What is cryptocurrency and how can businesses get on board?

Cryptocurrency is changing the way we do banking and how we do business. In fact, there are so many opportunities to take advantage of this new blockchain technology, businesses will be left behind if they don’t jump on board.

But first, let me tell you what it is and how it all started.

What is cryptocurrency?

The most popular cryptocurrency is bitcoin (BTC), with a market cap of over US$142 billion – almost 50% market share out of 1,600 coins available. Bitcoin, the very first cryptocurrency, was built to be a decentralised digital cash system. In other words, a payments system outside of government or centralised controls. Trust is taken out of the equation by using the blockchain – the technology underlying cryptocurrency – to secure and verify transactions.

It all began in 2009 with the launch of bitcoin, but it didn’t hit a world frenzy until last year, when two significant things happened. Firstly, there were 871 companies listing ICOs (Initial Coin Offerings, which is a fundraising strategy where new projects sell their crypto tokens in exchange for bitcoin or ether). This was the biggest jump in ICOs ever – 867% more than 2016, according to icodata.io.

The second significant moment was the price of BTC shot up by over 2,000% over the course of 2017, hitting a peak of around US$20,000 in December.

While BTC dropped down to hover under US$10,000 for much of this year, it’s picking back up again and expected to reach over $20,000 by the end of the year. Volatility aside, the use cases are growing as more banks and other companies are starting to embrace the tech. So how can your business make use of this new trend?

Paying employees in cryptocurrency

Surprisingly, this isn’t a completely foreign concept – paying your crew in cryptocurrency is starting to become more common. A Canadian speed skater made headlines at the 2018 Winter Olympics for being the first athlete to be paid in cryptocurrency. There are reports of it happening in Japan as well, where employees at Internet firm GMO Group reportedly have the option to receive part of their pay in bitcoin. At HiveEx.com, we have also offered our crew payments in crypto.

Not only can it be a cost-effective alternative to paying offshore workers through wire transfer or currency exchange, it’s a way of drawing potential employees, particularly in the hypercompetitive tech industry where many crypto-adopters are found. It also works to advertise your company as one that’s forward-thinking and flexible.

Loyalty programs

Almost everyone loves a loyalty program and businesses love returning customers. So it makes sense for loyalty programs to be the new fad for businesses and consumers alike.

Instead of customers carrying around a card to get stamped for their 10th coffee free, they can now be rewarded in crypto every time they buy a coffee.

While it’s not mainstream yet, it might not be too far off as more start to dip their toes the crypto waters. The University of New South Wales (UNSW) for instance, recently completed a world-first trial that saw participating staff and students earning cryptocurrency instead of points for their purchases across campus. Other loyalty programs are starting to pop up in all sorts of industries like travel and fashion too.

Accepting crypto as payment

While theoretically all businesses could adopt crypto as payment, it’s especially useful for those that operate online. For e-commerce businesses, customers can come from anywhere in the world. But many traditional payment methods charge hefty international fees, which are often passed onto the customer.

The biggest advantage of accepting crypto as payment? Reduced fees and faster transaction times. Earlier this year, we saw a transaction worth $99 million, which cleared in 2.5 minutes and cost only $0.40. When you compare this to traditional forms of payment, offering crypto as payment could allow businesses to compete on price by skipping the associated transfer fees.

Of course, it’s always important to do your own research and vendors should be across the legal obligations in the country their business operates.

Ethical business practices

At the heart of cryptocurrency is its decentralised nature – it lets us bypass the need for a third-party to authenticate a transaction and instead promotes complete transparency. The blockchain makes it possible to track transactions from beginning to end with complete transparency.

This has already happened in multiple industries, like fishing and retail, where consumers can track the product’s journey from start to finish. This will help to ensure sustainable and ethical practices and, through holding companies accountable, create greater trust.

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