Find out what you need to know in order to enable your business to accept crypto currency payments.
It wasn’t that long ago that many viewed cryptocurrency as something that only criminals and hackers used.
Fast forward only a few years and crypto has become a legitimate asset for hundreds of millions of people to hold. Not only that, it has also begun to be used as a convenient, fast, inexpensive payment form.
But what does your business need to know about crypto in order to start using it for payment? Let’s find out by first understanding the concept behind how it works.
Understand how cryptocurrency works
As we discussed in our article on what your business needs to know about accepting crypto, cryptocurrency functions on a digital record database known as “blockchain”. This digital leger publicly shows every transaction that has taken place, thus verifying the validity of each transaction.
This technology is decentralized, so no single country, organization, or entity has direct influence over it. However, because it’s a decentralized, fully-digital asset, you can’t just use it like cash or credit.
You’ll need tools to use it that will allow you to accept it, store it, and convert it to fiat (government-issued) currency if you choose to do so. This includes a “wallet”, payment processor, and any hardware you might need.
Before you do that, however, you will need to establish how your business will use it.
Determine how you’ll use it in your business
Different cryptocurrencies function in very different ways. Some are seen more as a store of value that will increase over time in comparison to merely a currency used for daily transactions. Thus, you may want to hold on to it if you hope its value will continue to climb. If that’s the case, you will need to bring it into your company’s balance sheet as an asset, as well as establish your goals.
Contrast this approach with a focus on crypto-enabled payments. This means you’ll need a third-party vendor to help you accept or make crypto payments through conversion in and out of fiat currency. This is a much more simple approach, as there are less factors to consider and less input needed from different parts of a company.
Choose which cryptocurrency to accept
At the moment, the number of cryptocurrencies are exploding. For example, statistics show that over 6,000 came into existence in 2021–roughly 17 per day.
However, the vast majority of these cryptocurrencies will fail, shunned by the public and investors. These are known as Dead Coins. Some were created for fun, others jokes, still others scams. Thus, it’s important to focus on well-established coins to choose one that will help your business.
Bitcoin, for example, is more and more seen as “digital gold”, due to its finite amount and deflationary design. Contrast this with Dogecoin, a crypto originally created as a joke and designed to have an endless supply but having caught on to the mainstream due to advocates like Elon Musk.
The fact is, cryptocurrencies vary widely in type, purpose, design, value, and acceptance. Research them thoroughly before you choose which ones to accept.
Choose the best crypto wallet
Making sure you choose the right crypto wallet for your business is important, especially since there is a surprising variety of wallets in the crypto world. Let’s take a look at each one’s unique features and benefits.
- Hard wallet
Otherwise known as a hardware wallet, a hard wallet allows offline storage of your crypto currencies. Because it’s offline capable, it’s considered the most secure wallet form since it’s unhackable if it’s not connected to the internet. This is a great wallet for those who will use crypto as a store of value.
- Soft wallet
Soft is short for “software” in this most-common form of digital wallets. It’s online, so it allows for quick and easy transactions–ideal for those who are going to use crypto payments.
- Hot wallet
Hot wallets are “hot” in the sense they’re connected to the internet. so it allows for quick and easy transactions–ideal for those who are going to use crypto payments.
Hot wallets include “soft wallets”, or software wallets. A soft wallet is a cloud-based software that stores user data and information. Because it’s cloud based, it needs an internet connection to be used.
- Cold wallet
A cold is “cold” because it’s not connected online. Thus, they allow offline storage of your crypto currencies. Because it’s offline, it’s considered the most secure wallet form since it’s unhackable if it’s not connected to the internet. This is a great wallet for those who will use crypto as a store of value.
These include hardware wallets, which are hardware devices that securely store user’s private keys. These keys are crucial pieces of information that authorize transactions.
Establish how you’ll accept crypto payments
How you choose to accept crypto payments depends on the amount of volume of crypto payments you’ll be accepting. In other words, will many of your customers or clients will be paying with crypto?
If it’s not many, you may choose to simply use a common fintech app like PayPal. They allow you to accept major cryptocurrencies like Bitcoin or Litecoin, charging a varying fee of 1.50% up to 2.30% which depends on the transaction amount.
If your business will be doing a high volume of crypto payments, you may consider using a digital wallet app on a smartphone that can produce a QR code for your customer to scan with their digital wallet app. This autofills information such as your wallet address, payment amount, etc. The customer simply authorizes the payment.
Digital wallet apps such as BitPay and Coinbase will allow for these types of simple, easy transactions–for a cost of roughly 1% per transaction.
If your business wants to start using cryptocurrency as payment, you’ll need to take the right steps. You need to first decide how you’ll use it, which cryptos you’ll use, what kind of wallet is right for you, and how your business will accept payments.
Progressive Payment is all about helping you make the best decisions when it comes to running your business. That’s why we’re constantly educating you via our blog so that you have everything you need to keep moving forward. Discover key insights into the payment world and see how you can save money by taking a look at it here.