Bitcoin and other cryptocurrencies have become extremely popular over the past decade. While at first they were just an interesting concept used by various people online, today many of them are becoming standard investment options and means of conducting business. What began as little more than “Magic Internet Money” is now being taken seriously by everyone.
Because of the rapidly increasing demand, many companies are beginning to accept cryptocurrency as a payment for their goods and services. If you are thinking about adding crypto to your list of approved payment methods for your business, it important that you consider each of the following things before moving forward.
Do You Understand Crypto?
The first thing to ask yourself is whether you have a good understanding of what cryptocurrency is, how it works, and why people are using it. If you do not have at least a good baseline knowledge of this technology, it would be a mistake to just jump right in because it is trendy.
While there are absolutely many amazing benefits to accepting and using cryptocurrency, there are also a variety of challenges and risks that you need to plan for.
If you do not know much about crypto, and you do not care to learn, it might be best to avoid accepting it for now. The other option, however, is to use a service that will allow customers to pay in crypto and then instantly convert it to the US Dollar or other local currencies.
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Will You Keep the Crypto or Convert it to the Dollar?
There are a variety of services that will let you bill customers in a cryptocurrency so that they can make payments using crypto. Once they make the payment, however, the service converts the value into the dollars and deposits them into your account. From the business owner’s perspective, this is not much different than accepting payments using credit cards.
Using this option is great if your customers are requesting the ability to pay using crypto but you do not want to hold digital currency yourself.
At this point, however, most businesses that decide to accept cryptocurrency will be doing it because they like digital assets and want to keep them. For example, when Tesla was briefly accepting payments in bitcoin, they would not sell back to the dollar, but would instead keep the bitcoin on their balance sheet.
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Do You Understand the Risks?
Cryptocurrency offers a variety of great benefits that people love. When it comes to accepting crypto as a business, however, there are also some risks to be aware of. Make sure you really know what could go wrong when dealing in crypto, including the following concerns:
- No Options for Disputes – If you make a purchase using a normal credit card, it is possible to file a dispute if the other party does not fulfill their obligations. That is not an option with crypto since the transactions are immutable. If you make a payment in crypto and the other party will not refund you, there is no way to make them.
- Mistakes May be Permanent – If you (or a customer) accidently sends crypto to an invalid address, it is likely gone forever with no way to recover it. If, for example, you give your customer your bitcoin address, but they wanted to pay in Ethereum, the funds they send will be gone. Fortunately, almost all wallets have some safety measures in place to reduce this risk.
- Constantly Changing Fees – The fees associated with credit cards are annoying, but at least they are predictable. The transaction fees on some cryptocurrencies changes dramatically from minute to minute.
- Lost Private Keys – If you are keeping the digital assets in your own hardware wallet (which is the safest option for large amounts or long term holds), you need to be certain that you have your private keys or pass phrase kept safe. If you lose them, you may lose access to your assets. In addition, if someone finds your private keys or pass phrase, they will have full access to your digital assets.
While these problems can be very serious, they can be avoided with some basic precautions. As long as you are willing to put in the effort to understand how digital assets like this work, you can accept them safely with your business.
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Which Cryptocurrency Will You Accept?
There are thousands of different cryptocurrencies out there, with more being created all the time. It is almost never a good idea to simply accept every coin or token that is out there, which means you have to decide which ones might be best for you. There are a few ways to go about making this decision:
- Bitcoin Only – Bitcoin was the first cryptocurrency and is by far the largest and most popular. It is also generally considered to be the safest. With this in mind, it makes an obvious choice if you only want to accept one type of crypto.
- Major Crypto Only – Most businesses that decide to accept cryptocurrency will choose this route and accept only the largest and best-known coins or tokens. This would include bitcoin, Ethereum, Litecoin, and possibly a few others.
- Pick and Choose – If you are passionate about cryptocurrency, you may want to accept a few of your favorite coins or tokens to accept because you believe they have a strong future. This would be in addition to the major crypto options.
Just keep in mind, unless you are instantly converting the crypto into your local currency, the more options you accept the more work it will be to manage and track.
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Are Your Customers Crypto Savvy?
One last thing to really think about is whether your customers are crypto savvy or not. Just because you are interested in cryptocurrency does not mean your customers will be. You do not want to spend a lot of time or effort making it so you can accept digital payments like this if it is unlikely that anyone will ever want to use it.
In addition, some people still have a negative view of cryptocurrency so if they see you accept it, they may lose respect for your business. Fortunately, the negative opinions of digital currencies are quickly fading away for most people.
Is Crypto Right for Your Business?
There is no doubt that a lot of companies have had a lot of success with accepting bitcoin and other digital currencies. Whether just using it as another payment option that you convert to dollars, or holding crypto on your balance sheets, there is definitely a lot to think about when making this decision. It is not something that you should rush into without understanding how it will impact you, your business, and your customers.
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