere near the size of traditional methods of payment, it doesn’t mean that it isn’t accessible. One benefit is how easy it is to access, use and transfer your Bitcoin to other users, companies and so on. Just like with the apps traditional banks use, people can make payments from their computer or mobile devices. Transferring funds between crypto wallets with the tap of a button, meaning they can get access to funds there and then, instead of having to go down to authorise a large payment at your bank’s local branch.
And keeping on that subject, the second pro. Local branches of banks are closing down as they all look to cut costs, meaning many people no longer have easy access to traditional banking systems. But, as 45.4% of the world’s population are predicted to have a smartphone, that means in theory, just under half the world could easily start using cryptocurrencies within just a few minutes of setting up a crypto wallet and purchasing Bitcoin, or mining for it if you have the hardware and time.
Value – 1 Pro, 1 Con
The final two and we’ll start with the pro again. Because the value of Bitcoin can rise so quickly as we’ve seen, it can be a risk, but It offers both the company and its customers the chance to make more money than with traditional currencies. For example, if you want to cash out your BTC a Sportsbook is a great option to make your profits grow if they accept it, as what you withdraw could be worth double or triple what it was in a matter of days, weeks or months. Likewise, on the business side, they could take money, which may increase in value over time. Where as with traditional money you have the same set amount (even if inflation devalues it), you’re not going to see the actual amount change.
The problem is, as quick as it can rise, it can also fall just as fast. That’s because it’s so volatile. As mentioned a few times above, something like security breaches could easily wipe out the value overnight and leave people in ruins, and without the proper Government regulation, there is no security there at all. You can always sit on it hoping it recovers, but it’s not guaranteed.
What are your thoughts?
So there you have it, just a few different ways that can be both good and bad for small businesses accepting cryptocurrency. But what do you think? Do you accept it for your business? Have you avoided it? Let us know your stories and thoughts in the comments below or in our social channels.