As technology continues to evolve, so do the methods we use to buy and sell products and services. One new concept that has garnered a lot of attention recently is the online digital currency dubbed Bitcoin. Bitcoin was introduced four years ago as an electronic alternative to standard worldwide currencies. It is a decentralized currency, totally independent of any government entity or financial institution, and Bitcoin transactions are managed purely by an online network.
Bitcoin.org describes itself as a digital currency, a protocol and a software that enables users to make peer-to-peer payments worldwide with low processing fees. As the network for the currency has grown, so too has its value; the value of one Bitcoin rose from $47 to $194 in just three weeks last month. That’s more than 300 percent growth, according to CNNMoney.com. Just a few months ago, the value of one Bitcoin was around $5. This significant increase in such a short amount of time has boosted the digital currency’s growth almost as quickly.
Bitcoin’s Rising Popularity
With all the buzz surrounding the digital currency, Bitcoin has reportedly become one of the most popular forms of alternative currency, with more than $1 billion in circulation around the world. As the popularity and value of the currency grows and Bitcoin mining takes off, many small business owners are asking if they should start accepting Bitcoins in exchange for their products or services.
One New York City bar, EVR, has started accepting Bitcoins. Customers can use the virtual currency to pay for their food and drinks. “When we opened a few months ago, I said that we needed to be the first New York bar to accept Bitcoins,” co-owner Charlie Shrem told CNN. The bar owner uses the BitPay app to process Bitcoin transactions.
According to Tony Gallippy, co-founder and CEO of BitPay, more than 100 retailers around the world use the BitPay app to accept Bitcoins as payment. This is the area of interest to small business owners: Are Bitcoins a new customer service and business revenue generator?
Benefits of Accepting Bitcoins
The most obvious benefit of using the Bitcoin is the potential profit you stand to make as its value increases. If the value continues to grow, users will earn gains from their initial investment. Your business could earn more revenue simply by accepting the Bitcoin in addition to standard forms of payment like Visa, MasterCard and American Express.
Secondly, the cost of a Bitcoin transaction using the BitPay app is less than a credit card transaction. BitPay charges 1 percent on Bitcoin transactions, while credit cards can charge 3-5 percent on credit card transactions. In addition, BitPay processes transactions faster than credit card companies do. BitPay transactions get processed the same day, whereas credit cards can take up to two weeks due to disputes made by credit card users.
And then there’s the “wow” factor: Accepting Bitcoins sets you apart from your competitors, marking you as a business that offers cutting-edge services to consumers.
Drawbacks to Accepting Bitcoins
There are some negative aspects to accepting Bitcoins that you should be aware of before you start.
For one, the rapid increase in Bitcoin value has some people concerned. A 300 percent rise in value in just weeks is not a rate that can possibly be maintained. Most consider this trend to be unsustainable; commenters on the CNN Money story called it a “Bitcoin bubble” that will burst.
In addition, the fact that the Bitcoin isn’t regulated by any government makes it difficult for any tax-collecting bureau to trace. To be in compliance with tax law (and perhaps your conscience), you’d have to report any gains you make if and when its value increases; that being said, governments around the world don’t know how to handle this new currency for tax purposes. They are, reportedly, trying to figure it out, so it’s something to be aware of if you are thinking about accepting Bitcoins.
Proceed With Caution
The move toward digital P2P transactions looks like it will continue to grow across the Web and the world. Small business owners will have to consider accepting this form of payment to stay current with modern financial practices. But as with any new technology or trend, it is always good to proceed with caution and do your research.
Cynthia Sassi lives, works and plays in Scottsdale, Arizona. She is passionate about running, her three pups and her work. You can learn more about her at linkedin.com/in/cynthiasassi and twitter.com/cynthiasassi
Image Credit: bitcoinworld.blogspot.comSuscribe to the podcast