Cryptocurrency has become one of the most popular online payment methods in this era. It is an online currency that relies on highly advanced cryptography systems to ensure secure payments across the Internet. Unlike other payment options, cryptocurrencies cannot be counterfeited and do not suffer from the error of double debit. The exponential rise in the value of cryptocurrencies like Bitcoin has made them a sought-after digital asset. Although many companies are still apprehensive about their usage due to their volatile nature, others are embracing them as a payment option. Let’s discuss what are the advantages and disadvantages of cryptocurrency in business.
What are the advantages of using cryptocurrency in a business?
#1 Secure and Fast
Cryptocurrency transactions are verified using encryption, thus the name “cryptocurrency.” Data transmission and processing involve advanced coding, with each coin and wallet being tracked through blockchain. The ultimate objective is to improve safety and security. In addition, transactions are confirmed much more quickly compared to fiat money, making speed a crucial aspect in payment receiving and processing in businesses.
#2 Protection from inflation
Most cryptocurrencies are created with a predetermined and finite amount. According to the ASCII computer file that denotes the amount of each coin, the worldwide Bitcoin supply is limited to 21 million coins, adding to its value when the demand goes up. This, in turn, stabilizes the market and prevents inflation.
#3 Growth of the company
As changes seep in, growth unfolds. Digital currencies have captured people’s imaginations, speeding up payment processing for customers. Embracing cryptocurrency in your business puts it squarely at the forefront of the evolution of currency.
#4 Transaction fees
Many payment services have additional charges for various transactions. PayPal, for instance, levies up to 4% per transaction, while cryptocurrency transactions have minuscule or even negligible fees. Binance, one of the world’s leading crypto-trading companies, levies roughly 0.04 – 0.10 percent charges on transactions based on trading volume.
#5 No chargebacks for merchants
Cryptocurrencies are a great choice for businesses that accept goods and services, as transactions are irreversible, eliminating chargeback risks. The advanced encryption of cryptocurrencies makes every transaction secure and final.
#6 Broader market reach
Fiat currency is limited to only one country, charging foreign exchange fees for all international transactions. In contrast, cryptocurrency can be used globally wherever accepted, without the need for forex.
#7 Reduces “friendly fraud”
Chargeback fraud, otherwise referred to as friendly fraud, occurs when a cardholder requests a payment reversal or refund from the issuing bank while retaining the purchased goods. Such malpractice is absent in cryptocurrency transactions, as blockchain technology’s rigid tracking system makes it virtually impossible to carry out chargeback frauds.
#8 Removes intermediaries
The intention behind the creation of cryptocurrencies was to eliminate intermediaries like banks and online marketplaces. Blockchain technology was developed as the solution by replacing the centralized system with a decentralized ledger of interconnected chained records.
Disadvantages of using cryptocurrencies in business transactions
#1 Illegal transaction
Governments find it near-impossible to identify users via their wallet addresses or surveil their information due to Bitcoin’s highly secure and confidential transactions. Widespread illicit activities like drug purchases on the dark web have often relied on Bitcoin for payments. Moreover, some individuals have used it to launder illegally obtained money discreetly through trusted intermediaries to mask the source.
#2 Prone to hacking
Cryptocurrencies’ blockchains provide high-level security; however, exchanges and wallets where the coins are stored are vulnerable to hacking. In recent years, several cryptocurrency exchanges and wallets have been hacked, resulting in the theft of millions of dollars in coins.
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#3 Data loss risk
Cryptocurrencies advertise themselves as anonymous, but they are merely pseudo-anonymous. That is to say, the electronic footprint they leave behind is subject to examination by elite agencies such as the Federal Bureau of Investigation (FBI). As a result, the financial transactions of everyday individuals can now be monitored by government and federal organizations.
#4 Volatile
Cryptocurrencies are considered volatile on open markets due to significant fluctuations in Bitcoin’s value, reaching an all-time high of $17,738 in December 2017 and declining to a low of $7,575 in the months that followed. Consequently, economists see cryptocurrencies as a fad or bubble that will soon fizzle out.
Conclusion
Cryptocurrency has many advantages and disadvantages for businesses. Those looking to incorporate cryptocurrency in their operations should weigh up the pros and cons before making a decision. The security, speed, and low transaction fees that come with using cryptocurrency are appealing but are counterbalanced by its volatile nature, hacking risk, data loss risk, and potential for illegal activity.