Around January of last year, the world woke up to cryptocurrencies. The media was reporting 24/7 on the meteoric rise of Bitcoin as it reached over $10,000 per coin. In the months following, that figure continued to grow as more and more people began to sink their savings into what was seen as an easy bet.
Currently, there are over 2,000 cryptocurrencies in operation that use blockchain technology to exchange digital currency.
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But how can you startup make the most of this explosion of cryptocurrency? What cryptocurrency opportunities are out there for your business?
Blockchain technology: what’s that?
For experts looking to make money from digital currencies, a lack of understanding is a central problem with harnessing Bitcoin, Ethereum, and other cryptocurrencies.
For those of you old enough to remember the dotcom bubble of the late 1990s — the lesson is clear. Stock prices initially soared as more and more investors got excited about dotcom startups, and constant media coverage contributed to their popularity. Then, eventually, savvy investors realized that many of these businesses were overvalued, and they wanted out.
Of the 1300 dotcom business that were huge successes before the turn of the millennium, only a handful, including Amazon and Google, survived the inevitable dotcom crash. A classic tale of supply outstripping demand.
In the last month or so, Bitcoin and crypto investors have been watching their investments de-value significantly. This unpredictability is enough to sour some business owners on the idea of cryptocurrencies altogether, but it isn’t all bad — hear me out…
Champions of crypto already know that blockchain technology was initially developed to shake up the financial system. Digital currency presents an alternative means of exchange, one that (if used correctly) can counteract global investment bubbles like the dotcom debacles of yore.
If you’re a small business owner and you believe you can handle the waves of the cryptocurrency movement as it stabilizes (and it will eventually have to in order to achieve mainstream viability), then read on.
Why accept cryptocurrency?
The decision to invest in crypto must be yours, and yours alone (though you should consult an experienced financial advisor to be fully informed, of course), but the decision to accept crypto payments as part of your business model should result from extensive customer research.
As digital currency has been around for a few years, many audience segments may be interested in purchasing with the more popular cryptocurrencies such as Bitcoin, Litecoin, or Ethereum — it’s just a matter of finding out first before committing, just as you would with a crowdfunding project.
Dig into your social media community and look for fans that also follow crypto pages and companies. If there’s a substantial overlap with early adopters of cryptocurrency, it might be worth pursuing —- tech-minded trendsetters are far more likely than anyone else to have major investments in cryptocurrency and an interest in spending it on your services.
Head to sites like Coinmap and look for businesses that already accept Bitcoin. Get a feel for the types of product they sell, and look into the people that would buy from these companies. Think about how your digital startup fits into this landscape.
Because the rise of crypto is tied to activism, don’t immediately assume that all parties interested in paying with Bitcoin are affluent, techy types from Silicon Valley. There are many beauty brands and coffee shops featured on Coinmap. Your digital startup could be relevant to this audience.
Many unexpected brands are also accepting Bitcoin purely as a means of publicity within the crypto scene. Take, for example, an ecommerce brand selling ‘Make Bitcoin Great Again’ hats – now that’s what I call ‘hustle’.
How to accept cryptocurrencies
Depending on your website’s CMS, hooking up your digital wallet to your website should be relatively straightforward.
For example, if you are an eCommerce brand running a hosted online store, you can just grab the API key from your merchant services account and automate Bitcoin payment methods in only a few clicks. Similarly, mobile payment services like Apple Pay can be synced with your secure wallet in seconds.
However, service-based startups and tech models can also raise digital capital through affiliate marketing networks. With your content marketing initiatives, you can sign up for a blockchain-affiliate service and drive traffic to listed sites in exchange for a cut of the sale proceeds. The campaign funds are repaid in digital currency, allowing you to generate a passive income.
Many of the networks seeking promotion include crypto credit cards and VPNs; there’s even a blockchain travel and tourism network.
Referral programs can also help you generate income from your merchant services wallet. Sites like Coinbase and Bitpay offer financial rewards for referring new businesses to the service. Take advantage of these incentives as a startup owner promoting digital currency.
Understanding the risks
Understanding the risks of cryptocurrency starts with speaking to experienced finance and accounting professionals. The most obvious consideration is the fluctuation in its value hour-by-hour, and how you will handle that as a business within your existing financial model.
The problem lies in the fact that digital currency isn’t backed by anything. Crypto currency is essentially air, code on a screen, or a collection of I.O.U notes between IP addresses.
It is for these reasons that business owners need to get to grips with conversion fees, wallets and market-monitoring services. Setting up secure exchange platforms like Coinbase or Bitpay makes this learning process more manageable, and you can supplement your knowledge with geek-oriented podcasts like the Optimized Geek and fintech podcasts such as Planet Money.
One of the advantages of digital currency is the ease of sending secure payments internationally. There are no chargebacks, and provided you can exchange the crypto funds for fiat within a workable time frame, you can somewhat shield yourself from market volatility.
Your customers choosing to pay with digital currency will also be aware of these risks. Therefore, to incentivize spending with crypto and mitigate risk, you may want to offer customers special discounts.
Essentially, your decision to try digital currencies hinges on your ability to handle risk. It is essential that you shield yourself from financial upheaval. Protecting working capital is never more critical than in the early stages of starting a business.
Discuss your plans with accounting and taxation professionals and keep an eye on the latest industry news. There is a bumpy ride in store for crypto in the months and years ahead. However, if you feel like digital currency could be right for your business, let your customers take the lead.
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