Blockchain technology is shaping an industrial revolution in financial markets. Network-based technology has rapidly disrupted almost every industry over the past two decades, specifically those facilitating connections between wider communities and stakeholders. The inherent benefits of the immutable distributed ledgers as the necessary layer of trust for the world’s economy to prosper in perpetuity, remain equitable and transition towards sound money principles.
As the future of money is evolving, small businesses need to understand the benefits of blockchain technology, particularly its application in cryptocurrency. The capacity to offer quick, permissionless and borderless money transfers is one primary use case, however, with the advent of DeFi, cryptocurrency also offers an alternative way to save purchasing power and earn interest on deposits whilst national currencies continue to inflate. The fact that cryptocurrency is still in its infancy should be considered an advantage for small-business owners and operators trying to find competitive advantage. It is certainly not too late to adapt and consider:
- Holding a portion of business treasury in cryptocurrencies.
- Signing up to a centralised exchange for FIAT on-ramp and off-ramping.
- Opening a wallet to accept, store and trade digital assets.
- Advertise and target new customers who have recently acquired significant digital wealth – ready to spend on your goods and services.
First, what is cryptocurrency?
Cryptocurrency is a digital form of currency to service and maintain a blockchain. The first-ever created cryptocurrency, bitcoin, is the most well known in the world and has a total market capitalisation of over $1 trillion at the time of writing.
Unlike national fiat currencies, there is a finite number of bitcoins that will ever be issued. The monetary policy which determines issuance has been fixed from its genesis and halves every 210,000 blocks mined, or roughly every four years, making it predictable. This means the longer it is used as a store of value and transactional currency, the higher the price of each token will need to become to support the cost energy “miners” consume to secure and add transactions to the ledger. The price will increase over a longer timeline if it maintains status as the dominant cryptocurrency.
When comparing the value of cryptocurrencies like bitcoin and national fiat currencies it is important to realise that the value of bitcoin is largely unaffected and independent of any single country’s GDP, debt and economic output. For example, the value of Bitcoin would not be affected if the Australian dollar falls in value due to a budget deficit or interest rate announcement.
How exactly can small businesses benefit?
While the technology is complex and can be difficult to understand in its entirety, the benefits are far more obvious. My first recommendation for small businesses looking to access the world of digital assets and decentralised finance is to explore the most suitable digital asset infrastructure to leverage – such as which wallets or exchanges to use. We do this with our first-time clients/businesses at Aus Merchant via supported a step by step transition towards utilising a blockchain-enabled digital asset economy.
Here is a summary of the benefits to small business:
- By accepting crypto, small businesses will gain access to new demographic groups and emerging wealth classes.
- Transition their money flows to a system which enables faster, safer and auditable transactions.
- Position themselves as cutting edge and future focused industry participants.
- Earn more interest from decentralised finance for minimal capital commitment than any bank could offer.
- Leverage the benefits of distributed ledger technology to furnish a high level of security, transparency, and accuracy that centralised traditional fiat systems cannot facilitate. Businesses which adopt this technology will find increased efficiencies when it comes to back-office accounting operations and automations moving forward.