The introduction of cryptocurrencies disrupted the world of finance and added a new dimension to how businesses work, pay, and get paid.
Cryptocurrencies generally and Bitcoin specially made their way to most online businesses, financial services, gaming platforms, and more, offering innovative solutions to transact and provide value.
Some companies still prefer sticking with old-school payment methods with credit cards and bank transfers. However, newly emerging businesses have embraced decentralised payments, and we will explain how accepting Bitcoin as payment can be leveraged in your company.
Understanding Bitcoin as a Cryptocurrency
Let’s start by explaining what cryptocurrencies are. These are digital money stored online using blockchain technology. This innovation was founded in 2009, with Bitcoin being the first cryptocurrency, powering decentralised transactions.
Decentralised finance refers to using peer-to-peer networks without relying on a central authority like banks or governments. Thus, these currencies are transferred directly between parties, supporting instant and transparent transfers.
Transactions are recorded on the blockchain technology, which is a public ledger where all crypto transfers are recorded and tracked. Anyone can check their transfers using blockchain explorers without disclosing personal information.
Transacting with cryptos involves a whole set of advanced technologies, like validating nodes and smart contracts that lead the transaction operation, while Bitcoin mining refers to the process of creating and finding (mining for) new Bitcoins.
Cryptocurrencies have different monetary values, which change according to market demand, functionality, usability and news. Speculations play a vital role in crypto valuation, and the sole news of adopting Bitcoin payments by a leading corporation can send the coin price surging.
Bitcoin is currently at the top of cryptocurrencies with a market cap exceeding $670 billion, followed by Ethereum, Tether, Binance Coin and Ripple.
BTC as a Payment Method
Bitcoin is expressed in monetary terms in US Dollars, and its value changes according to the demand and supply of the currency. The first surge in BTC value was by the end of 2017, when the coin price jumped from almost $1,000 to over $13,000 in the span of 12 months.
Another prominent jump in Bitcoin price happened in 2021, when the coin value increased over $68,000 in November, compared to $32,000 at the beginning of the same year.
Multiple currencies have emerged, but Bitcoin remains the most used and powerful one, given its price growth and use cases where many companies accept Bitcoin payments to facilitate faster and safer transactions.
Users can transact with Bitcoin as a full coin or in fractions. For example, if 1 BTC = $30,000 and you want to transfer $600 worth of money, you can send 0.02 BTC.
Besides transferring money in Bitcoin, ATMs and Bitcoin withdrawal machines have become available in multiple countries. Bitcoin ATMs work by scanning a QR code on the machines that reads how many coins you have to withdraw in fiat money.
How Do You Transact With Cryptocurrencies?
Transacting with BTC has become popular, and businesses are increasingly accepting crypto payments using their quick transfers and secure systems. Also, some users prefer BTC transfers to preserve their identity because blockchain technology does not ask for your personal information, unlike your traditional bank.
Creating a Bitcoin wallet
The first thing you need to have before transacting is a crypto wallet, where your coins are stored. Many wallet providers exist, like MetaMask, Coinbase, and B2Binpay, where you can create an account using randomly generated 12 or 24 code phrases (seed phrases).
Providers have made wallets available on the website, mobile apps and as a browser extension to make transactions easier and faster.
Crypto wallets are secured using your chosen password and seed phrases. Each wallet has a distinguished address consisting of 26 to 62 characters (numbers and letters) that are specific to each currency and its associated blockchain.
If you want to send Bitcoin, you must send the wallet address associated with your BTC holdings or simply let the other user scan the QR code of your BTC wallet.
If you want to accept cryptocurrency payments, you can scan the wallet address of the recipient or insert it manually in your wallet.
Bitcoin Use Cases
The widespread adoption of cryptocurrencies gave rise to decentralised ecosystems that use digital money as their central payment method.
Most of today’s organisations and service providers that deal with cryptocurrencies offer Bitcoin as the main currency, given its value and security system, unlike newly emerging coins that may default in a few weeks or have their blockchain breached by hackers.
Nowadays, you can use Bitcoin for different purposes besides sending and receiving money. BTC has promoted itself as a dominant trading instrument, where investors and crypto enthusiasts speculate on the price of Bitcoin and its high volatility to make significant gains.
Other use cases include remittances across borders without using intermediaries that eat your money in commissions. Moreover, in light of more Web 3.0 platforms and assets, Bitcoin is used to compensate and pay digital creators.
How Do Crypto Transactions Work?
Transacting in cryptos involves several advanced technologies that we will explain.
Smart contracts are functions that get triggered when certain conditions are met. In this context, once you approve a transaction and you have enough coins, the smart contract will deduct the transaction amount from your wallet, encrypt it using private keys and send the message to the receiver.
The receiver’s wallet then decrypts the message, and the funds are released to their account.
Validating nodes are machines and users consisting of crypto communities and miners who approve transactions based on given standards. The validation process happens momentarily, ensuring both wallets are valid and the amount is correct, and in exchange, they receive transaction fees, known as gas fees.
Bitcoin Payment Gateways
Traditional payment gateways receive credit and debit card information at the checkout, ensuring card details and purchases are valid.
Similarly, Bitcoin gateways are applications used to check the wallet information accuracy and the availability of funds you want to transfer.
Businesses search for the best Bitcoin payment gateways to deliver fast transactions and validation processes using peer-to-peer transfers at lower transaction fees.
