It's becoming increasingly clear that cryptocurrency usage is not a short-term fad and is likely to be a technology trend that will continue to provide benefits for business into the future.
For the uninitiated, cryptocurrency is a form of digital currencies that differs in many ways from the traditional fiat currency individuals worldwide have been using for centuries. Unlike fiat currency, cryptocurrency isn't issued and managed by any one central national government. Cryptocurrency is distributed and runs on blockchain technology that provides an immutable ledger for tracking transactions.
There are many different cryptocurrencies, with Bitcoin perhaps the most well-known, though not the only, cryptocurrency in popular usage. Other commonly used cryptocurrencies used by businesses include Ethereum, which is widely used in support of Web 3.0 applications. Here are some of the many benefits of cryptocurrency for businesses.
1. No paper money required
Unlike all fiat money, there's no paper version of cryptocurrency. Many transactions with fiat currency are digital, but they come with an underlying foundation of physical money. Businesses accepting cryptocurrency don't risk dealing with physical currency that can easily be mishandled.
2. Access to new liquidity and capital
Cryptocurrency has the potential to help a business raise new funds and improve financial liquidity. A business could potentially be loaned cryptocurrency without being subject to the same limitations that might be associated with getting a loan of fiat money from a traditional bank. Cryptocurrency is also often at the center of decentralized finance, which can potentially help a business with financial liquidity.
In the early days of cryptocurrency, funds also were often raised via an initial coin offering (ICO). A new cryptocurrency is first minted and offered on an exchange much like an initial public offering when a company offers shares for sale for the first time. But the practical utility of ICOs as a vehicle for fundraising has diminished due to the crypto market's maturation.
3. Expanded payment methods
By supporting cryptocurrency, a business can offer consumers and business partners a broader range of payment options, instead of being limited to fiat currency alone.
4. Potential for attracting new customers and demographic groups
Every business accepts fiat money, but not every business accepts cryptocurrency. That differentiation can potentially attract new customers and different demographic groups beyond what a business can serve with fiat currency alone. An October 2022 report found that a growing number of businesses in the U.S. and worldwide are accepting cryptocurrency.
5. Entry into the Web 3.0 world
Cryptocurrency is a gateway for organizations to enter and be part of the Web 3.0 universe. Web 3.0 technologies rely on blockchain and tend to require cryptocurrency as a method of payment during transactions. There are many different Web 3.0 use cases and examples that can benefit a business. One method is participating in the decentralized applications (dApps) space to build or sell services, though it's not quite as comprehensive as it once was. There's also a market for businesses with nonfungible tokens.
6. Transaction transparency and auditability
Cryptocurrency is based on blockchain, which provides an immutable ledger -- a tamperproof, cryptographically assured record of transactions. The ledger's high degree of auditability enables a business to track audit transactions. The ledger also enables transparency to identify if a transaction occurs, potentially boosting accountability as well.
7. Extra layer of customer privacy
While the blockchain on which cryptocurrencies exist provides transparency into each transaction, it also helps protect user privacy. Blockchain and cryptocurrency, unlike fiat forms of payment like a credit card or bank account, don't associate with any personally identifiable information. A cryptocurrency transaction relies on public key cryptography that involves a public and private key, which individuals can use and store in a crypto wallet.
8. Cross-border transactions
Even in the modern era of technology, businesses often encounter barriers when selling their products globally because of issues related to handling fiat money payments. Cryptocurrency offers an alternative, enabling businesses to buy and sell products without engaging a bank or payment processor that might charge additional fees for an international trade.
While the value of cryptocurrency can and does fluctuate, the prevailing value is consistent worldwide. This global consistency for cryptocurrencies like Bitcoin eliminates the complexities of currency conversions and associated transaction fees, while the absence of intermediaries can potentially foster faster and more cost-effective transactions.
9. Less risk of chargeback fraud
Cryptocurrency usage can help reduce the risk of chargeback fraud by introducing irreversible transactions. Unlike traditional payment systems like credit cards in which customers can initiate chargebacks, cryptocurrency transactions recorded on the blockchain are permanent and can't be reversed due to the immutable ledger.