- What Is Bitcoin?
- Bitcoin has user autonomy
- Bitcoin transactions are pseudonymous
- Bitcoin transactions are conducted on a peer-to-peer basis
- Bitcoin transactions do not incur banking fees
- Bitcoin payments have low transaction fees for international payments
- Bitcoin payments are mobile
- Bitcoin transactions are irreversible
- Bitcoin transactions are secure
- Why consider using crypto?
- What can crypto do for your company?
- Two primary paths for using crypto
- Enabling payments: “Hands-off”
- To ready itself, the corporate treasury might consider several preliminary issues, including:
- Treasury will be inextricably involved in these decisions, and the changes they require, since
- “hands-on” adoption of crypto
- Enabling payments: “Hands-on”
- Additional considerations for a “hands-on” approach
- Bitcoin Payment FAQs
- Can I make payments using Bitcoin?
- What are the advantages of using Bitcoin for transactions?
- Are transactions using Bitcoin completely free?
- Do Bitcoin transactions require bank accounts?
Advantages Of Using Bitcoin, When it was launched, Bitcoin (BTCUSD) was envisaged as a medium for daily transactions by its inventor. The idea behind a decentralized cryptocurrency was to eliminate centralized control of money from government agencies and ensure speedy processing of transactions.
An increasing number of companies worldwide are using bitcoin and other digital assets for a host of investment, operational, and transactional purposes. As with any frontier, Advantages Of Using Bitcoin there are unknown dangers, but also strong incentives. Explore the kinds of questions and insights enterprises should consider as they determine whether and how to use digital assets.
Advantages Of Using Bitcoin, More than a decade later, observers are questioning whether the cryptocurrency has failed to live up to that promise. Very few daily transactions are conducted using Bitcoin as a medium of exchange.
But the idea of an alternate currency, outside the purview of governments and federal companies, is powerful. Recent developments in Bitcoin technology, such as Lightning Network, have the potential to return Bitcoin to its original promise. Advantages Of Using Bitcoin, the number of places accepting Bitcoin has increased as the cryptocurrency’s technology and name recognition have evolved. You can buy a surprising number of things using Bitcoin.
Bitcoin is designed to offer users a unique set of advantages over other payment methods. We’ll take a closer look at those below, but before we do, it is useful to explore what Bitcoin, the cryptocurrency, actually is. By understanding Bitcoin’s design principles, it will be easier to see the advantages of using Bitcoin for payments, Advantages Of Using Bitcoin.
- Bitcoin transactions offer several benefits, such as low transaction fees and speedier processing, compared to transactions conducted with fiat currencies.
- Bitcoin transactions are especially useful for international transfers.
- The potential for making payments with Bitcoin has improved following technological advancements such as the Lightning Network.
- Bitcoin transactions can be conducted by those who are unbanked as well.
What Is Bitcoin?
Advantages Of Using Bitcoin is a decentralized, peer-to-peer cryptocurrency system that processes purchases through digital units of exchange called bitcoin. It was invented in 2009, and the Bitcoin network has come to dominate and even define the cryptocurrency space, spawning a legion of altcoin followers and representing for some users an alternative to government flat currencies like the U.S. dollar or the euro, or pure commodity currencies like gold or silver coins.
Part of the reason for Bitcoin’s attraction to these followers is its decentralized status, It is not controlled or regulated by a central authority. This immediately distinguishes it from fiat currencies, which are issued by central banks and backed by the government. Fiat currencies are also disbursed into a given economy through institutions like banks that are beholden to government regulations for their operations. Advantages Of Using Bitcoin.
On the other hand, Bitcoin creation and disbursal does not depend on government fiat. Payments involving Bitcoin are processed through a private network of computers linked through a shared ledger. Advantages Of Using Bitcoin Each transaction is simultaneously recorded in a “blockchain” on each computer that updates and informs all accounts. The blockchain serves as a distributed ledger and obviates the need for any central authority to maintain such records.
Bitcoins are not issued by a central bank or government system like fiat currencies are. Rather, bitcoins are either “mined” by a computer through a process of solving mathematical problems or algorithms are used to verify transaction blocks to be added to the blockchain. Bitcoin can also be purchased with standard national money currencies and placed into a bitcoin wallet that is accessed most commonly through a smartphone or computer. Advantages Of Using Bitcoin.
