Should Your Business Start Accepting Bitcoin?

Bitcoin has the first mover advantage when it comes to cryptocurrencies. It has ushered the way for many other cryptocurrencies to follow, and It currently has the highest market capitalization among cryptocurrencies (over $1 trillion when its price reached $58,858). There is no doubt that bitcoin has proven skeptics wrong and has become a very popular asset for trading. But does all that mean that your business should accept it as a payment currency?

Bitcoin as a value keeper

Elon Musk recently tweeted: “you can now buy Tesla with Bitcoin” which sparked an upward movement in the famous cryptocurrency. Paying for Tesla cars in bitcoin would in fact help Tesla, probably more than it would help customers. Musk’s move is an attempt to capitalize on the cryptocurrency’s movement and shore up Tesla’s finances (the company took longer than a decade to reach a quarterly profit), as he believes bitcoin would hold value better than, say, the US dollar, especially over the long term.

This shows that indeed some businesses are accepting Bitcoin, but is that a trend yet? The answer is no. So far only some large companies like Tesla can accept Bitcoin, but the currency is still not viable for smaller ones.

Bitcoin’s transaction speed is still too law

Even though it can take only 10 minutes to confirm a transaction on the Bitcoin’s blockchain, the actual transaction can take a lot longer to complete. In some cases, it can take up to a few days before a transaction can be completed. This very slow execution speed makes bitcoin a rather unattractive payment currency for many businesses, especially with small transactions such as when you buy groceries. However, this can be acceptable in larger transactions such as the case with Tesla. Tesla can afford to wait a few days before a transaction is complete. Moreover, orders for Tesla cars are often placed beforehand, and thus advance payment is made. In such cases, companies can accommodate bitcoin as one of their payment methods, as it won’t affect their liquidity much, but in other cases, this can be a challenge for smaller businesses.

Bitcoin may not be a sustainable solution for transactions over the long term

In addition to the slow transaction time, the supply of Bitcoin is rather scarce. The designers of Bitcoin have only allowed 21 million bitcoins to exist worldwide. This makes it difficult for this currency to become usable at a large scale – the way it needs to operate for it to become a mainstream payment currency. While Bitcoin’s protocol can be changed later to allow for more supply, this can take some time before it happens.

The benefits of increasing supply should be weighed against the costs

Increasing Bitcoin’s supply, within or beyond the current limit, will require some mining operations. Those operations require an extensive use of energy, which in turn contributes to CO2 emissions. This usually leads to backlash from environment protection organizations. Moreover, it shows that Bitcoin still has a sustainability issue it needs to address before it can become a mainstream currency.

Bitcoin is not liquid enough yet

Your business can accept bitcoin, but if your suppliers do not accept it, you will have issues securing needed supplies. Current currencies like the US dollar are far more liquid than Bitcoin and using it might slow down your operations.

Final thoughts

The price of Bitcoin has skyrocketed recently, and there is still a lot of hype around it. However, all this does not make it ready to become a mainstream currency, at least not yet. It still has to overcome challenges related to supply, transaction time, and liquidity before it can move to the next stage.