Business Advice sat down with CoinCorner’s Danny Scott and Molly Spiers to get to the bottom of Bitcoin. Bitcoin is gaining more and more attention across the globe, leading to the rise of ‘stockfluencers’ and major players like Elon Musk causing huge disruption to the way we traditionally purchase and sell goods.
Let’s start with the basics
Bitcoin is a pay-to-pay digital currency that is decentralised and therefore, able to be used globally without banks or exchange rates. Bitcoin is attractive to investors and buyers due to the fact it is not controlled by any one person or organisation. There is no reliance on banks, so it is not impacted by hyperinflation or potentially unethical banking infrastructures that could affect its exchange value. It is anew ways of transacting payments across borders, 24/7 and could be ushering in a monetary revolution.
How is Bitcoin valued?
Supply and demand. It is similar to the housing market. It is worth what people are willing to pay but with mining, there is only ever a finite amount. Gold and silver are restricted resources, so the value of traditional currency is also restricted. You cannot create artificial bitcoin.
How will Bitcoin impact industry?
Predominantly, at the moment, Bitcoin is being used for investment opportunities. We are seeing a lot of people beginning to use it as an actual currency. The great thing about Bitcoin is that it is not controlled by any one party and so it is borderless, which offers a lot more freedom to consumers and businesses. You can send payments to anyone, at any time, to and from anywhere in the world. That will make a huge impact on how industries run, potentially changing cash flow delays as payments stop relying on the time restrictions of traditional banks.
It is a foundational layer for a new monetary system. There will be systems built upon it. There are different layers for different payment types, for example, Layer 2 is the Lightening Network for making instant, cheap payments. The systems use smart contracts that allows both participants to access the Bitcoin network from anywhere and make fast, small payments through the Lightening Network. This system is great for e-commerce and removes the need for card processors or the worries around GDPR compliance as there is no need to store data. From a security and privacy aspect, it is a pretty superior option.
It has begun to open doors for streaming payments. For example, we could begin to monetise podcasts further than just one set payment to buy the entire episode. There is an app called Sphinx that uses a lightening wallet to charge people for the amount of time they actually spend listening to a piece of audio. So, if they listen to ten minutes, they would only be charged for that section of the podcast they had actually consumed. It means you are only paying for the services you actually use. That is only an insight into the potential applications of cryptocurrency in the future.
Why should an SME consider using Bitcoin as a payment method?
From a business side, there are a lot of reasons to accept a Bitcoin as a payment method, the first one being competitive advantage. By having Bitcoin payments, post-COVID-19, it is a way of standing out from the crowd. From a marketing aspect, it promotes that your business is potentially very forward thinking and encourages members of the public that have invested in Bitcoin to trade with your business. From a fee perspective, Bitcoin transactions are typically cheaper to process that VISA or Mastercard in terms of business rates. The Bitcoin community is very loyal and dedicated to companies that accept Bitcoin so it would open your business up to a new customer base that would be drawn to the business.
How to balance Bitcoin as an accepted payment method?
Bitcoin is an asset in the UK; when adding it to the balance sheet, it is registered as a new ‘intangible asset’ such as intellectual property, traded in exchange for services or products. According to the UK tax agency, the type of tax paid on cryptocurrencies depends on the parties involved but could incur capital gains tax or corporation tax.