Now that we have seen a brief overview of what bitcoin is, we can better understand how this leading cryptocurrency provides potential benefits to its users.
Bitcoin has user autonomy
Conventional fiat currencies are subject to multiple restrictions and risks. For example, banks are vulnerable to boom and bust cycles in the economy. Sometimes, these situations can end in bank runs and crashes, as has occurred numerous times in the past. This means that users are not really in control of their money. Theoretically, at least, bitcoin promises user autonomy because its price is not linked to specific government policies. This means that users and owners of the cryptocurrency are in control of their money. Advantages Of Using Bitcoin.
Bitcoin transactions are pseudonymous
Most online transactions require an array of information to identify the person conducting the transaction. For example, transferring money from one person to another can be done only after the identifying information for parties at both ends is verified. Advantages Of Using Bitcoin Similarly, online purchases also require you to enter identifying information to make a purchase. The verification process may prevent crime, but it also places an intermediary firmly in charge of the transaction, allowing them to control the provisioning of services to select parties.
Bitcoin transactions are pseudonymous. Advantages Of Using Bitcoin While this means that they are not completely anonymous, the transactions can be identified only by using a blockchain address. An individual can have multiple addresses, just as they can have multiple usernames and passwords for a single account. Internet Protocol (IP) addresses or other identifying information are not required to conduct the transaction.
Bitcoin transactions are conducted on a peer-to-peer basis
Advantages Of Using Bitcoin, The Bitcoin payment system is purely peer to peer, meaning that users are able to send and receive payments to or from anyone on the network around the world. Unless they are sending or receiving bitcoin from a regulated exchange or institution, the parties to a transaction do not require approval from an external source or authority.
Bitcoin transactions do not incur banking fees
Advantages Of Using Bitcoin, While it is considered standard among fiat currency exchanges to charge so-called “maker” and “taker” fees, as well as occasional deposit and withdrawal fees, Bitcoin users are not subject to the litany of traditional banking fees associated with fiat currencies. This means no account maintenance or minimum balance fees, no overdraft charges, and no returned deposit fees, among many others.
Bitcoin payments have low transaction fees for international payments
Advantages Of Using Bitcoin Standard wire transfers and foreign purchases typically involve fees and exchange costs. Since Bitcoin transactions have no intermediary institutions or government involvement, the costs of transacting are generally lower compared to those for bank transfers. This can be a major advantage for travelers. Additionally, transfer in bitcoins is fast, eliminating the inconvenience of typical authorization requirements and wait periods.
Bitcoin payments are mobile
As with many online payment systems, Bitcoin users can pay for their coins anywhere that they have Internet access. This means that purchasers do not have to travel to a bank or a store to buy a product. However, unlike online payments made with U.S. bank accounts or credit cards, personal information is not necessary to complete any transaction.
Bitcoin transactions are irreversible
One of the characteristics of Bitcoin’s blockchain is that it is immutable. Therefore, transactions using the blockchain are irreversible and cannot be amended by a third party, such as a government entity or a financial services agency. Also, it is not possible to file a charge-back for bitcoin sent to someone else. The only way to reverse, in a manner of speaking, Bitcoin transactions is by having the recipient send back the original bitcoin. Advantages Of Using Bitcoin.
Bitcoin transactions are secure
Bitcoin is not physical currency. Therefore, it is impossible for thieves to palm it off the holder. Advantages Of Using Bitcoin Hackers can steal a person’s cryptocurrency if they know the private keys for the wallet. However, with proper security, it is technically impossible to steal bitcoin. While there are reports of hacks at cryptocurrency exchanges, Bitcoin’s exchange has remained impervious to such breaches. Therefore, transactions conducted between two (or among multiple) addresses are secure.
Why consider using crypto?
More than 2,300 US businesses accept bitcoin, according to one estimate from late 2020, and that doesn’t include bitcoin ATMs. An increasing number of companies worldwide are using bitcoin and other digital assets for a host of investment, operational, and transactional purposes.
The use of crypto for conducting business presents a host of opportunities and challenges. As with any frontier, there are both unknown dangers and strong incentives. That’s why companies venturing to use crypto in their businesses should have two things: a clear understanding of why they are undertaking that action and a list of the many questions they should consider.
