In our previous article, you learned what bitcoin and blockchain are, how they are related, and their differences. The possibilities for larger enterprises are pretty apparent, including international payments and secure transactions. But what does it all mean to owners of small-to-medium-sized businesses (SMBs)?
Don’t let the complex nature of these technologies fool you. There are a lot of ways that SMBs can leverage both blockchain and even bitcoin to improve operations and potentially cash flow.
It is possible to accept bitcoin at your business, even if you’re a small retail store. How? You need to sign up with a service that allows you to accept bitcoin as payment, just like you did to accept credit and debit cards.
The question isn’t “can you do it,” however. The real question is identifying the advantages of accepting the cryptocurrency and whether it makes sense for you to accept it.
For those of you who are strong advocates or have an interest in bitcoin, you could accept it simply to show your support. But there are other advantages, too.
You might want to attract the kinds of customers that would typically own bitcoin, like a younger demographic that is technologically savvy, or perhaps clients who are well off. You may also like the fact that there is no waiting period for getting bitcoin from the customer’s account into yours. And, because of its secure nature, you wouldn’t need to deal with payment disputes for items purchased with bitcoin.
But there are disadvantages as well. Not many customers own bitcoin, so you’d still need to provide more common means of payment. And the capability to seamlessly accept cross-border (international) payments may be unimportant to you.
But here’s bitcoin’s biggest hurdle for most people — it’s unstable. Because bitcoin is a commodity and not simply a currency, it’s nearly impossible to know from day to day what the value of a bitcoin will be.
Besides its effect on your bank account, here’s a customer challenge you could face if you accept bitcoin. Let’s say you run a pizza shop. If a customer pays with cash or a credit card, the pizza costs $10 yesterday, $10 today, and $10 tomorrow. But if a customer wants to pay with bitcoin, the price of that pizza could change dramatically overnight. It could cost the customer 20% more bitcoin today than it did yesterday for the same pizza. That could be very difficult for your patrons to understand. Plus you’d need to keep up with the current exchange rates all day long and every day.
This also doesn’t take into account the legal and tax implications of accepting bitcoin. Be sure you talk with an accountant who is knowledgeable about accepting cryptocurrency during your decision process. An accountant can help you understand how accepting bitcoin will impact your taxes as well as your bookkeeping.
Separate from its relationship to bitcoin, blockchain has its own potential value for SMBs. Several applications of the technology could make operating your business easier.
First is the concept of a “smart contract.” The idea of a smart contract – or a self-executing contract – isn’t new. However, because blockchain offers privacy and security, smart contracts have become realistic and accessible to small businesses. A smart contract is stored on a blockchain and, when the condition of the contract is met, it’s executed.
A common example of when a smart contract is useful is with a rental property situation. If you have a rental property with a coded entry, it would be easy to set up a smart contract to give access to a renter only after payment is made. Once the smart contract has confirmation that the rental payment has been received, it could autonomously release the door code to the client. No need to meet the renter to exchange keys, and no worrying about a check clearing.
Another potential use of blockchain for small businesses is as a means of verifying and tracking items in your supply chain. Remember, items added to the blockchain are immutable – they can’t be changed once they have been added. This makes it easy to track back along the chain to find out where the item actually came from, who made it, and who took possession of it along the way. If RFIDs are used on shipments, you might even be able to see environmental data during the shipping process (imagine inventory that shouldn’t be stored above or below a certain temperature).
The availability of bitcoin and the uses of blockchain are growing daily. Even if you don’t currently have a use for these technologies, it’s in your business interest to keep track of what’s going on with them. In the near future, you may find that they become an important part of your organization’s operations.
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