With all the hype surrounding Bitcoin and its skyrocketing value over the past year, the average business owner could be forgiven for wanting to jump on the cryptocurrency bandwagon.
Many have indeed rushed into adopting so-called crypto – digitally encrypted currencies that operate outside of central banks – for fear of missing out on what could be the hot new trend in e-commerce. The result is a good number of retailers, cafés and even fast-food outlets accepting Bitcoin alongside cash, credit cards and Apple Pay.
But do they have to?
Experts believe there’s no urgency for businesses to get into crypto just yet. At the same time, it also won’t hurt if done carefully.
“There is very little harm in saying, ‘No, we don’t take crypto,’” says Duncan Stewart, director of technology, media and telecommunications research for consulting firm Deloitte Canada.
“On the other hand, the downside of taking it also isn’t that large as long as you’re willing to understand that this is likely to be an infrequent [transaction] and you need to learn how to do this.”
Bitcoin’s rise has been nothing short of phenomenal, shooting from a value of around US$1,000 each at the beginning of last year to more than US$22,000 in December as investors and speculators piled in. The success spilled over into other cryptocurrencies, such as Ether and Ripple, which also made significant gains in 2017.
Most have come back down to earth in the first half of 2018 – Bitcoin is now worth about US$7,600 – but the buzz hasn’t worn off completely. Many businesses are still wondering if crypto, which promises easier and less expensive transactions than traditional payment methods, is the future of e-commerce.
From Deloitte’s perspective, few businesses have reaped significant benefits from using cryptocurrencies. Early adopters tended to get positive press coverage for appearing forward-thinking, but that ship has since sailed, Mr. Stewart says.
The fluctuating value of Bitcoin is also making it difficult to conduct transactions. Those businesses that are accepting large amounts of crypto are quickly moving to convert such payments into real-world money.
“You don’t want someone effectively giving you a check for $10,000 that’s worth $7,500 tomorrow,” Mr. Stewart says. “Keeping it in in your electronic till for several weeks is very risky.”
Still, there is the potential that cryptocurrencies could become more mainstream once the volatility surrounding them settles down.
The technology that makes them possible – an encrypted online ledger known as a blockchain – is especially looking like it could have a significant impact on e-commerce, he adds. Blockchains promise faster and more secure transactions because they track every transaction made with a cryptocurrency.
For that reason, it might be prudent for businesses to learn about blockchain by dabbling in crypto.
On that front, Caddle Inc. believes it can help fill the gap – for some retailers at least. The St. Catharines, Ont.-based loyalty program company is partnering with DigitalBits Foundation to provide bonus crypto rewards to consumers through its retail product customers, which include PepsiCo, Nestlé SA and Domino’s Pizza Inc.
Caddle plans to allow participating retailers to award consumers DigitalBits, also known as XDB, on top of their regular cash-back rebates. Consumers will then eventually be able to redeem their XDB on products the same way they would cash in their other rewards.
The company is pitching it as a low-risk way for both businesses and consumers to dip their toes into cryptocurrencies.
“If you get $2 by buying a Delissio pizza and taking a picture of the receipt, you’ll still get $2, but you’ll also get bonus DigitalBits,” says Caddle chief executive officer Ransom Hawley.
“The value of that cryptocurrency, at least today, is not a major factor because we’re simply rewarding in addition to the existing rewards users get.”
DigitalBits Foundation CEO Al Burgio says it’s also an easy transition for consumers to make.
“This is already a learned behaviour, they already know how to go out and earn a digital asset,” he says. “This doesn’t change their behaviour, they hit the ground running.”
Industry experts say the approach could be a good one, since it helps takes the mystique out of how cryptocurrencies and blockchains work.
“Unless you’re tech savvy and really want to make the effort, it’s hard for people to do,” says Andreas Park, an associate professor of finance at the University of Toronto. “[This is] a way for people to get into the space and learn.”