How to Use Cryptocurrency for Business (and Why You Should)

If you are a business that earns or holds money and you are not incorporating cryptocurrency as part of your financial model and portfolio, you may be missing out. Cryptocurrency, also called crypto, used to be hard to invest in, but in the last few years, the process has become much easier. In this article, I will show how successful companies can gain an edge over their competitors by incorporating cryptocurrency.

Here’s what I’ll cover:

• What is crypotcurrency?
• Why is cryptocurrency important to business?
• How cryptocurrency differs from traditional financing
• Advantages of cryptocurrency
• Challenges of cryptocurrency
• Choosing the right cryptocurrency strategy for your business
• Learn more about cryptocurency

What is Cryptocurrency?

Cryptocurrency is a digital asset that can exist without a centralized authority, like a bank or government. Cryptocurrencies are supported on a technology known as the blockchain, which maintains a secure record of transactions and tracks who owns what. Units of cryptocurrencies are called either tokens or coins, depending on their use. We’ve posted resources at the bottom of this story if you’d like to explore further.

Why is cryptocurrency important to businesses?

The popularity of cryptocurrency has exploded since its introduction in 2009. As of 2022, more than 300 million people worldwide own some form of cryptocurrency. The global marketing cap is over $1 trillion and every day over $100 billion is traded. And if you think Bitcoin is the majority of those trades, you would be mistaken. Cryptocurrency is so much more than just Bitcoin now. Less than 0.65% of cryptocurrency trades are from Bitcoin owners. There are thousands of tokens and coins to buy, sell, and trade, each with its own function and utility.

Incorporating cryptocurrency into your business may be inevitable. Given its growth trajectory, I recommend adopting it in your business in the next few years to gain an advantage over your competitors.

Cryptocurrency will be more attractive to your business if your company has international revenue, but even without an international presence, you can both save and make money with cryptocurrency.

How cryptocurrency differs from traditional financing

There are five key ways cryptocurrency differs from traditional financing.

1. You can earn interest on your cryptocurrency holdings the same way you can with traditional financing. Some tokens and cryptocurrencies, however, offer a significant amount more interest than banks and credit unions.

I own tokens in Genius Token, for example, a decentralized token offering high-interest rates self-regulated by artificial intelligence (AI). I often advise businesses with cash stashed away at a bank to consider holding some assets in a token like Genius, which would allow their money to grow more aggressively than a bank alone.

2. Banks often require a person's physical appearance to complete a transaction, especially a large one. Transactions in the evenings, on holidays, or on weekends are tough, if not impossible. Cryptocurency transactions can be done by anyone, anywhere in the world at any time.

3. Banks have fees, crypto transactions do not. Both sending and receiving banks could take a slice of your transaction and take much more time to complete than a crypto transaction.

4. Cryptocurrencies have minimal barriers to entry. As a result, more people can transact with cryptocurrency regardless of their stature.

5. Diversification is key for cryptocurrencies. Banks offer limited financial services, usually cookie-cutter products from one bank to the next. With cryptocurrencies, there are thousands of tokens and coins, each with various features and benefits. Such features and benefits are outlined in the smart contracts—programs stored on a blockchain that run when predetermined conditions are met. These smart contracts are explained in detail on a token or coin's whitepaper—a document that explains the technology and utility of the token or coin. Always do your due diligence before buying.

Advantages of cryptocurrency

Here are my top five favorite advantages of cryptocurrency, in no particular order.

1: Increased reach

There is no denying that crypto transactions are easy to do. It’s easy to send and receive once you know how to do it. By accepting crypto as payment you are opening your company up to much more reach, especially with international customers. Those that have crypto, especially Bitcoin, love it when a company accepts crypto as payment. In the report titled "Paying With Cryptocurrency," the researchers found that among businesses with an annual income of $1 billion, 85% are adopting crypto payments to find and gain new customers. Your company may not be that big, but if the “big boys (him/his)” are doing it, you should consider it too.

2: Protected customer privacy

According to the Pew Research Center, as many as 79% of Americans on the web worry about companies infringing their online privacy. Online privacy is a big deal nowadays, and privacy is a core feature of crypto transactions (to its detriment and benefit). Accepting crypto as payment makes you attractive to customers who value their online privacy.

3: Reduced transaction cost

The traditional way of accepting money for a business is to use banks, credit cards, and other intermediaries. Unfortunately, every intermediary has fees, and sometimes multiple intermediaries work their way into a single transaction. With cryptocurrency transactions, there are few, if any, intermediaries, which keep transaction costs to a minimum. Don’t get me wrong, there are transaction fees, like exchange fees, network fees, and wallet fees, but these fees are almost always a fraction of the traditional way of accepting money.

4: Simplified international transactions

Given how connected our world is nowadays, it still amazes me how difficult it is to send and accept money to and from other countries. Each country has their own laws and security concerns around sending and receiving money, not to mention the currency from one country to another changes constantly, adding to the complication of transactions. With crypto, international transactions are quite easy. The price of Bitcoin is the same in the United States as it is in Zimbabwe and it is in India and so on; the price is consistent. With the lack of intermediaries coupled with the consistency of the price, helps make international transactions super easy.

5: Reduced chargeback fraud

If you accept credit card payments for your business you are no stranger to chargeback fraud. According to Cybersource, 2021 Global Fraud Report, friendly fraud is not the number one fraud attack source that merchants have to deal with. According to LexusNexus, for every dollar lost to fraud, it costs the company $3.75 to fight or even process it. Given high competition and tight margins in today's business environment, chargeback fraud makes crypto look like a great opportunity. Crypto payments occur on the blockchain and blockchain transactions are permanent and irreversible, this takes chargebacks off the table for the customer.

