All around the world, there are more and more companies accepting bitcoins, including such giants as Microsoft, Dell, and Overstock. Possibly, now is the time for small businesses to turn their attention to bitcoin as well.
What makes bitcoin so attractive to entrepreneurs, and why has it been on everyone’s lips for several years in a row? In this feature, ForkLog analyzes the basic advantages and disadvantages of the first cryptocurrency.
- 1 1. Negligible Fees
- 2 2. Nearly-Instant Transactions
- 3 3. Borderless Transactions
- 4 4. Security
- 5 5. New Opportunities and Advantages
- 6 6. No Intermediaries
- 7 7. Clearing Transparency
- 8 8. No Control
- 9 9. Inflation-proof System
- 10 10. Open Tech
- 11 11. 24/7/365
- 12 12. Expanding User Base
- 13 13. No Chargebacks
- 14 14. Pseudonymity
- 15 Disadvantages
- 16 Bitcoin and Small Businesses in Ukraine
- 17 Bitcoin and Small Businesses in Russia
1. Negligible Fees
As we know, bank transactions are infamous for their high fees. As for bitcoin network, they are much lower than those of traditional organizations, and hardly depend on the transferred amount or locations of the parties to the transaction. Aside from that, there are no recurring fees, limits and other substantial restrictions. Some online wallets like Xapo don’t charge any transaction fees whatsoever.
2. Nearly-Instant Transactions
It takes 3 to 5 business days for a bank transaction to go through. Cryptocurrency transactions take minutes: a transaction is confirmed when miners create a new block of 1 MB, which takes around ten minutes. Bitcoin is widely criticized for instances when transaction confirmation time takes up to seven hours. Still, there are ways to bypass it as offered by Segregated Witness and Lightning Network. Their implementation is likely to enhance the network’s scalability, and therefore accelerate transactions.
3. Borderless Transactions
Bitcoin is beyond nation states and central authorities. It is not controlled by any organization, and it has no jurisdiction. It could help many companies go international by dramatically cutting OPEX as it requires no exchange for local currencies and losing money on omnipresent fees. Companies could accept cryptocurrency payments anywhere in the world, which would take only a couple of clicks. Aside from that, blockchain has a great potential in such areas as cross-border B2B payments where it could remove numerous intermediaries.
Bitcoin network is very hack-resistant as it takes controlling at least 51 per cent of its power, which is nearly impossible as the entire network is more powerful than all supercomputers in the world combined. Using cryptography with open and closed keys makes digital asset storage and transactions truly safe. There also is the multisignature option, which allows one to require several independent confirmations to send money.
Offline storage (so-called ‘cold storage’) is the best option for long-term storage of cryptocurrency savings. In fact, it is a wallet disconnected from the network and stored in a safe place.
However, one should be extremely cautious about services offering online storage of your assets: they’re not insured against hacks and could have vulnerabilities as evidenced by notorious instances of numerous exchanges and wallets. Still, if you’re all about online services nonetheless, make sure your passwords are complex, and two-factor authentication is on (which means you have to enter your own password and a random one sent to you in a text message or in a special app installed on your phone.)
One of the most popular options here is Authenticator app by Google that generates confirmation codes. It’s available for both iOS and Android. On 2FA settings page of your online service you’ll see a proposal to scan a QR code with Google Authenticator app. Then you’ll receive a random 6-digit number you’ll have to enter to complete the setup.
5. New Opportunities and Advantages
Bitcoin is perfectly divisible, and it takes just a couple of clicks to send it. Smart contracts, multisignatures, and diverse services make it an attractive and convenient means of payment.
6. No Intermediaries
In the traditional system, the intermediaries in question are banks. Direct payments cut the transaction time, cost, and risks of errors. Notably, recent researches by Facebook and MasterCard have proven that most U.S.-based youngsters have not trust to the traditional banking system, and prefer new fintech services.
7. Clearing Transparency
All payments within the system are traceable down to the time of creation of bitcoins themselves. The history of transactions is stored in blockchain, a distributed database. Therefore, all incoming and outgoing payments may be traced provided a bitcoin address is known.
8. No Control
As blockchain is a distributed database without a central authority, nobody’s entitled to cancel or block payments, or change the supply of coins in the system. Bitcoin has no third parties or supervisors that could enforce their policies, require personal data, set limits, and interfere with the network’s operation.
