Cryptocurrency is a promising and rapidly developing field that should not be overlooked, unless you live in a cave. By November 2022, more than one billion people use cryptocurrencies. How can a business accept crypto to get closer to its customers? And how can you deal with the growing popularity of cryptocurrencies if using them to pay is illegal in your country?
Cryptocurrencies have entered various countries’ economies and social lives.
Bitcoin can be used to purchase dessert at the Steccolecco gelateria in Rome or to pay for an online Burger King order in Berlin. Donations in cryptocurrency are accepted by NGOs and politicians from around the world, and it is entirely legal (although it raises concerns that terrorism can be financed in this way).
So far, cryptocurrency has not evolved into a full-fledged alternative to fiat money. However, we are seeing isolated attempts around the world to put businesses on a cryptocurrency footing. For many years, Prague has had a Parallel Polis, a multi-pronged project that combines art, social sciences, and technology. Its philosophy is one of freedom, independence, and innovative social development. The project community owns the entire building, with each location reserved for a separate project within the overall system. On the ground floor, there is a cafe called BitcoinCoffee, where you can exchange your local currency for cryptocurrency and buy coffee and dessert in exchange for Bitcoin, as well as various gadgets such as a hardware electronic wallet.
Under BitcoinCoffee is the Makers Lab 3D printing lab, and the Paper Hub office is on the floor above the cafe. The top floor and its multifunctional hall serve as a meeting place for organizers and attendees. The Parallel Policy brings together a community of like-minded individuals who support the use of cryptocurrencies, oppose the state monopoly on financial emission, and contribute significantly to the alternative economy.
Using bitcoin as a form of payment for a good or service is, first and foremost, a security choice. Unlike traditional payment methods such as credit cards, bitcoin transactions are recorded on the blockchain, are controlled by a mathematical code, and are protected by cryptographic encryption. Scammers will have to work very hard to gain access to an anonymous crypto wallet, guessing its address (which consists of 34–62 characters) and selecting a seed phrase (consisting of 12–24 words).
It is also a way to reach new audiences and be open to new customers. In particular, those who want to keep their individual freedom from the control of banks and governments and use bitcoin as a global payment system.
To receive cryptocurrency from the buyer (or receive fiat through cryptocurrency conversion), the business owner must debug crypto payment processing activities, or set up crypto processing. Transactions can be processed by operators such as BitPay, Coinbase, and others. You can also hire IT experts to create a custom application for you.
In fact, the payment process will look like this. When you provide a service, you show the buyer a QR code. The client transfers the cryptocurrency from his wallet to yours by scanning the QR code. If you prefer to receive fiat currency, the crypto payment processor converts the client’s cryptocurrency and transfers it to you. Account information is anonymous, and transaction records are permanently stored on the blockchain. Transaction records cannot be reversed or changed retroactively.
Many countries prohibit the mining, sale, or purchase of cryptocurrencies. Another point to consider is blockchain, which appears to have been adopted bythe majority of the world’s governments. If your country does not accept cryptocurrency, you can create your own token. In most countries, the terms “cryptocurrency” and “token” are not synonymous.
Tokens are created in an existing blockchain and, in most cases, represent an analogy of securities (such as shares) and confirm ownership of a unique digital asset (we are talking about NFTs). Ownership of a token grants the right to vote, as well as bonus points or reputation. The token’s value can be linked to the value of fiat currency, gold, or goods. Tokens, like securities, can be bought, sold, exchanged, and accepted as a gift; however, they cannot be used to pay for goods and services.
As a result, an entrepreneur can legally issue private money for use in his business. To attract investors, manage a user community, and collect presales, having your own token will help a business attract investors faster (no need to conclude a sale and purchase agreement) and cheaper (no need to issue bonds).
Unlike Bitcoin and other altcoins, your tokens can only be used in your own establishment. However, they will provide additional opportunities for scaling and managing a business, and if applied more broadly, they will serve the same purpose.
Tokens, according to the theory, truly democratize money. Many people in post-pandemic society are concerned about their own privacy and the removal of state control over economic planning, emissions, and personal finances. The government and banks have access to all of our personal information and money, and they can decide how much and when we will spend it (as, for example, is already happening in Lebanon). Private money, to which only the owner has access, was first articulated in the twentieth century by Nobel laureate in economics Friedrich von Hayek in his books The Road to Serfdom and Private Money. Hayek recalls that there were no state banks in the Middle Ages and Renaissance, and that many countries had a variety of private money in circulation that freely competed with each other. At the same time, they performed admirably in their tasks. Today, a state monopoly on money issuance is seen as the only possible and inevitable option, despite the fact that the pandemic and the energy crisis have demonstrated that governments are incapable of protecting citizens’ private interests.
Although the term “token” was first heard on the Internet, we have long been familiar with private currencies. Starbucks and the cozy little coffee shop across the street all have reward programs where points can be redeemed for goods or services. Bonus points are essentially tokens, similar to electronic private money.