Advantages Of Using Bitcoin ,This paper endeavors to provide you and your company with an overview of the kinds of questions and insights enterprises should consider as they determine whether and how to use crypto. So, if your company plans to participate in crypto, it’s important to think ahead, prepare, and engage in a thoughtful manner. (For considerations related to investing in crypto currencies and digital assets, please consult Deloitte’s complementary report, Corporates investing in crypto: Considerations regarding allocations to digital assets. Why consider using crypto Download the PDF
What can crypto do for your company?
To spark your company’s thinking about crypto, here are some of the rationales behind why some companies are currently using crypto:
- Crypto may provide access to new demographic groups. Users often represent a more cutting-edge clientele that values transparency in their transactions. One recent study found that up to 40% of customers who pay with crypto are new customers of the company, and their purchase amounts are twice those of credit card users.
- Introducing crypto now may help spur internal awareness in your company about this new technology. It also may help position the company in this important emerging space for a future that could include central bank digital currencies.
- Crypto could enable access to new capital and liquidity pools through traditional investments that have been tokenized, as well as to new asset classes.
- Crypto furnishes certain options that are simply not available with fiat currency. For example, programmable money can enable real-time and accurate revenue-sharing while enhancing transparency to facilitate back-office reconciliation.
- More companies are finding that important clients and vendors want to engage by using crypto. Consequently, your business may need to be positioned to receive and disburse crypto to assure smooth exchanges with key stakeholders.
- Crypto provides a new avenue for enhancing a host of more traditional Treasury activities, such as:
- Enabling simple, real-time, and secure money transfers
- Helping strengthen control over the capital of the enterprise
- Managing the risks and opportunities of engaging in digital investments
- Crypto may serve as an effective alternative or balancing asset to cash, which may depreciate over time due to inflation. Crypto is an investable asset, and some, such as bitcoin, have performed exceedingly well over the past five years. There are, of course, clear volatility risks that need to be thoughtfully considered.
Two primary paths for using crypto
Advantages Of Using Bitcoin we hold crypto on our balance sheet or simply adopt crypto-enabled payments? To determine the right path for your business, you need to make a careful determination of the best fit for your business objectives. Consider the potential benefits, drawbacks, costs, risks, system requirements, and more. The following sections will provide some broad considerations around two different paths as your company embarks on its crypto journey.
Enabling payments: “Hands-off”
Some companies use crypto just to facilitate payments. Advantages Of Using Bitcoin One avenue to facilitate payments is to simply convert in and out of crypto to fiat currency to receive or make payments without actually touching it. In other words, the company is taking a “hands-off” approach that keeps crypto off the books.
Enabling crypto payments, such as bitcoin, without bringing it onto the company’s balance sheet may be the easiest and fastest entry point into the use of digital assets. Advantages Of Using Bitcoin It may require the fewest adjustments across the spectrum of corporate functions and may serve immediate goals, such as reaching a new clientele and growing the volume of each sales transaction. Enterprises adopting this limited use of crypto typically rely on third-party vendors.
The third-party vendor, acting as an agent for the company, accepts or makes payments in crypto through conversion into and out of fiat currency. This may be the simplest option to pursue. And, in all likelihood, it may cause relatively few disruptions to a company’s internal functions, since the “hands-off” approach keeps crypto off the corporate balance sheet.
Advantages Of Using Bitcoin, The third-party vendor, which will charge a fee for this service, handles the bulk of the technical questions and manages a number of risk, compliance, and controls issues on behalf of the company. That does not mean, however, that the company is necessarily absolved from all responsibility for risk, compliance, and internal controls issues. Companies still need to pay careful attention to issues such as anti-money laundering and know your customer (AML and KYC) requirements. And, of course, they also need to abide by any restrictions set by the Office of Foreign Assets Control (OFAC), the agency that administers and enforces economic and trade sanctions set by the US government.
To ready itself, the corporate treasury might consider several preliminary issues, including:
- What does the company want to achieve by adopting the use of crypto?
- What steps has treasury taken to acquire the necessary know-how to receive, monitor, and manage a crypto payment?
- Does Treasury think the company should maintain custody of the crypto itself or outsource that to a third party?
- What measures are in place, or what thought has been given, to possibly investing in crypto as a new asset class?
- What adjustments does Treasury foresee in anticipation of the eventual issuance of digital currencies by central banks?
Treasury will be inextricably involved in these decisions, and the changes they require, since
- Traditional treasury groups maintain the financing relationships for the company (e.g., banking groups, investment partners, third-party working capital providers).
