Bitcoin 101 for Entrepreneurs
What is Bitcoin?
Bitcoin is a digital currency that uses encryption techniques to verify transactions and to create even more coins. You can acquire them through accepting bitcoin payments, purchasing them on a bitcoin exchange, or mining for them. Mining means to solve for complex mathematical puzzles to gain a certain amount of coins as the reward. The most important point to note is that bitcoin is decentralized, with no authority to oversee how much is to exist or dictate its value.
How does this relate to entrepreneurship?
Over 100,000 businesses, including Microsoft and Dell, accept bitcoins as a form of payment, but why should a new, upcoming, smaller business also accept this digital currency?
1) Lower transaction fees
Credit cards usually charge a 3% transaction fee, however since bitcoin transactions do not go through a financial institution, the cost of accepting bitcoin payments only lie between 0-1%.
2) Faster transactions
Bitcoin’s technology, blockchain, allows you to process your transaction and receive the payment much faster as it doesn’t need to go through any institutions or regulatory figures. Bitcoin transactions process much faster than credit card transactions. For online businesses, it’s a huge cash flow advantage to quickly receive your money rather than waiting for it to come into your bank account.
3) Bitcoin is international
Bitcoin is a global currency. If you’re a Canadian entrepreneur wishing to sell your products internationally, bitcoin is a great solution for dealing with exchange rates and foreign transaction fees, which are also factors that may deter international consumers from purchasing.
4) Accepting bitcoins allow for an investment opportunity
Bitcoins fluctuate in value much more compared to other currencies. While this may present a risk to accepting bitcoins, it can also be seen as a large investment opportunity. By accepting bitcoins, you’re investing in the potential of its value increasing. Within this past year, the value of bitcoin has grown from $686.52 USD to $5,862.51 USD whereas the number of digital wallets has grown from 77,232 in 2012 to 17,515,831 in 2017. Bitcoin has a large potential to continue to grow and as more businesses accept this as a form of payment, the value may trend upward.
Overall, this currency’s digital format allows for easier, cheaper, and faster exchanges of money, which small businesses and entrepreneurs can leverage if used carefully. However, bitcoins are extremely controversial and accepting them as a form of payment come with their own risks. It’s extremely volatile, unstable, and most importantly, it’s unregulated.