Does cryptocurrency/Bitcoin, also called “magic internet money”, have the potential to transform today’s reality and how the world does business? I believe so! Already, more than 2,300 US businesses accept bitcoin as a form of payment from an estimate done in late 2020. Some say that Bitcoin has the potential to greatly affect businesses in the present and the future by providing a decentralized digital form of payment that is fast, secure, and global. Here, I will explore some of the ways a business can prosper using cryptocurrencies for business transactions.
WHAT IS BLOCKCHAIN TECHNOLOGY?
To fully understand Bitcoin/cryptocurrency, one must understand that cryptocurrencies are decentralized digital currencies that use blockchain technology to ensure the security and integrity of transactions. So, what does this all mean? Well in essence, the blockchain technology works by maintaining a continuously growing list of records, which are called blocks, that are linked and secured using secret writing, aka-cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. This is done by design because the open distributed ledger that is recording the transactions between any two parties is verifiable and permanent, and cannot be altered or modified in any way. This process creates a network that is not controlled by a single entity but by a group of nodes, also called miners or validators, and any alteration to the blockchain would require more than 50% of the validators to agree on the alteration, thus making it almost impossible to alter data on the blockchain.
CRYPTOCURRENCY HAS THE ADVANTAGE OVER ACCEPTING CREDIT AND DEBIT CARD PAYMENTS
Now, how can a business use this technology to gain the upper hand on the competition? Here, one of the main benefits of accepting cryptocurrency is the potential to reduce transaction costs from credit card payment providers. On average these providers charge around 3-4% on every purchase a customer makes. In turn, some merchants, such as Kroger and Starbucks have chosen to accept or intend to accept blockchain-based payments, which would allow the merchant to accept the cryptocurrency and covert their revenue to fiat currency for less than 1%. Saving 2-3% on all transactions would ensure a higher profitability for any business.
NO SUCH THING AS CHARGEBACKS FOR BUSINESSES WHEN USING CRYPTOCURRENCY
Next, businesses often deal with chargebacks on debit or credit cards from the banks, whether they be from fraudulent activity or not. This can cost the business valuable time fighting these, and ultimately the business could potentially suffer consequences, such as being charged additional fees or receiving various fines. Unlike credit or debit cards, accepting cryptocurrencies like Bitcoin would remove this problem. Once the transaction on the blockchain was completed, the transaction is immutable and irreversible, so, it would be impossible for a customer to reverse the transaction and pull the money from your account and put it back into theirs. Although, this does have the potential for drawbacks, such as, a merchant selling a bad product and refusing to return the cryptocurrency received for it; however, I believe that reviews of companies on the internet would solve this issue very quickly. If a business decided to operate in that way, individuals would shop elsewhere and the business operating in a shady fashion would close down for lack of business. Moreover, from a security standpoint, it is much harder to steal one’s information when using cryptocurrency because a shopper doesn’t disclose his or her private information, whereas when you pay with a credit card, your personal data is revealed to the merchant, the acquiring bank, the card service, and the issuer.
CRYPTOCURRENCY CAN ATTRACT A NEW DEMOGRAPHIC OF CUSTOMERS
Furthermore, businesses using blockchain technology and accepting cryptocurrencies can help position one’s company to reap the rewards from this important emerging space that could potentially include a Central Bank Digital Currency (CBDC). The acceptance of cryptocurrency could also provide access to a new demographic that values transparency in their transactions. A recent study done and conducted by leading research and advisory firm Forrester Consulting revealed that businesses who integrated BitPay, which is a cryptocurrency payment provider, saw an average return on investment of 327%. This was no surprise to BitPay’s CEO, stating, “accepting bitcoin and other cryptocurrencies through BitPay saves merchants considerably on fees, and unlocks a whole new customer base.” In the study, it was also revealed that 40% of customers that paid with cryptocurrency were new customers and their purchase amounts were twice that of the credit card purchases. Thus, providing more evidence that there are many individuals who are looking to spend their money/cryptocurrency, but don’t want personal information being revealed to banks, credit card companies, etc.
In conclusion, cryptocurrency, also known as “magic internet money”, is here to stay. Businesses in every facet stand to prosper from the use and acceptance of it. Accepting cryptocurrency payments will raise the bottom line of any business by excluding high rates charged by credit card companies, attracting new customer bases, not dealing with chargebacks from banks causing money to be taken without question, and lastly, boosting a business’s average return on investment. Therefore, it would behoove all businesses to start learning about how they could provide cryptocurrency payment methods and to understand how the world of “magic internet money” really works. Here is a quick video breaking down and elucidating in more detail how a business could benefit from accepting Bitcoin/cryptocurrency. https://www.youtube.com/watch?v=ZX7V3Z2jr_s
Sources
https://www2.deloitte.com/us/en/pages/audit/articles/corporates-using-crypto.html
https://techcrunch.com/sponsor/unlisted/why-bitcoin-is-big-deal-for-small-businesses/
https://coingate.com/blog/post/bitcoin-vs-credit-card-payments
Photo Sources
https://cryptobrowser.site/fr/digest/visa-expand-partnership/
https://zipmex.com/learn/elon-musk-bitcoin-price/
Alec,
This was an interesting read! I didn’t realize that businesses could avoid costly credit card fees by accepting cryptocurrency–I assumed the same fees would apply. My mom is a small business owner, so I know how much of a burden and expense credit card fees are. As a consumer, however, I would definitely be concerned about the inability to get a chargeback or refund. As you mentioned, reviews may deter bad business practices, but it would be really unfortunate for the first few people who received a defective product or experienced issues with the business. Those customers wouldn’t be on notice of the bad product/service and wouldn’t be able to get their money back.
Overall, nice job!
Hey Alec,
Great topic choice for a blog! Blockchain and cryptocurrency certainly are new, disruptive forces in the business world, and understanding how to leverage the possibilities the new technology affoards while comprehending its limitations could certainly make all the difference for a new or existing business looking to improve its operations. I appreciated the structure of your blog, as it let me learn about what blockchain was, get some comprehension of how it functions, then pivot to see how it could benefit a potential business. – Collin
I have never heard the term “magic internet money,” but I’m glad I learned about it today. This is a great topic, very timely and socially relevant. It seems like you did a lot of research and learning to understand the technology behind cryptocurrency.
I also appreciate the lighthearted tone of your article. Cryptocurrency is an intimidating topic. Some folks don’t bother to learn just because it is so complex. The lighthearted tone can help people who don’t understand it to engage the material better. From the start, with the picture of Musk and the big clickbait title of “How to Make Any Business Profitable,” your article draws in the read with humor. Great work! – Eric L.