• As the popularity of cryptocurrency continues to rise, small businesses are considering the pros and cons of accepting crypto as a payment method.
• Weighing the benefits of accepting cryptocurrency against the risk is important to determine if it’s a good decision for your small business.
• Learn about cryptocurrency and why you may consider it as one of many payment options for your small business. 

Learn About Cryptocurrency: The First Things Small Businesses Should Know About Cryptocurrency

Cryptocurrency, also known as crypto or a fiat currency, is a digital or virtual currency (or money) that uses a decentralized system and cryptography to verify and record transactions. Unlike traditional currencies like the U.S. dollar or the euro, cryptocurrencies aren’t regulated by a central issuing authority like a government or a bank. 

Many cryptocurrencies, like Bitcoin, Ethereum, Tether, or Litecoin, are extremely popular with investors, mostly because they’re extremely easy to invest in and there tend to be few or lower fees associated with it. In the past, cryptocurrencies have had a reputation for being shady because of their lack of regulatory oversight. But in the past few years, they’ve gained in popularity and have started to have an improvement in their reputation. In fact, the country of El Salvador recently opted to use popular crypto Bitcoin as legal tender, becoming the first nation in the world to do so and adding 

The Rise of Using Cryptocurrency in Business

As we mentioned before, cryptocurrency has had a somewhat shady reputation, due in part to its use in black market online transactions as a preferred method of payment, because it can be less traceable than traditional bank currencies due to its encryption. But investors started seeing crypto as an interesting option several years ago, especially as more exchanges became public companies and the currencies started to do well in trading. 

Blockchain technology, which is an important aspect of cryptocurrency, has also sprung up as a legitimate industry in the past few years. The blockchain management industry is leading to more digital currencies, including stablecoins and cryptocurrencies. 

Since 2020, more and more businesses are accepting cryptocurrency as payment, and there have even been Bitcoin ATMs available in major cities. More brokers are offering crypto trading options on their platforms, adding legitimacy to the currency. There are also more crypto wallets available to help make payments easier, and mainstream payment apps like Google Pay or Apple Pay allow you to use Bitcoin to pay for transactions. 

Now, cryptocurrency for small business is becoming an increasingly important part of the crypto ecosystem. 

How Digital Currencies Can Help Small Businesses

As a small business owner, you may be wondering how cryptocurrency can help your business. Crypto can help all businesses (and economies in general) by providing a real-time, low-cost option for payments across borders, time zones, and currencies. Overall, crypto is leading to more competition in financial services and markets. The increasing development of these alternative currencies may also push governments to get involved and create their own central bank digital currencies (CBDCs), which could help with volatility and provide greater access to everyday consumers, as well as investors.

What this means for you as a small business owner is that you can use crypto for transfers overseas or even locally with fewer fees, because there’s no need to do currency exchanges. You can also accept or pay for items in real-time, instantly, regardless of where you or your customer happen to be. You can also use crypto for more complex business transactions like conditional payments or escrow, if you happen to be in real estate.

Five Reasons Small Businesses Should Consider Accepting Cryptocurrency

Here are five reasons you might consider accepting cryptocurrency payments for your small business:

1. Cut out the middleman — Because crypto transactions happen directly between you and the customer, you don’t have to deal with an intermediary. This makes refunds and chargebacks easier, too, and cuts out room for fraud and errors. 
2. Lower the cost of transfers and transactions — That lack of a middleman helps you reduce the fees you pay per transaction, too, especially if you do a high volume of credit card sales. Cryptocurrency transactions tend to cost less than 1% of each transaction, compared to up to 4% for credit card transactions. 
3. Avoid fraudulent chargebacks — Using crypto is like using cash, which means there’s no third party who could reverse charges fraudulently. When an item is paid for, the money goes directly into your bank account. 
4. Offer your customers convenience — As crypto becomes more common, customers will appreciate the convenience of being able to pay with a secure digital form of payment. 
5. Improve your sales — Because you won’t need foreign transaction fees and there will be no lag time between payments, accepting crypto can open you up to a whole world of new customers. 

How to Accept Cryptocurrency: What a Bitcoin or Other Crypto Transaction Looks Like

In order to accept Bitcoin and other cryptocurrencies, you need to have a fundamental understanding of how blockchain transactions work. A crypto transaction is made up of the following four key elements:

1. Origin or input: the public address of the payor’s digital wallet.
2. Amount: how much crypto will be sent.
3. Destination or output: the public address of the recipient’s digital wallet.
4. Optional metadata: this is like the memo on a check — you can use it to say what the transaction is for or to send a message. 

