Once an obscure term reserved for computer scientists and futurists, cryptocurrency has grown to become a key player in small business finance.
In fact, Bitcoin, the world’s largest cryptocurrency, has a market capitalisation of £165 billion - and statistics
such as this show cryptocurrency is no economic outsider.
So, what is cryptocurrency, how does it work, and what could it mean for your small business?
The big idea
Cryptocurrency – a term meaning digital or virtual currency – found roots in the 1990s, when engineers and mathematicians began to ponder how technology might help solve financial problems and bring money into the digital age.
The idea, outlined in part by Nick Szabo in 1998, was to decentralise currency and eliminate inefficiencies in the traditional system – such as the need to use metal and paper for coins and notes.
A decade later, the global financial crisis brought a new, political context to the creation of digital currencies, which were viewed as a way to side-step banks and governments.
By 2009, cryptographic methods were able to secure transactions and prevent double spending. Bitcoin started to be mined and transactions were recorded on the blockchain – it was the beginning of a currency revolution.
Cryptocurrency in business
Skip forwards to 2020 and a plethora of cryptocurrencies are in circulation. Their worth has surged and stabilised, and the speed with which transactions can be processed makes them appealing to businesses of all kinds. Customers can even use Bitcoin to buy a coffee at Starbucks
Cryptocurrency is versatile, user-friendly and there are roughly 24 million global users
of Bitcoin alone. For this reason, accepting payments in cryptocurrency can open digital doors to a broader range of customers.
The technology is also more secure than standard currency exchanges, according to some measures. The risk of facing illegitimate chargeback requests are almost eliminated thanks to the rigidities of blockchain, for instance.
Plus, transaction fees are often lower than they are with traditional payment services, leaving more cash for a company’s bottom line.
Getting started with cryptocurrency trading isn’t as complex as you may think, and there are lots of resources available for beginners. Free Money
has a hub filled with cryptocurrency news and tips, for instance, which lists regular giveaways. These make it possible to acquire your first cryptocurrency without spending a penny – it’s a great way to get used to the technology.
In order to accept payments in cryptocurrency, a small business would need to set up a platform with which to do so. This might involve creating a crypto wallet, adding a plugin to your eCommerce site or using a third-party company to take care of the nuts and bolts.
Card readers with the capabilities to completely bypass traditional currencies such as pounds sterling, in favour of cyber versions, are also emerging. These are hardware versions of crypto wallets, which might prove useful for a business operating primarily face-to-face.
Such transactions may start to appeal to consumers in a cashless future, especially given the anonymity advantage
they have over standard card payments.
For businesses looking to get ahead of the trend, cryptocurrency transactions offer a very real prospect of success.
There is still no one-size-fits-all approach to rolling out the technology, but the options are becoming easier to access than ever before.