Businesses of all shapes and sizes have been increasingly adopting blockchain technology for several processes, and under the umbrella of blockchain technology sits cryptocurrency. Blockchain can seem nebulous and complicated for small businesses with streamlined accounting processes, but ultimately it’s a tool that will help owners future-proof their business.
At the most fundamental level, blockchain is a database that collects, stores, and organizes information groups (or blocks). These blocks are connected to create a chain, and the forward progress of these chains is irreversible. Each block has a precise timestamp to signify when it was created and added to the chain.
Cryptocurrencies (the most popular of which is arguably Bitcoin) are a blockchain method designed to exchange payment or currency. Because of the inherent transparency of blockchain technology, cryptos are safer and more secure.
Customers are also getting savvier about using cryptocurrencies as they become more mainstream and recognize the importance of more secure payments for online or high-dollar transactions. The security of cryptos also insulates business owners from insider financial threats like employee embezzlement or misappropriation of company money. It’s not likely that every vendor or employee will want to accept cryptos as payment, but it’s an excellent way to mitigate risk for those that do deal in cryptos.
Cryptocurrencies are decentralized, meaning the parties within a transaction deal with each other instead of an intermediary partner. This is different from more traditional payment methods like credit or debit cards, whose intermediaries (Visa, Mastercard, banks) charge processing fees. Decentralization eliminates the middleman, lowers processing fees, and makes global transactions easier when calculating currency exchange rates.
There are even countries that are considering adopting cryptocurrencies as their national currency because of their decentralization. El Salvador, for example, has recently declared Bitcoin an official legal currency in an effort to rebuild its struggling economy. The hope is that its citizens will save a significant amount of money by avoiding processing fees that can instead be injected into the economy.
However, this decentralization has its drawbacks. It has led bad actors like hackers to demand cryptos as payment for ransomware attacks because there’s no paper trail and it’s harder for the payments to be seized by law enforcement.
If you do any research on cryptocurrencies and blockchain technology, you’ll quickly find a school of thought that’s deeply hesitant about early adoption. Cryptocurrency can be volatile, and the technology and methodology are largely unregulated. You could do severe financial damage to your business by making uneducated guesses or improperly vetting crypto exchange partners. The taxation of cryptocurrency is unclear as well. For non-profit companies or those that have already complicated tax structures, crypto could present another layer of complexity.
The best way for business owners to get their feet wet in the crypto pool is to work with industry peers or other entrepreneurs who have proven track records of crypto transactions and have experienced first-hand the growth that can come from adoption. There needs to be a solid game plan in play for this investment to provide a return in the form of business growth.
Small business owners sometimes need to leave their comfort zones to find success, and this can include seeking out professional coaching. The Alexander Group isn’t your average business coaching company. We focus on providing clients with a more personal, intimate approach to guidance. Coaching isn’t done by phone or even over Zoom— there is no substitute for one-on-one mentoring, and as such The Alexander Group coaching is always in person. To learn more, contact us today!