A smart business owner is always looking for ways to innovate and maintain an advantage over competitors. Just as the Internet changed the competitive landscape across multiple industries, the way businesses choose to proceed with Bitcoin could significantly influence future success.
Bitcoin is fundamentally a technology that uses math to maintain a trustless public ledger, called the blockchain, where every Bitcoin transaction can be viewed at anytime by anyone. Bitcoin essentially allows the transfer of any type of property between two people without relying on a third party, such as a company or government. Using Bitcoin is comparable to completing a hand-to-hand cash transaction, yet both parties can be miles apart and everyone in the world has the ability to verify that it took place.
Entrepreneurs can set up Bitcoin acceptance for their business in 15 minutes and instantly reach new customers at no additional cost. Bitcoin acceptance is merchant friendly and has limited downside, aside from setup time.
Bitcoin enables a business, regardless of size, to accept payments from global customers with negligible fees and no risk of fraud. All that is required for a transaction is access to a smartphone or computer. Funds are cleared within an hour and all transactions are final.
By using a payment processor, such as Bitpay or Coinbase, Bitcoin is instantly converted into local currency at the time of transaction, obviating the need for a merchant to actually hold Bitcoin. The ease of automatic conversions makes Bitcoin a very attractive alternative to credit cards, which require a third-party terminal, charge high fees, don’t clear funds for weeks and carry the risk of charge backs after goods/services have been delivered.
Bitcoin has many advantages, but there also drawbacks in using the currency. One potential drawback, which caused Jimmy Wales, the founder of Wikipedia, to be hesitant in accepting Bitcoin donations, is a phenomenon called choice paralysis. Choice paralysis occurs when users are presented with too many options, in this case payment methods, resulting in fewer conversions. Put simply, Wikipedia was worried that adding Bitcoin as a payment option would result in fewer donations among all payment methods. They have since begun accepting Bitcoin donations using Coinbase to instantly convert all Bitcoin to U.S. dollars.
Another drawback is regulatory uncertainty. Bitcoin adoption is still in its infancy. Most governments have not yet decided how to react. Just a few days ago, Bangladesh outlawed all Bitcoin transactions in the country, punishable with up to 12 years in prison. Other countries have had more positive reactions towards the currency, and the risk of a heavy-handed regulatory response in those locales is minimal. Since Bitcoin is a global phenomenon, regulations that are too strict will push Bitcoin business elsewhere.
Despite regulatory uncertainty and other potential drawbacks, the advantage of accepting Bitcoin is undeniable. The savings, added visibility and ease of accepting Bitcoin as an alternative payment method make incorporating Bitcoin a low risk/high reward decision for business owners.