02 Apr The Impact of Cryptocurrencies on Small Businesses
New developments in the world of finance almost always affect commerce, and the same can usually be said for technology. As such, cryptocurrencies have the potential to introduce major changes to the way small businesses work. However, cryptos are still relatively new and many small business owners do not yet fully understand them. If you want to be more informed than your competitors, it’s worth reading more about how cryptocurrencies may impact your business practices in the not so distant future.
The Future of Cryptos: E-Commerce?
The most obvious way that cryptocurrencies can affect your business practices is that you may see increasing pressure to accept them as payment for your goods or services. A growing number of large corporations already accept forms of cryptocurrency, including Microsoft and Amazon. Their credibility has inspired many smaller organizations to jump on the bandwagon and begin accepting Bitcoin, Litecoin, Ethereum, and other tokens. It’s not just other businesses you’ll have to keep up with, though. Many consumers themselves are requesting that businesses allow them to spend their cryptocurrency tokens the way they would spend dollars and cents. Currency conversion platforms like Uphold make this easier by allowing businesses to convert tokens directly into fiat currencies or physical assets once they are received.
The Pros and Cons of Crypto Use
There are several reasons why consumers are requesting that their favorite shops and local businesses begin to accept cryptocurrencies. Most of them have to do with the technology that makes practically all cryptocurrency possible: blockchain. Blockchain technology allows transactions conducted with cryptocurrencies to be nearly fraud-proof. This is because blockchain keeps a digital record of each transaction, and sends copies of the record to multiple devices across a global network whenever a new transaction occurs. Not only does this make verification easy; it also means that potential hackers would have to know every device storing transaction records and be able to access it if they wanted to alter them illegitimately.
Cryptos that use blockchain offer the following benefits to users:
- Unrivaled transaction security
- Various degrees of anonymity (depending on the type of cryptocurrency used)
- Ability to conduct transactions without third-party verification (unlike credit cards)
- No processing fees
Additionally, all cryptocurrency transactions are final. Because most cryptocurrencies offer anonymity to users, there is no requirement for them to provide personal information to retailers. Many users see this as a benefit because it prevents their data from being sold to advertisers, but there is an upshot for small businesses as well. Imagine never needing to offer another refund to a customer because their identity cannot be verified.
There are certain risks involved with investing in or accepting cryptocurrencies…
…and business owners should be aware of them before doing either. Cryptocurrencies are often particularly volatile, and they are largely unregulated. This presents at least two potential liabilities:
- Investors may engage in the kind of currency manipulation that is illegal if it done with conventional money. Artificial inflation scams can cause the value of a given token to shift drastically in short time periods. This increases the risk for those who hold cryptocurrency of that kind.
- As cryptocurrency usage becomes more commonplace, some countries may pass legislation limiting its use. These laws have the potential to make cryptocurrency a safer investment. They may also do away with some of the advantages mentioned above.
Only you can decide whether or not cryptocurrencies represent a risk or an opportunity for your business. In either case though, it is worth learning more about how this technology functions and what its role in your company can be. Use what you’ve learned here as an introduction to this exciting new technology, and make the choice that’s best for your small business.