Let’s face it: You’re not much of an ecommerce merchant by today’s standards if you’ve still never heard of Bitcoin. After all, it’s been nearly a decade since the original cryptocurrency was first used in a transaction.
There is, however, no shame in admitting that you don’t have more than a peripheral understanding of Bitcoin. Or, for that matter, Etherium; or Ripple, Litecoin, Dash or Monero. In fact, the majority of merchants not only don’t accept payments in any of the nearly 1,000 cryptocurrencies that exist today, many of them would also be hard-pressed to name more than a few – much less explain how they work.
Nevertheless, that’s not to say that merchants who continue to ignore cryptocurrencies won’t be jeopardizing the long-term success of their online businesses. As evidenced by the astonishing global growth of these multiplying forms of virtual tender, they are assuredly here to stay and arguably destined to have a profound impact on the future of payments.
Right now then, is the ideal time for online merchants to become more closely acquainted with cryptocurrencies – after they’ve proved themselves to have more significance than an ordinary, fleeting trend, and before it’s too late for those who deal in the processing of digital transactions to adequately prepare for cryptocurrencies’ potential influence on the payments ecosystem.
Here is a guide to help you get started:
What is a cryptocurrency?
Cryptocurrencies are digital forms of payment that can be used to perform peer-to-peer transactions as well as, with increasing frequency, consumer-to-business and business-to-business transactions. The currencies are created with encryption software, are stored in digital wallets and exchanged on secure networks without any oversight by outside government or financial institutions.
What are some examples of cryptocurrencies?
As stated above, Bitcoin was the first cryptocurrency to be developed and remains the most well known nearly a decade after its debut. Today there are more than 900 cryptocurrencies in existence, among the most popular are Ethereum, Ripple, Monero, Dash, Peercoin, Nextcoin, Primecoin and Litecoin. Approximately 75 percent of the nearly $150 billion total market capitalization of every cryptocurrency combined belongs to the handful of currencies listed above.
How do cryptocurrencies work?
Bitcoin, as an example, uses a technology known as blockchain that verifies and timestamps each transaction, thus creating a systematic “chain” of transactions publicly visible to all those in the network. Verifying transactions and adding them to the blockchain requires solving highly complex mathematical equations to unlock the encryptions in a process called “mining.” Most currencies have their own nuances with regard to their specific mining processes, but they all share the same concept of utilizing encryption technology to drive paperless economies in which tender is exchanged in secure, unique transactions that occur in highly insulated digital environments that are carefully guarded from outsiders.
What businesses currently accept cryptocurrencies?
You may be surprised at some of the big names mentioned below, but rest assured that cryptocurrencies have not already hit the mainstream before you’ve had a chance to do some homework. Most of these companies are relatively progressive in their thinking as compared to their competitors, and almost all of them accept Bitcoin only and none of the other cryptocurrencies. That said, big-time retailers such as Gap, JC Penney, Whole Foods, Subway, GameStop, Microsoft and Dell all accept the currency, as do equally well known service providers such as Bloomberg, Zynga, Shopify, Newegg, Tigerdirect, Expedia and WordPress.
What’s a merchant’s greatest risk or reward in accepting cryptocurrencies?
They can be one and the same, depending on who or what you believe. The most polarizing issue is that of security and protection from fraud. Cryptocurrency advocates steadfastly maintain that the encryption technologies protect merchants and their customers in ways that traditional payments systems cannot. Detractors argue that the technology is still nascent and therefore unreliable and as prone to theft or even more so than legacy platforms. Regardless of what your own research bears out, this is the very reason why we suggest that now is the time to become educated about cryptocurrencies as forms of payment, so that when – and not if – the security debate subsides and these monies truly do hit the mainstream, you will be in a better position to react swiftly and intelligently.