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Cryptocurrencies such as Bitcoin, Ether, and Doge, among others, have become part of our daily vocabulary. These digital currencies, once cast away and linked to illicit activities, have become the new normal today. Bitcoin, the king of cryptocurrencies, now records billions in daily transactions.
However, there are those who consider cryptocurrencies only as a financial tool instead of money. Regardless, the number of companies that accept Bitcoin as a payment method is increasing with each passing day. In fact, many Bitcoin casinos accept various cryptocurrencies, allowing gamblers to play the Bitcoin poker in Australia and other countries.
Today, one can take a vacation paying with cryptocurrency, purchase a cup of Starbucks coffee in the airport, pay for hotels and resorts, or even buy drinks from a vending machine.
Does this mean that one has to accept cryptocurrencies as payment to remain relevant?
It is not a very easy question to answer. This is because of the overwhelming amount of fake and misleading information about cryptocurrency that circulates on the internet daily.
However, a realistic consideration of the advantages and disadvantages will enable you to determine whether they should accept cryptocurrencies as payment.
Advantages of Cryptocurrencies as Means of Payment Despite the cryptocurrency crash that occurred in 2022, cryptocurrencies remain to be a very inviting proposition for most business owners.
The following are the most common benefits of cryptocurrency.
Decentralisation
The most important benefit, which can be highlighted concerning cryptocurrency, is that it is not controlled by a certain financial or governmental organisation.
This eliminates the idea of money monopoly and validates the concept that the value of cryptocurrency is not bound by the discretion of the central bank or any other form of authority.
Lower Transaction Fees
The fees for transacting in digital currencies are extremely low or even free at times. This is due to the fact that third parties and intermediaries, like VISA and PayPal, are cut off in the process. Furthermore, cross-border transactions with digital money are also carried out without the need for foreign exchange procedures with more efficiency and cheap cost.
Protection Against Inflation
Owing to the scarcity of currency, cryptocurrency is viewed as a hedge against inflation. For instance, the number of bitcoins that can be produced is limited to 21 million, and once this figure is achieved, no more bitcoins will be available for mining.
Other digital currencies also employ this method to cap supply and help safeguard against inflation. With limited supply, if cryptocurrency demand increases, then the value of cryptocurrencies will increase as well.
Potential for Massive Profits
The vast majority of cryptocurrency investments are lucrative, and those who invest generate significant income. From the various sources available, in 2022, the global cryptocurrency market was estimated to be about $4. 67 billion, and analysts expect that this figure will rise at a compound annual growth rate of 12 per cent. It is expected that the value will continue to rise with more global acceptance.
Accessibility
Cryptocurrencies increase the reach of financial services. They are built on open platforms and do not require an individual to go through a lengthy sign-up process and wait for approval, as with many traditional financial institutions.
Unlike accounts offered by conventional banks, opening a crypto wallet does not require providing identification details, undergoing rigorous vetting, or even undergoing a credit check.
With regard to conventional forms of payment, cryptocurrency eliminates the need to deal with excessively high commissions, long processing times, and third-party characteristics of banking systems.
Transparency
Although cryptocurrency transactions involve anonymity, the data recorded on a public blockchain, such as the Bitcoin and Ethereum blockchains, can be seen by anyone who is willing to go through it. Every cryptocurrency holder receives a public key, which can be used to recognise an investor.
This means that while the investor names are not disclosed, the transactions can be traced for clarity on some matters. In real-time transfers, users can track information from the blockchain using various cryptocurrency platforms.
Again, not all cryptocurrencies employ public blockchain ledgers. Other ledger types include private and permissioned ledgers. Private ledgers are only open to a certain set of clients, and permissioned ledgers are a blend of public and private blockchains but allow access only to those who are allowed by the chain administrators.
Disadvantage of Cryptocurrency as Means of Payments
On the positive side, the ease of doing business and high return on investment within a short span of time are some of the advantages of cryptocurrencies. However, cryptocurrencies are not without their challenges. The following are some common disadvantages of cryptocurrency:
Volatility
The value of cryptocurrencies is not fixed and may regularly be prone to changes. Although this volatility may not be a hindrance to earning quick profit, it is a major disadvantage that may lead to huge losses in situations like a downturn in the price of cryptocurrency. Such fluctuations make it a high-risk investment and payment option, thus not suitable for anyone seeking a fixed income.
Poor Regulation
Although the use of cryptocurrencies is legal in many developed countries, central governments do not recognise them legally. The lack of control and poor regulation in the cryptocurrency market also raises fears of cryptocurrency fraud and market manipulations. Until federal governments ratify and supervise cryptocurrencies in the same manner as they do fiat money, like US dollars, there will always be a higher risk attached to cryptos.
Security Risks
Despite the adequate security measures that stem from the use of the blockchain, more and more cases of insecurity incidents and hacking take place in the framework of cryptocurrencies.
Hackers have targeted cryptocurrency trading platforms and blockchain destinations for storing digital coins and tokens, which has led to massive losses for individuals and companies. Additionally, Bitcoin involves irreversible transactions, making it hard to track and get back the money once it has been fraudulently obtained.
Possible Loss of Coins
Several cryptocurrencies, including Bitcoin, require the token owner’s private key to access the virtual wallet where the tokens are stored. Nonetheless, if the private key is lost or stolen, it becomes impossible to prove ownership again or to regain the lost digital tokens.
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