Although we have come a long way as a society when it comes to our currency system, our agreed upon form of exchange for goods and services continues to evolve.
Business is increasingly done online, and transactions are rarely face-to-face or finalised with a solid handshake. Plus, the way we pay for services has changed too. And I’m not talking about online banking.
Cryptocurrency has made its way into our business community and has the potential to change the economy as we know it.
But virtual currency is not a new phenomenon. Cryptocurrency has been buzzing around the world wide web since Bitcoin was invented in 2009 by an unknown person using the alias Satoshi Nakamoto. For almost a decade now the bitcoin movement has continued to gain traction and has even been touted as the next ‘internet’.
The invention of bitcoin inspired a collective of virtual currencies known as altcoins, that position themselves as new and improved versions of the original.
Although primarily used in online stores, cryptocurrency is also accepted in bricks and mortar stores, service-based establishments and even car yards. It is becoming an increasingly accepted form of payment.
With all the hype and interest, small business owners find themselves asking if Bitcoin is a business tool they should be looking into to utilise for their company. And why not? With companies all over the world using Bitcoin and other cryptocurrency to build their business empires it is certainly worth looking into.
Bitcoin and other cryptocurrencies, operate on a decentralised peer-to-peer network with no central authority or government backing. You can pay bitcoin to someone and there is no bank or third party to go through to make the transaction, just a peer-to-peer networked program on your computer.
The process is all made possible by the magic of blockchain — a public ledger of all transactions ever made in the currency which keeps track of which user owns what coins and solves the issue of double spending.
The decentralised nature of cryptocurrency means more freedom to spend your cryptocurrency without a third party overseeing the transaction and no sales tax added to purchases. Plus — as a business offering cryptocurrency you may open yourself up to big business opportunities and are also catering to consumer preferences.
Big players like Microsoft and Dell now accept cryptocurrency, and over 100, 0000 companies are following suit. But before you throw your small business on the cryptocurrency bandwagon there are a few hurdles unique to small business to consider.
The first is stability of cryptocurrency. Even though Bitcoin has increased in stability over time, and it can be expected to continue to do so, it is essentially a currency not overseen by a financial institution or government body. This makes it unstable.
Values can decrease rapidly, forcing businesses to take a loss. This may not be damaging for large companies, however for small businesses with minimal margin it can be bad news.
The second thing to consider is the cost of using a cryptocurrency like Bitcoin. Until recently, Bitcoin had relatively low transaction fees for users. This has, however, changed with the transaction fee increased to $25. Again, for a large company this would not make an impact to their bottom line but for a small business using Bitcoin to get their car serviced, buy a pizza or get business cards printed, it could become too expensive to see a benefit.
The final point to consider is security. In an increasing online world, business owners need to carefully consider their online security, especially when it comes to their finances. While the bitcoin blockchain did solve the issue of double spending, it is open to security issues. Like all things online, there is always the possibility a user’s bitcoin wallet could be hacked and their bitcoins stolen.
For small business owners considering utilising Bitcoin as a tool for their business, I encourage you to do your own research and speak to industry professionals before opening your account. Like all business tools, a little research and asking the right questions will help you weigh up the potential benefit of adding cryptocurrency to your small business toolkit.
About the author
Together with Wayne Sharpe and Brian Hall, Andrew Federowsky founded Bartercard Australia in 1991 and he now heads up the Bartercard South Gold Coast branch. The Bartercard trading network is the nation’s largest of its kind, with more than 20,000 cardholders exchanging goods and services to the value of $60 million each month.