Bitcoin Payment Processor
After a transaction passes the gateway, the processor’s turn comes in. The payment processor communicates with the credit card company and issuing bank to release funds from the account. Then, processors communicate with the merchant to transfer the money to the receiver.
Bitcoin payment processor companies play a vital role in decentralised finance, like Binance, Coinbase and B2binpay. Simply, these companies allow you to transfer crypto money and embark on fast and secure transactions.
Bitcoin Payment APIs
API stands for Application Programming Interface, which enables swift information exchange and communication between different applications and sources. The software provides innovative solutions for online stores and websites that sell services.
Using a crypto payment API, you can support crypto payments on your platform or website without having the user leave your webpage. This allows for faster transactions and better user experience.
It is crucial to find the best crypto API integration to aid your platform with fast executions and accurate information exchange, avoiding delays or outdated exchange rates.
Bitcoin Security Considerations
The deregulation of cryptocurrencies raises concerns for central banks and governments amidst fears that the high volatility and unpredictability of most cryptocurrencies can hurt the economy. Therefore, many countries have not regulated them as legal securities.
Moreover, the decentralised nature of cryptocurrencies contradicts how banks and central authorities work. These central entities collect user information and bank account details and have all transactions going through them, giving them more control and power.
On the other hand, the decentralised economy aims to share power and distribute control among users through peer-to-peer transactions with minimum identity disclosure. This way, users engage in secure, transparent and fast monetary transactions.
Additionally, and despite the higher personal security decentralisation provides, cryptocurrency transactions and wallets have been targets for several hack attacks over the past few years. Over $730 million worth of crypto coins and tokens were stolen in hacks in 2023 until October, compared to around $3.4 billion in 2022.
Crypto Considerations in 2023
Many digital currencies recovered in 2023 after the market crash in 2022. However, this year has been eventful for the crypto community.
The Securities and Exchange Commission (SEC) in the United States has been on a stride to regulate Bitcoin and consider it a regulated security subject to the SEC authority. Crypto enthusiasts strongly oppose this initiative because it changes the dynamics of cryptocurrencies and contradicts their fundamentals.
In the second half of the year, major financial institutions and investment firms managed to get the approval to list Ethereum futures ETF contracts in their trading desks, including Bitwise and ProShares.
This application came in light of the ongoing request to list Bitcoin spot ETF at major investment firms like BlackRock and Fidelity Investments. This event is crucial for the Bitcoin value and is expected to drive prices higher if the SEC approve this application.
Should You Accept Bitcoin Payments?
Choosing to accept crypto payments depends on your company and business operations. However, there is an increasing trend to deal with digital currency over traditional credit and debit cards.
Credit card payments rely on the central bank’s service and are associated with different fees, especially if multiple currency exchanges are involved.
Advantages of Accepting Bitcoin as Payment
Not only dealing with Bitcoin is contemporary and responds to modern business needs, but there are several benefits of accepting Bitcoin, and cryptocurrency as a whole, as a payment.
Faster and borderless: crypto payment methods are instant and immutable, where transactions take only a few minutes to process and cannot be reversed if you were to get paid by a suspicious entity. On the other hand, traditional payments can be refunded or subject to local regulatory requirements.
Additionally, accepting crypto payments allows you to send and receive money worldwide without worrying about exchange rates and local laws of transferring money across borders.
Lower fees: cryptocurrency payments have lower transaction costs because they do not involve intermediaries and exchange rates, and the only fees you have are the gas fees.
Crypto payment processors conduct transactions peer-to-peer, unlike traditional payment process that entails several middlemen and financial institutions that charge substantial fees.
Identity preservation: accepting cryptocurrency payments does not require the submission of any personal or business information to any authority. This feature helps preserve your identity and your clients without having the Internal Revenue Service question your cash flow.
Highly available: Some countries may impose business activity limitations on receiving money from abroad or dealing with foreign currencies. This is where crypto payments come in handy, where anyone can own a crypto wallet and engage in direct transfers without going through any central authority.
Disadvantages of Accepting Crypto Payments
Despite the several features of dealing with Bitcoin, this method is still new, with some challenges when you accept payments in crypto.
Volatility: Bitcoin and other cryptocurrencies are highly volatile, and their prices fluctuate several times a day. For example, if you receive 1 ETH as compensation for your service, there is a high chance that the value of what you received will change in the course of days.
This becomes more of a challenge with altcoins, in which prices change rapidly in a short period of time.
Technically challenging: accepting crypto payments involves highly technical terms like crypto wallets, smart contracts, crypto payment gateway and more, which can be challenging for someone used to local fiat currency.
Local regulations: Governments are still careful in dealing with cryptocurrencies, and some countries have strict laws for accepting digital currencies. Therefore, many business owners prefer traditional methods to avoid any tax implications and repercussions.
Security risks: Cryptocurrencies have been the target of several hacks and cyber attacks in the last few years. Every year, millions are stolen in wallet hijacks and blockchain breaches, which imposes some dangers when dealing with crypto, especially newly emerging projects and coins.
Conclusion
As a business, accepting crypto payments enables you to enjoy faster transactions, send and receive money with lower fees merchants, worldwide adoption and many other benefits that come with these innovative solutions.
These payment options must be treated carefully regarding the security of your funds and volatility risks, besides some technicalities. However, adopting those will put you on par with modern technologies and the most thriving companies around the world.