- Treasury determines which types of banking and financial services—now in a potentially broader and bolder digital asset ecosystem corporates will need.
“hands-on” adoption of crypto
- Use a third-party vendor or custodian to maintain custody of the crypto on a blockchain and provide wallet management services that facilitate the tracking and valuation of the crypto assets.
- Integrate crypto into the company’s own systems and manage its own private keys. (Consult your legal counsel to determine whether any license will be required to enable the transmission of crypto.)
Enabling payments: “Hands-on”
Advantages Of Using Bitcoin, If a company is ready to go beyond simply enabling crypto payments and intends to broaden crypto adoption within operations and the treasury function in other words, to go the “hands-on” route it may potentially find a significant increase in benefits, as well as in the number of technical matters to address.
Most companies currently using crypto in a “hands-on” fashion use a third-party custodian. Given that tendency, we will examine this path in greater detail.
The second approach, self-custody, presents more complexity and requires deeper experience. Moreover, if the company follows this route, it will likely have greater accountability for the work supporting its transactions. That said, much, if not most, of what follows will also be applicable to companies that self-custody. Advantages Of Using Bitcoin.
Wallets and tracking, An additional perspective from Treasury, Anti-money laundering and know your customer, Second-layer protocol risks.
Additional considerations for a “hands-on” approach
Advantages Of Using Bitcoin ,Tax and accounting considerations, Integrating Treasury and Operations, Choosing and evaluating a vendor or custodial partner.
Identify your company’s path and develop a road map
Crypto is viewed by some as a critical part of the evolution of finance. When your company chooses to engage with crypto, that triggers changes across the organization, as well as changes in mindset.
As with any technology change or upgrade, there is a need for an implementation plan. That plan should include, but is not limited to, these types of questions:
- What is the overall strategy?
- What are the short-term and long-term objectives?
- What partners, internal and external, does the company need to involve? Can leaders identify effective champions for the effort across the enterprise, in all relevant departments?
- Will the decisions and actions the company takes now allow for flexibility and scaling of efforts later?
- How can the company integrate the security needs of operating in the digital asset ecosystem with existing security and cyber efforts in the company?
- How does the company implement the introduction of crypto? Does it begin with a payments-only, “hands-off” approach? Or does it engage “hands-on”?
- What resources will the company need above and beyond those it currently has? What new expertise might it need?
- What will the implementation road map look like?
- How will the company evaluate progress as it implements? Does the company have the necessary processes in place to monitor the execution of transactions and vendor performance?
- What does the final state before launch look like?
This can be a complex endeavor. Advantages Of Using Bitcoin That’s why, before engaging in a more robust launch, some companies have chosen to pilot the use of crypto just as they would pilot a new technology. One type of pilot a number have chosen is an internal intradepartmental pilot. It’s based in Treasury, since Treasury is typically responsible for internal funding of the company and its departments and subsidiaries. The pilot can begin with the purchase of some crypto, after which Treasury uses it for several peripheral payments and follows the thread as the crypto is paid out, received, and revalued.
Because users are able to send and receive bitcoins with only a smartphone or computer, Bitcoin is theoretically available to populations of users without access to traditional banking systems, credit cards, and other methods of payment.
Bitcoin Payment FAQs
Can I make payments using Bitcoin?
Several online retailers, such as Overstock (OSTK), allow users to pay with Bitcoin. In recent times, small businesses and individuals have also begun using the cryptocurrency’s blockchain for overseas remittances.
What are the advantages of using Bitcoin for transactions?
There are several advantages to using Bitcoin for transactions. However, the two main advantages of using the cryptocurrency are its peer-to-peer focus that removes intermediaries and its pseudonymous design that eliminates the need for identification information for both parties. Both characteristics expedite transactions and remove unnecessary steps for transactions. Advantages Of Using Bitcoin.
Are transactions using Bitcoin completely free?
Because they are conducted without intermediaries, Bitcoin transactions do not involve fees or service charges using third-party intermediaries. However, users do have to pay Bitcoin’s blockchain network fees to conduct the transactions.
Do Bitcoin transactions require bank accounts?
Transactions using Bitcoin do not require users to have bank accounts. The only requirements for such transactions are that the user is connected to the Internet and has an associated address on the cryptocurrency’s blockchain to send or receive payment.