What Do Small-Business Owners Need to Know About Cryptocurrency?

Why are digital currencies so popular? Should your company accept cryptocurrency? Does it make sense for your small business to start experimenting more with virtual payments? These and more questions surrounding Bitcoin, Ethereum, and other leading cryptocurrencies are increasingly becoming top of mind lately for small-business owners. It’s no surprise, with market researchers Gartner reporting that the market for cryptocurrency is now worth upwards of $2 trillion – and that these and other blockchain-based solutions will generate $3.1 trillion in new business value by 2030.

At the same time, uncertainty continues to swirl around the cryptocurrency space, with crypto assets having plummeted in value so far in 2022. Cryptocurrency has a roller coaster-like tendency to rise and fall in worth, and its performance isn't directly tied to the traditional stock market, so one has to wonder: Is now the right time for your small business to start accepting cryptocurrency – and to what extent should you be investing in it?

Despite the uncertainty, these technologies are still enjoying growing mainstream adoption, and could soon become a preferred payment method of choice for customers, suppliers, and employees alike. It’s important to get up to speed on cryptocurrency quickly. Thankfully, for small businesses wondering if they should begin accepting cryptocurrency, as well as other kinds of digital currency, doing so doesn’t have to be especially time-consuming or difficult. Let’s take a closer look at why cryptocurrency (aka “crypto” to fans), digital currencies, and virtual payments are on the rise − and what you need to know to make these online payment solutions work for you.

What Are the Basics of Cryptocurrency?

Looking for a simple definition of cryptocurrency? It may help to know that it’s most-commonly defined as a heavily-encrypted form of digital asset that’s powered by and traded over a decentralized network of computers which maintain closely-tracked ledgers of transactions. (Which you’ll often hear referred to as blockchain technology.) This system of secure ledgering offers users a considerable degree of privacy and security.

Note that cryptocurrencies are not issued by a central authority such as a government. Likewise, they’re not typically backed by government-issued currencies (although some cryptocurrencies do actively seek to tie their intrinsic value to real-world currencies such as the dollar or Euro). But even more compelling to many fans is the fact that cryptocurrencies offer considerable speed, privacy, and security, as well as additional resistance to outside compromise.

Be advised, however: There are now more than 10,800 different cryptocurrencies available, Money magazine reports, offering investors more options to choose from than there are actual stocks of real-world corporations. Many cryptocurrencies are highly lucrative, while just as many are equally volatile and unproven, even as these digital currencies (many of which can be traded 24/7, unlike stocks) can wildly fluctuate from day to day in actual valuation. All are quickly upending the world of digital finance, and all come with risks and benefits attached.

Why Is Cryptocurrency So Popular?

Enthusiasts like cryptocurrency for the speed, ease, and anonymity with which it can be growingly traded. Likewise, you don’t need much money to invest, nor do you need to worry about carrying around paper notes, credit cards, or physical IDs to utilize it, as trades occur using digital platforms and apps. A tidal wave of news stories, media headlines, and rising interest from retail (armchair) investors has also helped raise mainstream awareness. Fear of missing out has also become a powerful force prompting more shoppers to try these digital currencies, as well as for more small businesses to start accepting them.

Given mobile wallets’ burgeoning growth, skyrocketing mainstream awareness for digital currencies, and cryptocurrency’s ever-growing ability to increase audience spend and reach, it’s obvious which way the commercial world is trending.

Cryptocurrency is also becoming more popular because it offers both businesses and customers lower processing fees and more (and faster) opportunities to transfer money worldwide. Many of today’s most popular forms of crypto effectively offer shoppers (and the businesses who serve them) an easily-implemented suite of globally-recognized payment solutions. Moreover, many individuals who may not hold a traditional checking, savings, or credit card account can also utilize them freely.

What Is the Difference Between Cryptocurrency and Digital Currency?

Digital currency is simply defined as any type of currency that’s housed in a digital format. In other words, cryptocurrency is a form of digital currency − but it’s a term that’s used only to describe digital currencies that leverage blockchain storage and distribution methods. Three different forms of digital currency fall under the shared banner of cryptocurrency: coins, alternative cryptocurrency coins (altcoins), and tokens. Differences between the trio are largely determined by the underlying technology that powers each format and use case that each of these three digital currencies is designed to support.

Coins: You’ll typically hear the term “coins” used to refer to cryptocurrencies such as Bitcoin that are meant to facilitate digital payments and the transfer of value, aka those that underpin monetary transactions and trades of various kinds.

Altcoins: Alternative coins or “altcoins” are various forms of crypto that arrived on the scene after Bitcoin, the original cryptocurrency, and offer alternatives or enhancements to its pioneering blockchain software. Altcoins are powered by their own forms of blockchain technology.

Tokens: Not actually monetary forms of currency. Rather, these virtual intangibles (credits, customer loyalty points, etc.) exist on blockchains as methods of exchange that can be swapped for other useful assets.

How Are Traditional Businesses Using Cryptocurrency?

Accepting cryptocurrency allows businesses and consumers alike to exchange peer-to-peer online payments without having to look to financial institutions or banks as intermediaries. In practical terms, cryptocurrency functions as an electronic form of cash for many users. Digital currencies based on blockchain technology (aka cryptocurrencies) also provide many potential benefits to businesses of all sizes, including, but not limited to:

• enhanced security and encryption
• reduced financial costs and expenses
• more rapid and seamless payments
• lowered payroll, legal, and audit costs
• alternative investment opportunities
• hedges against inflation
• safeguards against shifting currency valuations
• better physical and digital portability

Keeping these upsides in mind, it’s no surprise that even the world’s largest enterprises are increasingly investing in the space.

Should Small Businesses Accept Cryptocurrency?

Keep in mind that individual cryptocurrencies (like many other types of digital currencies) can be prone to extreme price fluctuation, volatility, and lack of regulation. At the same time, crypto is becoming an increasingly popular payment option for everyday audiences and enjoying growing acceptance amongst global consumers worldwide.

Given mobile wallets’ burgeoning growth, skyrocketing mainstream awareness for digital currencies, and cryptocurrency’s ever-growing ability to increase audience spend and reach, it’s seems like the commercial world is trending in the pro-crypto direction. With crypto becoming more efficient, effective, and trusted with each passing year, and legal/regulatory clarity finally starting to coalesce, it may only be a matter of time before the market reaches a tipping point, although who knows what the future holds. 

It may be helpful for small businesses to start accepting cryptocurrency as a payment method at the moment, given its growing acceptance with domestic and international audiences alike. While crypto is currently likely to represent just a small fraction of online payments at the moment, and is unlikely to make a huge impact on your small business’ balance sheet in the immediate future, accepting cryptocurrency will only become more imperative in the years ahead. Any investments made today in crypto and digital currency, however small, hold the potential to be wise and forward-thinking investments in your company’s future.

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