When the digital currencies such as Bitcoin came to light, there was a lot of negativity especially from governments and players in the financial markets. However, over time, the online currencies started to gain legitimacy. In the last few years, major cryptocurrencies such as Bitcoin, Ethereum, and Litecoin have been the major focus of many tech and financial journals. Many people got in and purchased the cryptocurrencies leading to a fast rise in value over a short time.
Unfortunately, most mainstream businesses remained in the periphery with little information about how the cryptocurrencies work. However, given that most of the people online now have cryptocurrencies and are willing to trade them with goods and services, it may be time that your business understood these currencies.
Understanding cryptocurrencies
Cryptocurrencies are a form of digital money that makes use of algorithms to determine value, secure it, trade and anonymize transactions. Each cryptocurrency is unique in its technical configuration. However, since they do the same thing as currencies, they have a lot that they are in common.
All of the cryptocurrencies depend on blockchain technology. Blockchain consists of a number of data blocks, encrypted and digitally constructed. They are also peer-to-peer currencies. Therefore the verification of the transaction between two parties is done between the individuals and all the data relating to the transaction stored locally where each gets a copy. Moreover, the transaction is almost anonymous. The identities of the individuals that take part in the transaction are not disclosed at the time of the transaction.
Bitcoin is the most popular crypto in the market and most reliable as of now. Whenever two individuals transact in Bitcoin, a record of the said transaction along with any other relevant information is stored in a block of data that is currently available. Moreover, each data block has the information contained in the previous block. The information is highly encrypted. Once the new data block is decrypted, the information is automatically compared with the previous block and then the new transaction information added to the data block. Every block of data is verified by the succeeding block of data and its information stored across the blocks of data. In the process, any fraudulent transaction is identified as fast as possible as the blocks of data do not match. The process enhances the internal security of the Bitcoin technology.
Some people dedicate their computers to decrypting the digital currency. They are called miners. Bitcoins are rewarded to the miners for their efforts. There is a definite number of Bitcoins in the market. Therefore, their value is set to increase as we move on. The data blocks also grow with an increase in the number of transactions carried out and become difficult to decrypt.
Why and how should you accept the online currencies for your business?
As said earlier, leading cryptocurrencies have been experiencing a surge in their value in the last few months with many going past the 5000 per cent mark in value increase. As many people continue to invest in cryptocurrencies, the value goes up.
A business that gambled with cryptocurrencies a few years back is reaping the benefits of the increase in value. Given that the value is set to keep increasing as many people trade in the currencies, you can still reap from the online currencies by opening up payment gateways that accept cryptocurrencies as a form of payment.
What about volatility?
One of the major drawbacks of the cryptocurrencies is that they are volatile. May businesses are apprehensive about this fact and would rather trade with fiat currencies such as the dollar and Euro. However, there are plans you can put in place to ensure that the price fluctuations do not affect the business profits.
First, there are very low exchange costs between fiat currencies and cryptocurrencies. Therefore, you can exchange your cryptocurrency into fiat currency in an instance and lock the value of the currency. Second, you can use the dynamic pricing apps to determine the value of the cryptocurrency at the time of the transaction. Customers then pay for the goods and services using the most current rate at the market.
Given the benefits that come with trading in cryptocurrencies, there is a strong case for accepting them as a form of payment for your goods and services. You can also integrate the option into your e-commerce website. In addition, it also makes sense for your business to start some investment in cryptocurrencies now that their value is set to go up as online trading continues.
