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What Your Small Business Needs to Know About Cryptocurrency

Cryptocurrency. Bitcoin. Blockchain. These words were the playground of just a handful of technology enthusiasts and investment speculators only a couple of years ago. But thanks to a massive bubble in the digital currencies, as well as a slow but growing movement of vendors accepting them, those words have hit the mainstream – hard. In fact, cryptocurrencies have come so far that a handful of small businesses have begun accepting them, and many more are starting to toy with the thought.

But accepting cryptocurrency as payment is far from easy, and it’s fraught with hang-ups and risks.

To help you better understand cryptocurrency, we’re highlighting some of its benefits and pitfalls, and providing you with some guidance if you’re considering weaving cryptocurrency into your small business.

Cryptocurrency: The Basics

A cryptocurrency is a digital or virtual currency that lives as information rather than, say, a metal coin or a paper bill. But its digital nature makes it so much more complicated than traditional physical currencies.

That’s because cryptocurrencies essentially aren’t so much a fixed thing as they are a living record of transactions. Most cryptocurrencies are based on blockchain technology – what Wikipedia succinctly but accurately defines as “a growing list of records, called blocks, which are linked using cryptography.” (Hence: “crypto”currencies.) These records contain transaction data, such as who did the transferring and when. Records can be added over time, but they’re protected and difficult to modify retroactively.

Cryptocurrency Pros

Cryptocurrencies are appealing because they’re “decentralized” – that is, they’re not managed or tied to any one country, and instead are managed by an entire network of computers theoretically anywhere.

Moreover, the systems are set up in a way that users can remain somewhat if not entirely anonymous – at the very least, their identities have some amount of protection.

These are the most typically touted benefits of cryptocurrency: privacy, security and no tethering to any one country, which means it isn’t affected by inflation or deflation.

Cryptocurrency Cons

All that said, there are several reasons why cryptocurrencies haven’t taken off completely unchecked. This “Wild West” technology also has several negative aspects that should give small business owners pause.

For one, while cryptocurrencies are supposed to be secure, they’re still susceptible to hacks – in a few cases, hundreds of millions of dollars’ worth of cryptocurrency has been hacked away, with many more smaller incidents popping up in between. And while money has been returned to crypto-holders in many cases, sometimes they’ve been left without recourse.

Also, the cryptocurrency world is rife with scams. CoinMarketCap.com lists more than 1,800 cryptocurrencies at the moment – and there are still hundreds more that go unlisted there. Many of these are the subjects of scams, and a few cryptocurrencies themselves have been nothing more than elaborate scams designed to rope in investor money only to disappoint overnight. The Internet is littered with headlines such as a $3 billion Bitcoin scam in India, or how cryptocurrency fraud has become the second-largest type of investment scam in Australia.

Cryptocurrency and Your Small Business

But perhaps the biggest reason to avoid cryptocurrency, as a small business, is lack of practicality.

Consider this: As of March, only 8% of Americans actually owned a cryptocurrency, and just another 7% or so said they didn’t own a digital currency but planned to own one in the future. That alone demonstrates that it’s hardly a priority for consumers right now … so why try to meet demand that’s hardly there and probably won’t be anytime soon?

Even if you did decide to get a head start on the future, which cryptocurrency should you go with? The market is extremely fractionalized, with even the largest currencies – Bitcoin, Ethereum, Ripple and others – commanding relatively small percentages of the overall pie. Moreover, cryptocurrencies aren’t easy plug-and-play solutions; there’s no program to allow you to accept a thousand different digital “coins” overnight.

Lastly, even if you did manage to plug in a wide swath of cryptocurrencies, you’d have to deal with the massive swings in value they experience on a nearly daily basis. That’s because many of these cryptocurrencies have become the subject of speculative investment. Sure, daily swings of 10 to 15 percent might sound great if you’re a day trader, but if you’re considering buying a pair of shoes with a digital coin, why spend it today when it could be worth double the value in dollars a couple weeks later?

At McManamon & Co., we definitely believe small businesses need to tightly embrace technology to stay ahead of the competition. We suggest numerous resources for startups, and even offer paperless office consulting for companies looking to take their operations digital. But while cryptocurrencies might be the future, they’re the very far-off future – even if the drumbeat of optimistic daily headlines indicates otherwise.

Does your small or mid-size business need a leg up? We can show you various ways to implement technology into your day-to-day, saving you time and even money. Call McManamon at 440.892.9088 or contact us online today.


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