Challenges of cryptocurrency

There are several challenges associated with cryptocurrency to know about.

Mismanaging your crypto wallet

The crypto industry is still young with only 1 in 5 Americans having reported completing at least one crypto transaction. As a result, when new people come into the industry they are subject to bad actors who try to scam them out of their money.

Before doing any crypto transactions you must understand how to manage your wallet. There are two types of keys in your wallet and understanding the difference between them are … key. Here’s what to know:

1. Public keys. A public key is used to send cryptocurrency into a wallet. Think of this as a mailing address. Anyone can send money to you if they know your public key. It’s just like setting up a direct deposit and inputting your routing and checking number. You can share your public key to anyone because it doesn’t allow anyone to withdraw money unless they are logged into your account.
2. Private keys. A private key is, essentially, your password and for your eyes only. If someone gets a hold of your private key they have access to your wallet and can do whatever they want with it, anonymously.

Issues with security and scams

Depending on what platform you transact crypto on, you will most likely be assigned seed phrases. Don’t give these out either, the seed phrase is your crypto wallet recovery password if you ever lose access to the device where your wallet is stored. Someone knowing your seed phrase is just as damaging as knowing your private keys.

Scams occur when someone contacts you and asks you to verify ownership of your wallet. And to verify such ownership all you have to do is give them your seed phrase. Don’t do it, the seed phrase is for your eyes only. Keep them in a very safe and secure place. No credible company will ask you for your seed phrase under any circumstance.

The security protocols around crypto might seem daunting, but knowing the basics about crypto security will prevent you from falling for such scams.

Fluctuations in value

Cryptocurrency is a relatively new investment option and there can be large swings in value, both positive and negative. These swings can create uncertainty for businesses accepting payment by cryptocurrency. Imagine accepting a Bitcoin payment one day and the next day the value of Bitcoin drops 10% (or more). It's tough to run a business when your profits could disappear overnight.

Companies that accept Bitcoin, like Overstock for example, have developed creative strategies to mitigate this risk. Overstock has been accepting Bitcoin since 2014 and was the first major retailer to do this. The company’s strategy was to “pocket 10% of a sale in bitcoin and convert the rest into U.S. dollars. To facilitate transactions, Overstock used Coinbase’s exchange to convert digital currency in real-time.” Their strategy has shifted over time, but converting the Bitcoin into U.S dollars as fast as possible minimizes the risks of price fluctuations.

Choosing the right cryptocurrency strategy for your business

There are several ways that a business can grow by incorporating cryptocurrency into its business model. The three most popular are loans, interest-bearing tokens/coins, and accepting payments. Let’s take a look at each.

1. Loans. The loan industry from a traditional financing perspective needs a massive overhaul, and cryptocurrency is their wake-up call. With crypto loans being funded on the blockchain, consumers enjoy an unbiased and decentralized process for fast processing and low-cost funding. What takes months to get traditionally financed can now take minutes for a crypto loan at a fraction of the cost.

The downside to these fast, low-cost loans are the lack of FDIC insurance. Crypto accounts are not FDIC insured, so if an exchange fails for whatever reason or if the loan company doesn’t maintain a certain amount of liquidity, it could mean trouble for the borrower. So if a borrower puts up some crypto as collateral and one of those aforementioned occurrences happens, the lender may be unable to return the borrower's collateral. Also, given that crypto values still swing wildly, the lender may ask for more collateral if there is a drop in the borrowers' assets.

‍2. Interest-bearing tokens/coins. Another way a business can grow by incorporating cryptocurrency into its business model is to utilize interest-bearing tokens or coins. I hold a personal stake in Genius Token because it utilizes a completely decentralized AI token offering high-interest rates. A company might consider putting extra cash in an interest-bearing coin or token rather than a traditional CD or savings account. At the time of this writing, the national average for a CD is only 0.42%, which doesn’t even keep up with inflation.

3. Accepting payments. Another popular method for businesses to utilize crypto is by accepting cryptocurrency payments. Integrating crypto payments into your checkout process is fairly straightforward nowadays. Companies like BitPay, CoinPayments, Paypal, and OpenNode (to name a few) have a host of user-friendly integration tools. For those businesses taking payments outside the office (at an event for example), you can even accept crypto payments in-person with a mobile POS. NowPayments is an example of one company that does this.

Accepting crypto payments on your website is faster and easier for crypto consumers. This would boost conversion rates and lower cart abandonment rates. In addition, processing fees are smaller, international sales are easier, and there is no risk of chargebacks.

Cryptocurrency: a strategic decision

Cryptocurrency, though still in its infancy, has come a long way since Bitcoin was introduced in 2009. Every day more and more consumers and businesses around the world are making it a part of their portfolios. My estimate is that in 10 years, we will barely recognize what we now know as traditional financial transactions and financing.

As a fractional CMO and entrepreneur coach, I partner with companies from around the world to help them make strategic decisions to remain relevant and competitive. Reach out to me here to learn more.

Learn more about cryptocurrency

Learning about cryptocurrency is like learning a new language. There are many terms, definitions, concepts and strategies that will seem difficult to understand at first, and they are! Below are some resources that will help you get started if you are just diving into the learning process.

• Beginners Guide to Crypto (22-minute video)
• Business ideas (20-minute read)
• How Cryptocurrency Works  (13-minute video)
• Binance Academy (hundreds of articles for beginners)