Lavkalavka, a Moscow-based farming service, created a loyalty blockchain platform and its own Biocoin token a few years ago. Biocoins, like bonus points, were awarded for purchases in the Lavkalavka chain of stores; they could also be purchased for rubles, Bitcoin, Ethereum, or Sibcoin. All transactions were recorded in the blockchain, which was integrated with 1C. Biocoin has become the community’s internal currency, with some notional value.
At least 1000 different blockchains exist in the world. You can use an existing one to create your own token. The digital constructor enables even non-programmers to create their own tokens on the blockchain; you will need to name the token and decide on the number of units of account. The process takes no more than 20 minutes.
A stablecoin’s value can be linked to the value of any other commodity. If you decide to open a coffee shop, for example, the cost of your conditional coffee coin can be linked to a cup of espresso. The client can purchase your currency ahead of time and exchange it for goods later. This provides opportunities to raise funds prior to the sale of a product, allowing for better control of pre-purchases and sales planning. Furthermore, such a feature will distinguish your coffee shop from competitors and make it appealing to crypto enthusiasts.
Scalability will also benefit from business tokenization. It’s not easy to find Rothschilds with deep pockets, but it is entirely possible to raise funds from around the world via the launchpad from interested users.
Launchpads are crowdfunding platforms used to fund blockchain projects. A startup registers its project, and an investor invests in the development stage of a product or service in exchange for tokens. Tokens may be exchanged for real goods or services in the future, such as a cup of coffee or the opportunity to vote on the layout of a coffee shop. Both parties benefit: a crypto startup receives funding and continues to grow its business, while investors purchase tokens at a much lower price than the market price and can resell them for a higher price if they wish.
KYC Launchpads act as guarantors of user safety. Therefore, they carefully screen both startups and investors (for example, by conducting a “know your customer” KYC process) before allowing them to participate, helping to build trust between the parties and reduce the likelihood of fraud. Most launchpads today issue their own tokens.
Tokenization and investing in a blockchain startup through a launchpad is the pinnacle of blockchain technology development, ensuring the accelerated development of the real sector of the economy through new currencies. This is an opportunity for small businesses and provinces (including endangered villages) to develop a local business with the participation of local residents. Instead of raising funds from outside or taking out large loans, the local community can invest in a common cause, eliminate bureaucratic delays and collection of certificates, and distribute funds fairly using smart contracts.
Smart contracts are computer programs; they are a collection of code and data that are assigned a unique address in the blockchain. Smart contracts enable the conclusion and control of commercial contracts that are deployed in the blockchain network but are not coordinated by the user (but only by the algorithm). As a result, the person in question cannot remove or modify smart contracts retroactively. When all of the smart contract’s conditions are met, payment is automatically credited to the supplier of goods or services.
Smart contracts are used to verify agreements on the U Promise Me platform. The service permanently fixes any agreements in the blockchain and also allows you to request the history of any counterparty working in the system’s reliability. The smart contract keeps track of Who, To Whom, What, and When the Promise was made, and changes its status based on the user’s actions. This happens automatically: anyone can see both the Promise and the smart contract on the blockchain, but they cannot change the Promise’s status on their own. Whether the contract is fulfilled or violated, a record of it will be kept in the blockchain and cannot be changed. And, based on blockchain data, the product displays the rating of participants and can even predict the likelihood of fulfilling or failing to fulfill obligations.
Smart contracts have enabled businesses to decentralize their organizational management. DAO is a type of governance (and stands for Decentralized Autonomous Organization). By purchasing a coffee shop token, the client becomes a member of the DAO and gains the ability to suggest or vote on a seasonal drink, interior design, events, and so on. This is the implementation of a mini-democracy that increases buyer engagement and empowers them from guests to owners by providing them with the necessary rights. As a result, a favorite coffee shop becomes a common cause for local residents.
At first glance, it appears utopian; however, there are already examples of managing an organization without central leadership using DAO outside of the digital space. And it’s not just about homeowners associations; theCaféDAO, for example, opened a few months ago in Seattle. On the coffee shop’s website, you’re greeted with the inscription “The Café Everyone Owns” (the cafe is owned by everyone). Each coffee shop token owner can, of course, vote on business decisions and investments. Investors’ experience and ideas will enrich the coffee shop’s space and improve the quality of service. It appears that such coffee shops can compete with social networks by offering opportunities for communication and meetings with like-minded people, as well as the ability for customers to manage and make decisions about their favorite place. As a result, Ray Oldenburg’s concept of Third Place appears to be gaining traction.
Business tokenization creates new management and investment opportunities. The use of blockchain will provide transaction privacy and security, and the creation of your own token will become a physical symbol of ideas and community. But perhaps the most important value of tokenization is the person’s ability to manage his money freely and confidentially.