Digital cryptocurrency is on the rise as we see that almost 17% of the American adult population own a share in Bitcoin – that’s 46 million Americans!
If you have a business (whether online or local), chances are you might have considered implementing bitcoin payments but haven’t because you’re still unsure about how it all works and whether it’s secure? If so, then this guide is for you. So keep reading to learn more about joining the cryptocurrency market and whether it’s the right move for your business.
What Is This Cryptocurrency Business?
If you’re reading this article, you probably already know what a cryptocurrency is, but for the uninitiated, let’s elaborate. A cryptocurrency is a form of digital currency that differs from regular currency as it has no regulating authority. Instead, it uses a decentralized system to record transactions as well as issue new units.
Currently, there are more than 6,500 types of cryptocurrency; however, bitcoin continues to lead the pack. Bitcoin payment services, also known as bitcoin merchant services, allow business owners (or merchants) to receive payment in a digital currency such as bitcoin.
More people today are starting bitcoin investments, so let’s take a look in a bit more detail as to why.
Investing in Cryptocurrency
Aside from more individuals investing in cryptocurrency, more companies are starting to accept bitcoin payments as an official payment option. And for a good reason too. For example, in February this year, Elon Musk announced that Tesla would begin accepting bitcoin as payment for all models of Tesla cars.
Yum Brands, which manages Pizza Hut, KFC, The Habit Burger Grill, and Taco Bell, also accepts cryptocurrencies. In addition, in October 2020, Paypal announced that their clients could buy, sell, and hold particular cryptocurrencies through their accounts starting in 2021.
So with significant brand companies and so many people investing in bitcoin, there has never been a better time to start accepting bitcoin payments.
So, Where Do I Start?
To buy and trade in bitcoin, you will need a cryptocurrency wallet. This wallet functions as a traditional wallet, but instead of storing hard cash or credit cards, it holds proof of your digital currency. In addition, these digital wallets have a digital address that allows the digital money to be transferred to your control and are password protected.
Bitcoin and other cryptocurrencies are also considered to be immune from inflation. This immunity is because there is a fixed supply, and governments cannot manipulate the value as they can with fiat money.
Types of Bitcoin Wallets
There are many formats to digital wallets, and each has its pros and cons when it comes to ease of use and transacting. Either way, it’s always recommended to keep your passwords safe and private. There are two main categories of crypto wallets: hot storage and cold storage wallets.
Let’s take a quick look at each below.
Hot storage wallets are connected to the internet via an app on your smartphone, a desktop software program, or an online provider. These are all free, but they come with risks due to being connected to the internet (aka “hot”). One of the main risks here is hackers gaining access to your funds, so using secure passwords is strongly recommended.
On the other hand, cold storage wallets are physical, small, encrypted devices that allow you to store your digital money offline (hence the name “cold”). As your funds aren’t held online, cold storage offers more security from hackers; however, there is an initial cost of purchasing the device, while hot storage is free. One of the most frequent risks has been lost passwords which resulted in funds lost forever.
Which Wallet Is Best?
Thankfully the answer is quite simple. Suppose you are a cryptocurrency trader with many cryptocurrency assets. In that case, a combination of hot and cold storage is recommended – hot storage for purchases and quick trading and cold storage for keeping the bulk of your cryptocurrency assets safely offline.
Just keep in mind that some cold storage options only have a limited number of times you can input the incorrect password before it locks you out and encrypts the contents forever.
Advantages of Bitcoin Payments Services
There are a few advantages to using a cryptocurrency like bitcoin. More and more companies are offering bitcoin payments as an extra payment method on checkout.
Lower Transaction Costs
Compared to standard credit card processing costs, which sit at around 2% to 3%, you’re looking at a flat rate of 1% with cryptocurrency.
Borderless Payment Network
Paying with cryptocurrency allows seamless transfer of funds to anyone across the globe.
Availability of ATMs
With more and more ATMs appearing around the US, where you can buy and sell crypto with cash, you can easily find one near you. Customers will find this method quick and easy.
Bitcoin merchant services maintain transparent exchange rate information. This ensures you always know the value of your bitcoin and fiat currency.
Now that we know some of the advantages let’s look forward to how bitcoin payments are processed.
The workflow for how cryptocurrency gets processed is similar to using a credit card. Let’s have a quick look at the step-by-step process:
- At checkout, whether online or in-store, the customer opts for payment in bitcoin.
- At a locked-in exchange rate, they pay the amount applicable at the time of purchase.
- The bitcoin payment service converts the received bitcoins into the currency of your choice instantly.
- The money gets added to your account and finally gets credited to your designated bank account.
The bitcoin payment service then securely sends the necessary details to the blockchain network as a final step. Authentication and recording happen after this is complete.
Get More Business
Hopefully, with everything we’ve covered, you should now better understand how a cryptocurrency merchant account can best benefit your business, as well as an understanding of how bitcoin payments work.
As we progress in the digital age, cryptocurrency is not going away. However, with so many people jumping into the cryptocurrency market, you have to ask yourself, “Can you afford not to accept crypto payments?”.
If you’ve found this article helpful, be sure to look through our other articles in our Business category.