In September of 2021, El Salvador made headlines for the first country to recognize Bitcoin as its legal tender. Since then, this announcement has become a milestone in cryptocurrency, and experts suggest it can play a pivotal role in the mass adoption of digital currencies.
But is that truly the world we all want to live in?
Decentralized finance and digital currencies seem like a swell idea – but have you considered both sides of the coin? With time, cryptocurrencies have fought an uphill battle to enter mainstream conversation. However, if you’re considering accepting payments via cryptocurrency, you should ponder some pivotal pros and cons.
But first, let’s understand what cryptocurrency truly is.
Understanding Cryptocurrency
According to Investopedia, cryptocurrency is a virtual or digital currency protected by cryptography. As a result, it’s almost impossible to double spend it, and counterfeiting it is extremely difficult. You may have heard the term “bitcoin” in several conversations. It was the first-ever type of cryptocurrency, and in the present world, there are several other forms of cryptocurrencies as well.
Cryptocurrency is based on blockchain technology. It’s a form of payment that the government or the central bank doesn’t directly regulate. There is also no third party involved in the payment processing procedure. In buying, the buyers are directly transferring funds to the sellers.
Pro: Get Rid of those Cashback Woes
Fraud has become a prolific problem for ecommerce stores worldwide. This happens when you receive a payment through a credit card only to see it being reversed after a few days. The result? You have no choice but to pay for the product since you’ve already shipped it to the customer!
As a result, you lose money, but you’re also one item short in your inventory. However, in the world of crypto, payments can’t be charged back or reversed.
Con: Highly Volatile Prices
In the last few years, digital currencies have garnered attention for all the wrong reasons due to the drastic rises and falls of cryptocurrency prices. Even though crypto brings several benefits, it’s also known for being incredibly volatile. For instance, in just a matter of years, Bitcoin has catapulted from $300 to $69000.
Suppose you sold something today for a value of $100. There’s no guarantee that it’ll have the same price when you get up tomorrow morning.
Pro: It Makes You Virtually Anonymous
With bitcoin, you can stay anonymous since there are no digital footprints or paper trails anyone can follow. Even though unscrupulous characters have gained notoriety for using it for illicit transactions, no one can deny the anonymity edge digital currencies have.
Con: Security Protocols Maybe Subpar
Since cryptocurrency is still in its developmental stages, bitcoin and other currencies still lack the needed protocols to protect your money from malware and hackers. With bitcoin, however, the vulnerability woes increase fourfold. You’re not just losing a couple of files that you can get back by rebooting your CPU.
If your digital wallet gets hacked, you lose everything.
Pro: You Decide Your Transaction Fee
Merchants that use payment processing providers attest that credit card transactional fees can swallow a considerable chunk of their profits. In some instances, you be charged a 30% transaction fee depending on the payment processor you’re working with.
On the other hand, some platforms (like PayPal) will only charge a three to four percent transaction fee. However, while this may seem inconsequential, it can create overtime. With bitcoin, you get to decide your own transaction fee.
This ultimately impacts the speed at which you get the payment from your client.
Con: Lack of Trust
As mentioned earlier, the digital currency industry is increasingly volatile. It impacts you, the seller, and the other party, the buyer. The volatility factor acts as a barrier, so many people don’t prefer using them as a mode of exchange. Moreover, you may also need supplemental hardware like QR codes or wallets so that customers can pay easily.
Pro: A Global Clientele
You’re not dealing in USD, CAD, or INR – you’re dealing in an international currency that fluctuates in the same way for every person globally. As a result, more customers may be willing to engage in business with you since there’s a uniform payment method both of you can stand behind.
This eliminates the hassle of finding payment apps that work in both countries.
Con: Tax Implications
Initially, people thought that a digital currency meant lesser tax. However, every person has to classify their income from crypto as their gross income based on the fair market valuation. Simply put, it still has tax implications.
One of the many reasons crypto entered mainstream conversation was that it was backed by the modus operandi of “by the people, for the people,” but this isn’t the case.
Pro: Decentralized
One of the most prominent pros of cryptocurrencies is that they’re mainly decentralized. Several currencies are governed by the developers who are using them. These people have a significant amount of the coin they’ve created, or it’s either run by a corporation to further develop it before it’s released in the market.
The decentralization aspect keeps the currency free from a monopoly and in control. That is also why no single organization can determine each coin’s flow or worth. As a result, it stays comparatively stable compared to fiat currencies controlled by a country’s government.
Con: Few People Run the Show
Even though cryptocurrencies have the interesting feature of being decentralized, the amount of currencies in the market and their flow is still somewhat controlled by organizations & developers. These people can manipulate the coin for massive swings, which works in their favor.
Conclusion
Whether you’re technologically gifted or are simply curious about digital currencies, make sure you do your due diligence before you start accepting payments via cryptocurrency.
Developments happen daily, on the cryptoworld, so its crucial to stay updated.
