While the popularity of cryptocurrency has grown significantly over the years, it has also captured a ton of skepticism. Some believe that crypto is the solution to inflationary money and is the future global currency. Others see crypto as a paradise for gamblers and criminals to make quick money and perform illegal activities.
As a business leader, it’s important to be open to innovation, but also willing to ask questions. There’s a reason why the biggest companies are accumulating digital assets and expanding into crypto-related services or offerings. That alone should be enough reason to start asking what crypto really is and what it could mean for your business.
What’s the point of crypto?
Before we get into it, the first question to answer is what is cryptocurrency? There are a ton of buzzy words and jargon used to describe it, but simply put, cryptocurrency is digital money that is created, secured and transferred by software hosted on a decentralized network. When you think about our traditional payment system, the whole network and infrastructure is owned by financial institutions. This means that they have all the control to monitor, regulate and block transactions if they’d like.
Crypto is different in that it runs on software that can be downloaded on any computer. That means any individual can create crypto (known as mining) and own it by downloading a digital wallet software. All these applications are hosted on the underlying technology, which is blockchain, the decentralized network.
This is the main appeal of crypto - the ability to truly own your assets without the reliance of third-party institutions. Naturally, there will be criminals that will take advantage of crypto, just like the traditional financial system. However, there are many retail investors and consumers who see the value of owning their money without interference. Particularly the Gen Z and millennial generation, trust in the government and institutions is the lowest amongst this group. As a result, they will continue to flock to crypto as an alternative and will look for businesses that align with their values.
If you want to know if crypto is something you should consider incorporating into your business, here are some things you should know to start.
Major institutions are making waves in crypto
There are several examples of big consumer brands adopting crypto into their business. Nike, Coca Cola, the NBA, have all dipped their toes into crypto, but what’s more important to take notice is how institutions are adopting crypto. While it doesn’t always make a big splash on headlines compared to retail news, institutions are the true spearheads of crypto adoption.
The first major mover was Microstrategy that purchased $250 million worth of Bitcoin in August 2020. Shortly afterwards, Tesla entered into the market with $1.5 million Bitcoin and Square with $50 million Bitcoin. These are just financial records of prominent public companies. There are several private institutions that are also making investments into crypto. It’s reported that 47% of traditional hedge funds managing over $180 billion, will look to add crypto to their portfolios.
What’s more interesting is that even in a bear market, institutional adoption is continuing to thrive. Large financial institutions are also beginning to offer crypto services. BNY Mellon just announced the launch of their crypto custody solution. Nasdaq, Blackrock and Fidelity have also expanded into crypto offerings. Clearly, there is enough demand for these traditional institutions to offer crypto-related services.
You might be wondering, why is this all important to you and your business? The market often moves to the trend of institutions. Any major move they make will impact market demand and set the standard for smaller players. By keeping an eye on what major brands and institutions are doing, you can start to see what may lie ahead for your business’ future.
Real-world use cases
While institutions make their move into crypto, a big question is why? Especially with the narrative floating around that crypto is a scam or enables criminal activity, why would businesses participate in this? What often gets overlooked is the fact that cryptocurrencies have utility.
There are certainly plenty of tokens on the market that don’t have real use to them, but there are a select few that have real people building applications on the decentralized network. For instance, Ethereum is a top blockchain project for developers to build decentralized applications and financial services. The Ethereum token is what helps fuel the ecosystem.
Some other real-world blockchain use cases could be:
- Supply chain management - organizing and tracking the movement of goods
- Real estate - streamlining the home buying process with efficient verification
- Media - protecting IP rights and reducing fraud
Though it is heavily speculative at the moment, it’s expected that as the industry matures and the use cases develop, the utility of crypto will begin to shift. It will be seen less as an investment tool and more of an actual utility to power decentralized applications.
Early adopters will win
In the grand scheme of things, crypto is still in its very early stage of adoption. Though it has gained plenty of momentum in the past few years, only 1% of the global population owns crypto. However, this doesn’t stop major brands and institutions from innovating because they can see that a decentralized future is the path we’re heading towards.
Much like the rise of the internet era, adoption did not take off for years and when it did, it led to the infamous dot-com crash in the early 2000s. People were excited about the promise of this new technology revolutionizing the way we interact. It ultimately led to several companies being overvalued and the market crashing to wipe out companies offering little-to-no-value.
The same is happening to the crypto industry today. The fundamentally strong crypto projects will survive, just like how Amazon and IBM prevailed from the crash. Meanwhile, early users of the technology, particularly businesses, will also find themselves ahead of the curve. That’s why major brands are investing in their crypto initiatives now, so when the market hits majority adoption, they’ll be ready while their competitors catch-up.
What can your business do today?
There are endless possibilities of how crypto can shape the future of business. Today however, there are a few main ways we see businesses incorporating crypto into their strategy.
- Portfolio diversification: As part of their investment strategy, businesses will add crypto to their portfolio to diversify the assets they are exposed to.
- Payments: Some businesses have begun to accept crypto as payment for goods and services. It’s cheaper, more efficient and internationally accepted.
- Customer engagement and loyalty: Brands have been experimenting with using crypto and NFTs as incentives to strengthen their relationships with customers.
For small businesses, getting started can be difficult. If you decide that you want to start your businesses’ crypto journey, partnering with a third-party platform or service is your best option to help operationalize the process.
For instance, if you want to allocate crypto into your business investment strategy, you can partner with a hedge fund or institutional trading platform. To accept crypto as payment, Shopify’s partnership with Coinbase makes it easy for businesses to enable crypto payments. To boost customer engagement, Peopletail is an app for Shopify merchants to create and launch a crypto-back rewards program with little-to-no-risk.
Crypto isn’t going anywhere. It will continue to evolve and mature, and when it does, you want to be sure that you are placed in the best position to succeed.