To my surprise, I recently discovered that many still don’t know what is Bitcoin and how it works.
Bitcoin is the first of what is now known as a cryptocurrency.
The newest way for small businesses to charge customers for goods sold or pay for products and services themselves.
Since the creation of Bitcoin, there have sprung up hundreds of other cryptocurrencies known as Alt-coins.
Out of the plethora of cryptocurrencies only the top seven account for the majority of the total market capitalization.
Bitcoin, Ethereum, LiteCoin & Bitcoin Cash are the most popular forms of digital currency in the US as these are the only ones you can buy with a Coinbase account (with the exception Ethereum Classic which is being phased out).
You can buy and sell Bitcoin now through multiple online Bitcoin exchanges.
Even though this is a completely new way to accept payments in addition to existing methods, very few businesses now take advantage of this cutting-edge technology.
Accepting Bitcoin as payment requires you to choose a service provider.
The entire process is quick and simple and you can start accepting payments immediately.
How does Bitcoin work?
Bitcoin and other cryptos, or this new form of payment, are entirely digital and do not have a paper counterpart.
Instead of needing serial numbers and a central entity, these cryptocurrencies use the latest form of encryption to make every transaction is secure and unique.
Within each Bitcoin account, each Bitcoin block has a unique Bitcoin address that the Bitcoin community uses to send or receive Bitcoin.
Each type of cryptocurrency has its unique abilities on top of being a form of payment.
Most of these “cryptos,” such as Bitcoin, limit the number of coins in circulation.
Others, like Ripple, have a small inflationary aspect to add more coins over time.
Of course, pros and cons exist for each of the two forms of cryptocurrencies with heated debates on each side.
Understanding the facts is crucial for companies that accept Bitcoin or want to invest in Bitcoin.
If your business becomes one of the first, if not the very first, to nail down these factors, you will be way ahead of your competitors.
Cryptocurrency wallet accounts
In order for us to use Bitcoin or another cryptocurrency, we need to create an account on a wallet of some sort.
The best options for the long term are hardware wallets as we mentioned above but there are other options that would be best for everyday payments.
It’s best to use the hardware wallet like your bank account and have your mobile or online wallet act like the wallet you would carry cash around in the traditional sense.
Both hardware and mobile wallets allow the user to send and receive the cryptocurrency it’s designed for.
The most popular platforms to accept Bitcoin within the business world are CoinBase Merchant Services in the United States or CoinGate in Europe.
These services allow you to either hold Bitcoin or cash them out for the fiat currency of your choice.
It only takes a few minutes to create an account with these services and they allow you to buy Bitcoin for USD in case you want to invest.
Buying Bitcoin with on these platforms will take a few days over ACH due to the traditional banking system limitations.
Once you create your account the wallet provider will assign an address for you of about thirty characters.
This is what your customers need in order to send you payments.
You will get a QR code that people can scan to send payments making it much easier than having to type in the long line of letters and numbers.
Your wallet also has a private key that needs to stay secret.
This key is how the business sends funds to either receive fiat currency or to buy goods from another business.
The most popular wallet providers hide this from the users to limit the chance of sending out the wrong key and the business losing their Bitcoin.
If you decide you want to keep Bitcoin for the long term and not sell them right away it is also a good idea to get a hardware wallet.
Some wallet providers allow the owner to accept only Bitcoin while others like Coinbase, give the business the ability to accept other top cryptocurrencies.
Make sure you know which cryptos your wallet allows you to store and be sure to give out the corresponding QR code to your customer.
Sending a coin that does not match the wallet will result in a loss of funds for the customer.
There is no downside for a business to accept multiple forms of cryptocurrency since they have the ability to immediately convert them to fiat for traditional use.
“Bitcoin is the only cryptocurrency with any type of retail footprint. However, it’s relatively easy to accept other coins and there’s no reason not to accept multiple types.
All you have to do is open a merchant wallet and post your public address so customers know where to send the coins.
These digital wallet companies automatically convert cryptocurrencies into a business’s sovereign currency, thus removing any tax and accounting issues and market risk.”
David Yermack, Professor of Finance at NYU.
The Future Is Here
Signing agreements with vendors through smart contracts
Signing up a contract with a vendor or a third party requires a lawyer for both you and them.
This takes a lot of time that could be used much better to grow your business instead.
After the contract is drafted each party then needs to sign the papers followed by notarization just to get to work and to be able to receive payments.
If the paying party did not pay, the contractor doing the work would have to go back to seek help from lawyers again in order to file a complaint.
Enter “Smart Contracts” — a new way to set up contracts using blockchain technology that makes the entire process much more simple.
A smart contract is an agreement placed on the blockchain where an event (such as a payment) will execute as soon as the contract is fulfilled.
The parties involved determine the conditions to meet, the amount of cryptocurrency to pay, and a desired time frame for the work to complete.
Once the smart contract is submitted to the blockchain it can not change and copies are made on each computer running the cryptocurrency software.
Once the contract is filled the blockchain pays out the predetermined amount of crypto on the due date of the project without any intervention needed by either party.
One of the ways to create such contracts is already in existence.
It’s service product called “Agrello” which lets users create such contracts without the need for lawyers, through their smartphone app called Agrell ID and may be used by businesses or individuals to conduct various transactions in a structured and binding manner.
For a few years, cryptocurrency is reported to use a lot of energy which concerns many people.
Luckily, smart people have taken up this issue and created a way to use blockchain technology to conserve energy.
This is done by using the blockchain to enable people with solar power to sell their excess power for the needs of cryptocurrencies.
Their excess power is stored on a smart grid, tied into a blockchain that monitors power usage both coming in and going out.
This also enables communities as a whole, to sell their extra power to neighbors in need of power during an outage.
All of which is handled via cryptocurrency!
Any business owner in a city using this technology will benefit from lower power costs as well as earn money for giving back to the smart grid.
With a big enough solar power facility, a business can become a net power provider.
Brooklyn MicroGrid is one such project.
It is these kinds of crypto-based projects that will enable a business to keep track of more metrics and help distribute energy around their region to provide a more stable market for them and their region.
Track logistics and vendor shipping
Since the blockchain is “tamper-resistant” we are able to trust it with our documents and data.
Any and all information can be added and once it is in a block it can not get changed but may still be audited, monitored, and tracked as needed.
This will save time and money for any business that needs to track inventory, shipping, or another type of data important to logistics.
Receiving inventory? It can be on the blockchain.
Selling inventory? Record in on the blockchain.
Shipping date? Check the blockchain.
Whether you buy inventory, sell a product, need to check if something has shipped, or if a product is delivered, the blockchain will have it and it won’t get accidentally deleted.
So there is no more need for expensive programs to do this very task that may end up destroyed due to a computer crash or loss of a database.
And on top of that, it can all be done in real-time with little or no intervention from the business owner or their employees.
There are already several startups taking on this issue and it will not be long until this new way to track logistics and data become the norm.
CEO & Founder @ Orumfy
Working Capital Breakthrough System