9. Inflation-proof System
Issuance of bitcoins is strictly limited to 21 million coins, while reward for each mined block halves every four years. Any concealed issuance is completely impossible, while the trust to the issuer is replaced with math and cryptography. Steady growth of demand for cryptocurrency combined with limited supply continuously push the price upwards reinforcing it against inflation-prone fiat money. It makes bitcoin a ‘safe harbor’ capable of storing most of your savings in case a global financial crisis strikes once again. For people in countries like Venezuela or India bitcoin has become a savior in the aftermath of unreasonable monetary policies.
10. Open Tech
Decentralization and open development of bitcoin guarantee that the network cannot vanish or be conquered. Its source code is available to anyone, which is a guarantee that the program runs only those functions that had been declared.
There’s no need to worry that payments don’t go through due to some holidays. The number of transactions is unlimited, and they can be effected anytime and any day.
12. Expanding User Base
The number of bitcoin advocates is steadily growing. According to the joint report by ARK Invest and Coinbase, there are upwards of 10 million people in the world that own bitcoins these days. Infrastructure is continuously developing, new services emerge, demand increases, and the number of operations involving bitcoin as means of exchange is growing.
13. No Chargebacks
Transactions in bitcoin are irreversible, which distinguishes it from traditional means of payment. It means that a payment sent through the network can’t be cancelled, therefore no chargebacks that are typical of traditional banking are excluded.
Users don’t have to provide their personal data to effect a payment, so there’s no risk of leakage and further mishandling of such data. However, bitcoin is in fact pseudonymous: all transactions are recorded in the public blockchain. Modern methods allow one to link a bitcoin to a particular IP address, physical address of cashing, etc. This means that financial history of bitcoin wallet owners is in fact traceable.
1. Lack of Formal Recognition
Various nations perceive cryptocurrencies differently. While developed economies of Europe, or the U.S., show a trend of support, other nations restrict or sometimes ban cryptocurrency. According to Coindance, bictoin is absolutely legal in 77 nations, and therefore has no limitations. Governments of some nations, including China, the United States, France, India, Sweden, Turkey, and Australia consider bitcoin a commodity. In Poland and Brazil it is deemed property. In Argentina, Nigeria, and the Philippines, it is money. In Bangladesh, Bolivia, Colombia and Ecuador it is banned.
Generally, more and more governments show positive attitude towards cryptocurrency, so one might expect further growth of demand, and therefore growth of price and expansion of new services.
2. High Volatility
This justifies significant exchange risk, requires constant recalculation of prices,and complicates forecasts of future incomes.
3. Insufficient Popularity
Globally, bitcoin cap is minor (around $14 billion). Many people have no idea of bitcoin (or know too little.) Not every institution, online store or payment service trusts bitcoin, so they don’t accept it. Still, it is gradually becoming popular with masses in various countries, so the situation is likely to change for the better.
Bitcoin and Small Businesses in Ukraine
Even though most blockchain initiatives are at initial phases, Ukraine is among the leading nations in terms of bitcoin usage, including that in small businesses. Thus, in the country’s capital of Kyiv, there are stores accepting cryptocurrency payments. Additionally, supplier of honey from Lviv province started accepting bitcoins via his company’s online store. The supplier intends to use Ethereum smart contracts to create an online ordering system. Other companies, including Ukrainian iPhone Services, Yaware (developer of corporate apps), Juscutum (law company), SendFlowers (online store), Kava Like (coffee shop), Gek (real estate agency), BlitzTravel (travel agency), Silenca Tech (IT company) as well as some others also accept bitcoins for their services.
Bitcoin and Small Businesses in Russia
In Russia, an apartment in the city of Yekaterinburg was put up for sale for 77 bitcoins. Earlier, a local resident announced an online auction to sell his Mercedes Benz for bitcoins (however, no results were eventually announced.) Prior to the New Year holidays 2017, a farmer from Moscow province offered Christmas trees for bitcoins.
Bitcoin popularization in Russia faces obstacles because there are still some grey areas in cryptocurrency’s legal status. According to Russia’s deputy minister of finance Alexei Moiseyev, the government has no plans to pass any laws regarding cryptocurrency in the near future preferring to monitor international development of policies concerning the matter.
Therefore, notwithstanding some troubles, bitcoin is becoming gradually popular both in consumer and entrepreneur communities. It is quite likely that in a few years it will become acceptable by default at most online stores around the world. If you’re an entrepreneur and still don’t accept bitcoins for your goods and services, now is the time to seriously consider the issue.