There is no doubt that cryptocurrency is one of the fastest-growing finance industries in this era. In the beginning, we had the original Cryptocurrency - Bitcoin, which was founded in 2009 and is now the most famous type of cryptocurrency. As of 2021, there are over 7000 types of cryptocurrencies known, such as Ethereum and DogeCoin. Cryptocurrency is essentially Digital Currency.
Unlike flat currency, where we can touch, hold, and keep in a physical wallet, digital currencies are slightly different in the sense that we still keep it in a wallet. Still, instead of a physical one, we keep it in a digital wallet. This digital wallet could be hardware-based or web-based, depending on the currency. With the booming growth of cryptocurrencies in the commercial industry, the big question arises- will it replace flat money? If it does, how safe is it for commercial use?
Generally, cryptocurrency has the same purpose as flat currency – they are used to buy and sell things. Not just that, they can even be traded because of their value-changing nature. However, not all cryptocurrencies serve the same specific purpose. Some are used for private transactions; some are for direct transactions, while others may simply be for buying and selling; These functions of cryptocurrencies prove how versatile they can be.
With all the talks about cryptocurrency right now, it is nearly impossible for businesses to ignore this futuristic currency that may replace our traditional money. However, not many companies have started using cryptocurrencies as a means of transaction nor for operational purposes yet due to the risks and issues that the cryptocurrency industry is facing.
One of the apparent risks that cryptocurrencies may pose for commercial use is their uncertainty. Unlike flat currency, where all our notes and coins are fixed at a specific value (£5, £10, 50pence), the value of cryptocurrencies fluctuates too much to be stable enough for commercial use.
How safe is it if we cannot store it somewhere only we have access to? Storage issues are one of the tackiest problems that cryptocurrency owners have to deal with. In most cases, cryptocurrencies are stored in a 'digital wallet', but what happens when your currency gets stolen from a business' digital wallet? Digital wallets are prone to security issues such as hacking.
Not only is it pricey and time-consuming to retrieve your money back, but you also may not even be able to recover it at all. Moreover, this also means there is a high chance of fraud risk because of its lack of security and governmental oversight. Cyber threats are present at all sides, and it may be challenging for businesses to adopt cryptocurrency for their operations.
Businesses may also face technical issues when using cryptocurrency for transactional purposes. The complex process of mining cryptocurrency may pose a potential risk to a company, and again it may be expensive to hire a professional technician to keep this in check. Also, not forgetting the massive energy consumption of cryptocurrency mining may be a financial and environmental burden for a business.
Adopting cryptocurrency as the primary form of currency for a business may seem risky. Nonetheless, it has some positive aspects, such as its volatility. As mentioned above, cryptocurrency tends to be very volatile and unpredictable.
However, let's look at this from another perspective. The volatility of cryptocurrency is crucial for trading or investing purposes. They mainly depend on the increase or decrease in the currency's value, making it perfect for trading or investing. Not just that, transactions are done with cryptocurrency instead of credit cards having lower fees, and in some cases, when cryptocurrency is used, bank charges are unnecessary.
True, cryptocurrency is becoming the new big thing, but it is still relatively new for businesses, and not enough research has been done to ensure it is safe for businesses. Will it replace flat currency? Maybe, in the future.
References
Anello, R., (2021). Crypto Goes Corporate: Litigation Sure To Follow. [online] Forbes. Available at: <https://www.forbes.com/sites/insider/2021/05/26/crypto-goes-corporate-litigation-sure-to-follow/?sh=369d39ba42d1> [Accessed 18 November 2021].
Little, K., (2021). What is Cryptocurrency?. [online] Time.com. Available at: <https://time.com/nextadvisor/investing/cryptocurrency/what-is-cryptocurrency/> [Accessed 18 November 2021].
McIntosh, S., (2018). The business benefits of cryptocurrency - The Global Treasurer. [online] The Global Treasurer. Available at: <https://www.theglobaltreasurer.com/2018/08/08/the-business-benefits-of-cryptocurrency/> [Accessed 18 November 2021].
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