Is cryptocurrency FOMO getting hard to bear? Are you sure you’re missing out on millions in bookings because you don’t accept Bitcoin? Before you jump into the complicated world of digital currency, take a moment to consider what’s best for your tour and activities company.
Cryptocurrency has potential, but it isn’t without its flaws. Here are four considerations to keep in mind when deciding whether or not to dive in:
One: Unstable Values
It may be a while before we see any widespread adoption of cryptocurrency for business transactions, and with good reason: current values are too unstable. If you charged 1 Bitcoin (BTC) for a tour at the start of 2016, its value would have been about $500 US. If you charged 1 BTC for that same tour near the end of 2017, its value would have been around $20,000. And when the market fell a few weeks later, the value would have been closer to $10,000.
This volatility makes vendors reluctant to trade in cryptocurrency. Businesses thrive on predictable income. If the value of the payment you’re taking could skyrocket or plummet in the time it takes to receive it, process it, and convert it to your local currency, your business becomes incredibly unstable. Even digital services designed to adjust prices with the ever-changing price of Bitcoin have trouble keeping up in the face of transaction delays.
Bitcoin’s ever-changing value can also make its owners reluctant to spend. Imagine spending $500 on a tour when your currency might be worth $1500 by the time you travel.
In January, Stripe, a popular payment processor, announced that it would no longer support Bitcoin for payments. The problem, as explained by Stripe CEO Tom Karlo, is that Bitcoin has become too popular. “Over the past year or two, as block size limits have been reached, Bitcoin has evolved to become better-suited to being an asset than being a means of exchange.” Fewer people were using Bitcoin to pay for things, businesses were seeing fewer Bitcoin payments, and the fluctuating Bitcoin market made the whole process far too risky for everyone involved.
Other cryptocurrencies have shown less volatility, like Ethereum or Litecoin, but nothing is stopping them from seeing the same sudden spikes and falls as Bitcoin. Not yet. That’s why newer cryptocurrency startups often focus on creating coins with stable values that would be more practical for businesses.
Two: Transaction Woes
Another reason Stripe cited for discontinuing Bitcoin support was an increase in transaction confirmation times and transaction fees. With cryptocurrencies, each transaction needs to be processed by a computer before it’s confirmed on the blockchain. Transaction fees are effectively bids, with processors picking the higher bids to process. Fees rise as users try to keep their bids competitive, and people who try to pay lower fees see their transactions languish or fail entirely.
Never has this been more evident than in late 2017, when a video game called CryptoKitties launched on the Ethereum blockchain. The gold rush for digital kitties — each relatively inexpensive on its own — filled the blockchain to capacity. The whole system was busy processing transactions for virtual cats, so larger financial transactions went unprocessed. Game users were paying more and more for transaction fees, and traditional users couldn’t keep up.
While this was a huge success for CryptoKitties’ creators, it was also a disturbing sign of things to come. Imagine if your business relied on Ethereum and you could no longer process payments because too many people were buying virtual pets. Technology innovators are constantly looking for new ways to use blockchain tech and smart contracts in this manner, with each new success adding to congestion and fees.
This lack of scalability is one of the biggest challenges in the cryptocurrency world, and a lot of brilliant people are working to find and implement solutions. It remains to be seen whether anyone can solve the existing bottlenecks for established cryptocurrencies, so if quick, inexpensive transactions are a selling point for you, caution may be warranted.
Three: Fraud Potential
While cryptocurrencies are lauded for their security, they aren’t exactly fraud proof. We can assume that any popular public blockchain is generally safe — its distributed nature will keep it secure from all but the most esoteric attacks. But hackers and thieves don’t need to attack the blockchain to steal your money. They just need to get to you.
Cryptocurrency is stored in digital wallets, and those wallets can be stolen. They’re only secured with private keys, long passcodes that only their owners know. If someone were to get access to your private key through phishing or other illegitimate means, they would control your funds. At that point, you would have no recourse. Cryptocurrencies are largely anonymous and almost entirely unregulated, so no bank or authority could help. The same would be true if you lost your private key. The Internet is piled high with horror stories about people losing access to millions of dollars worth of Bitcoin, after all.
The ever-changing nature of the cryptocurrency market also plays a role. New currencies and cryptocurrency-based platforms are created all the time, and not all of them are designed to succeed. Initial Coin Offerings (ICOs) allow investors to get into a new cryptocurrency venture early. For less-than-honest people, ICOs are a great way to get a lot of money quickly, with little or no legal oversight.
That makes being an early adopter of a new currency or blockchain-backed tech platform a risky proposition. With the excitement of Bitcoin’s spikes and valleys, the temptation is strong to get involved with fresh, up-and-coming currencies. Unscrupulous people know that, and they’ll do everything they can to tempt you to make a costly mistake.
The Wild West era of cryptocurrency is coming to an end. China recently pushed through harsh regulations that target ICOs and foreign exchanges. Russia enacted regulations in January. The U.S. has been examining its options lately, too.
While some of this might be promising for people who want to use cryptocurrencies legally, there’s no denying that black market activity has helped stoke the cryptocurrency market. Tight regulations may discourage users, and the mere threat of regulation has caused repeated dips.
The future of cryptocurrency remains uncertain. It’s possible that there may one day be a currency that’s perfect for business use and a global market that makes sense. Today, it’s a speculator’s game. Weigh the risks and benefits carefully before getting your tour and activities company involved.