What is cryptocurrency and why it matters for small businesses

Editorial Team

4 min read
Bitcoin symbol on a data graph

In early 2021, Dogecoin, the cryptocurrency that started as a joke, caused quite a frenzy.  It ultimately became known as the first meme coin popularized by billionaire Elon Musk.

Day traders fascinated with Elon Musk’s wealth bought into the joke–quite literally–and united to increase the value of Dogecoin to $0.420 to commemorate 4/20, the holiday observed for the celebration of, you guessed it, marijuana.

And so began the immense hype and excitement around Dogecoin among newly introduced cryptocurrency traders betting in hopes that its value would increase to $1. According to The Motley Fool, Dogecoin reached its highest value of $.74 in April of 2021, before it started to come back down. If this excitement is any indicator of the future of cryptocurrency, it could very well become the next new normal.

Dogecoin certainly isn’t the only cryptocurrency. In fact, it’s not even the most popular. The first cryptocurrency, Bitcoin, launched in 2008 and remains the most well known and most influential, according to Coinbase, one of the largest cryptocurrency trading platform.

Cryptocurrency explained

Cryptocurrencies are unregulated currency meant for online use. No government or third-party has control over how much it’s worth. Instead, it’s managed by peer-to-peer networks of computers running free, open-source software. Anyone who has the technical knowledge, money, and means, can create a cryptocurrency.

Over the past decade, cryptocurrency has increased in popularity, but never with a breakout moment like in 2020, when government stimulus money equipped people with the cash to invest in cryptocurrency, Bloomberg reported.  

Though cryptocurrencies fluctuate wildly in value, there’s plenty of interest in them. So, whether in the short- or long-term, small business owners may begin to see accepting digital currencies as vital for the future of business.

Benefits of cryptocurrency to small businesses

Most small business owners could find a likely foray into cryptocurrency via payments. Some small businesses are already accepting cryptocurrencies as a form of payment–up to 32 percent of small businesses have been reported as accepting cryptocurrency. What’s more, cryptos offer these three benefits to businesses.

1. They can open new revenue streams

Accepting cryptocurrency as a form of payment can open new avenues of income and revenue for small business owners. Although different laws apply, it’s possible to accept cryptocurrencies from anywhere in the world, thereby expanding products and services to consumers that may typically not be reached. 

2. They don’t require banks or payment processors

Another benefit is that transferring cryptocurrencies doesn’t require banks or payment processors to transfer value, making it a much more effective and streamlined way to sell and make purchases. Additionally, cryptocurrency transactions cannot be reversed, which benefits merchants who do not want to deal with the problems and fees that come with credit card transactions.

3. They’re decentralized and traceable

According to Coinbase, “each [crypto]currency has its own blockchain, which is an ongoing, constantly re-verified record of every single transaction ever made using that currency.” That means, cryptocurrency transactions may offer greater visibility and traceability than other currencies. What’s more, “a crypto blockchain is distributed across participants of the digital currency’s entire network.” That means, no specific entity–bank, company, or individual–controls it. It’s available to anyone.

Considerations for cryptocurrencies

While cryptocurrency appears to be a promising path for the future, not everyone has caught on yet. So, it’s important for small business owners to determine whether accepting crypto makes sense.

Here are a few considerations:

1. Location

Research shows that cryptocurrency tends to be more popular and used in coastal cities. Los Angeles is the friendliest cities for cryptocurrency, offering several crypto-ATMs, restaurants and retailers who accept the currency.

2. Consumer demographics

Younger people are more likely to use cryptocurrency than those who are older. The average age of crypto investors is 38-years-old, according to CNBC.

3. Competitive advantage

Skynova reported that 1 in 4 business owners who do not currently accept cryptocurrency would like to do so in the future. It could be a competitive advantage to get ahead of other businesses wishing to go the crypto route.

As with any new ideal or currency, it’s important to conduct research before jumping on board. This article is a great place to start, but it will be interesting to study cryptocurrency in the months ahead and take note of the way it continues to change the way of life and business. 

In the meantime, learn more about how Clover can help small businesses begin accepting payments quickly and easily.

This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.

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