Start with a Digital Wallet

First, you’ll need to create a cryptocurrency digital wallet. Like other digital wallets, this device (“cold storage”) or program (“hot storage” on your mobile phone or computer desktop) keeps track of your digital assets, such as the keys you and others need to buy Bitcoin or other crypto and how much of it you have. It also provides a digital signature to authorize every transaction. 

Many crypto exchanges will provide their own digital wallet for customers to use. Using a mobile app or program on your own computer can give you more control over security, as long as you’re vigilant about hackers. Whatever type of wallet you use, it’s important that you safeguard the private key that comes with your digital wallet, the same way you wouldn’t let your credit card fall into the wrong hands. 

Some popular digital wallets include:

• Robinhood
• SoFi Active Investing
• Coinbase
• Gemini
• eToro
• Binance.US
• FTX US 
• Webull
• BitPay

Paypal, Apple Pay, and Google Pay are also starting to offer crypto payment options as part of their digital wallets. If you already use them to accept payment or pay for services, you may find it easy to use them as your crypto wallet, too. In fact, many crypto wallets are also offering debit cards to allow you to access your crypto funds like you would a regular bank account. 

Transact with Cryptocurrency

Once you’ve got your digital wallet, you’ll have a unique address where others can send or request cryptocurrency payments. From there, you will be able to follow the following steps in crypto transactions:

1. Creation of the transaction and signing — this takes place at the point-of-sale. The transaction is created using the public addresses of the sender and recipient, the amount to be paid, and the digital signature of the sender (provided by the digital wallet). The sender will also agree to how much of a fee they’d be willing to pay, which is important during validation. 
2. Broadcasting — transactions are then sent to a node on the network. This can be done immediately, or you can wait to do it until a later time, in which case, the sender needs to be sure they have enough currency in their wallet when the transaction does go through. 
3. Propagation and verification — once the transaction is at the closest node in the network, it gets propagated to the network. Then it gets verified by making sure that the sender’s private key is able to unlock its public key. After this, the transaction is sent to the Memory Pool (or Mempool), where a miner will pick it up to include in the next block on the chain.
4. Validation — a miner will pick up the transaction, picking up ones with higher fees quicker than ones with lower fees. They’ll add the transaction to the next block on the blockchain, which allows them to pick up a block subsidy and the transaction fees. Each block can include up to 1MB of information, which can include up to 3,000 transactions. 

Pros and Cons of Investing in or Using Cryptocurrencies in Your Business 

The benefits of cryptocurrency can seem pretty clear, but there are cons to using crypto, too.

Accepting Crypto vs. Credit Cards

Digital payments are quickly becoming the norm for retailers, especially e-commerce and online businesses. Most businesses accept credit cards and debit cards, but crypto currency is becoming increasingly popular as a payment option. So what’s the difference between accepting credit cards and accepting crypto?

Credit Cards	Cryptocurrency
Uses multiple parties to pull money from one account to another, including a payment processor	Is a direct payment like cash or wire transfers with on intermediaries or other parties
May require a physical card to be read at a point-of-sale terminal	Handled completely digitally using digital wallet and QR codes
Can include fees from .5% to 5% or 20 to 30 cents per transaction for the merchant	Offers generally lower transaction fees decided by how quickly the payer would like their transaction processed
If credit card numbers are stolen or lost, the issuing authority may protect against fraudulent use	If the private key is stolen or lost, the owner has no recourse or protections
Allow for charge-backs, which may be fraudulent	Eliminates the risk of charge-backs
May offer rewards or perks	Offers anonymity for users
Are widely accepted globally	Is still gaining market share

Given the limitations of cryptocurrency with regard to how many places accept it, most retailers, e-commerce stores, or other providers will probably want to accept both credit cards and cryptocurrency, at least for the time being. 

Credit Cards with Crypto Rewards 

Thanks to the increasing popularity of crypto currencies, some credit card companies have started to offer rewards in the form of crypto. Like with a regular rewards credit card that may offer you points, cash back, or other perks, these credit cards offer cryptocurrency rewards. They’re issued by the major credit card companies (Visa, Mastercard, etc.) and are therefore accepted wherever those cards can be used. But instead of getting double points on dining out or airline miles on gas, you’d get an addition to your cryptocurrency digital wallet when you use the card. 

Nav’s Verdict: Crypto and Small Businesses

While wide adoption of cryptocurrency as a standard payment option is still in the works, many companies who are tired of high credit card fees or who do business internationally may want to look into it now. Startups and entrepreneurs who have a highly technical clientele may also benefit from offering crypto as a payment method.

If you’re looking for small business loans, business credit cards, or even how to establish business credit, Nav is here to help. Sign up for a free account today and see your financing options.