While today’s shoppers are forced to face higher and higher prices on consumer goods, it’s likely that most wouldn’t dare pay a nine-figure sum for a couple of pizzas.
However, 12 years ago, one unlucky customer made history by doing exactly that. (Well, sort of).
Known as “Bitcoin Pizza Day” in cryptocurrency circles, May 22, 2010, celebrates the day computer programmer and early adopter Laszlo Hanyecz posted a humble, yet world-altering request on a message board: Would anyone accept crypto payments in exchange for the delivery of two large pizzas?
“You can make the pizza yourself and bring it to my house or order it for me from a delivery place, but what I’m aiming for is getting food delivered in exchange for bitcoins where I don’t have to order or prepare it myself,” Hanyecz wrote, as noted by Yahoo on Bitcoin Pizza Day’s 11th anniversary.
When another user took him up on the offer, the resulting transaction became the first time in history cryptocurrency was exchanged for a good or service.
Then, the value of 10,000 bitcoins was roughly $40. In October 2022, that same amount would be the equivalent of about $200 million — and at the peak of its valuation last year, well over half a billion dollars.
(For the record, Hanyecz told Cointelegraph that he’s at peace with his decision).
Obviously, bitcoin — and much of the world — have undergone some tremendous changes since that first sale. The cryptocurrency market has seen some dizzying highs, some brutal crashes, as well as an increase in adoption by consumers and businesses alike.
Why are so many consumers and businesses embracing crypto payments? And should the option to accept crypto payments be a priority for your company?
The Public’s Love-Hate Relationship With Crypto
Cryptocurrency has undoubtedly gained a foothold in both the marketplace and public imagination since Hanyecz’s ill-timed pizza delivery.
For example, bitcoin has led to the creation and growth of other cryptocurrencies like ethereum, litecoin, tether, and more. Even dogecoin — created as a humorous commentary about expansive speculation in cryptocurrency markets — traded at a height of 70 cents per coin, fueled purely by viral online enthusiasm for the meme-inspired currency.
An expansive 2015 Pew Research Center cryptocurrency study found that 48% of adults in the U.S. had heard of bitcoin, with only 1% reporting they ever collected, traded, or used the digital currency. Six years later, the firm’s follow-up study found that 86% of respondents had now heard at least a little about cryptocurrencies, with 16% reporting they had performed some kind of transaction with the currency.
The U.K. has seen similar trends, with about 78% of adults reporting familiarity with cryptocurrency in general, per a 2021 Financial Conduct Authority (FCA) report.
It’s important to note, though, that while these figures point to slow but steady growth, consumer attitudes about cryptocurrency have become more discerning as they continue to learn more about its volatility and risks — most notably after crypto markets lost more than $2 trillion in value following a 2021 crash.
In 2022, only 21% of Americans have some level of comfort investing in digital currencies, a Bankrate survey found. Younger generations — who tend to be the most bullish on cryptocurrency — expressed a sharp drop in their comfort levels, too: About 30% of millennial investors feel comfortable with cryptocurrency, down from nearly 50% the year before.
The decline of millennial investors’ comfort levels with cryptocurrency mirrors the steep declines in major cryptocurrencies such as bitcoin and ethereum in 2022, notes CNBC analysis. From their all-time highs set in late 2021, bitcoin has fallen more than 72%, while ethereum has sunk 73%.
While there is dampened enthusiasm in the short term, this phenomenon can theoretically “cut both ways.” Shoppers and investors may be cooling off on cryptocurrency after last year’s losses, but there’s no fixed rule that this enthusiasm can’t come roaring back.
Benefits of Empowering Your Company To Accept Crypto Payments
If the ongoing market volatility is a risk you’re willing to accept, there are a number of benefits to offering your customers the option of making crypto payments.
More traditional forms of electronic payment, such as credit or debit cards, can leave vendors waiting anywhere from two to seven business days for funds to arrive. With the right cryptocurrency set-up, you could instead receive those funds instantly.
No/Low Fees per Transaction
Another benefit over credit/debit cards? No merchant fees, which typically amount to about 3% of each sale’s cost. And while third-party crypto tools may take per-sale payments as well (more on those later), it’s usually at a much lower rate.
If you cater to customers (or a segment of customers) who are more likely to engage in crypto trading than average consumers, that enthusiasm could be an untapped resource for your company. A great example of this principle in action is AMC Theaters, who began accepting cryptocurrency payments after achieving “meme stock” status last year, as noted by CNBC.
Possibility of a Valuation Bump
While market volatility is always a possibility when working with crypto markets, there’s a reason so many people were drawn to invest in them in the first place: Weathering risk has led others to significant financial gains.
There’s always the possibility that a business could store away some cryptocurrency, and — in the event prices rise — end up with much more money long term. Of course, even that isn’t an excuse for reckless investing without the help of an adviser.
What Tools Does a Company Need To Get Started?
While there are different tools your company can adopt in order to accept crypto payments, they all come down to three basic approaches: classic-style crypto transactions, applications that provide on-the-spot conversions to fiat currency, or a hybrid model.
Cryptocurrency Wallet (Classic)
A must-have for any kind of cryptocurrency activity, a digital “wallet” is exactly what it sounds like: a device, program, or service that allows you to keep track of your crypto funds — and receive and send funds to other users. Services like Coinbase and TrustWallet provide easy-to-use wallet services accessible through a smartphone app.
The wallet provides its user with two “keys” — one private and one public. A public key, often helpfully represented as a QR code, allows users to scan your wallet and send you funds. Your private key allows you to access your funds, as well as transfer them to other users.
Your wallet’s public key can be integrated into both in-person point-of-sale devices and ecommerce checkout portals. If you have a small business and feel comfortable navigating the set-up process, this is the most direct way to provide cryptocurrency payment options to your customers.
Payment Applications (Conversions and Hybrid)
Larger enterprises might need to take a different approach. But, luckily, a number of third-party applications are at their disposal, too.
For example, big box retailers like Home Depot and Whole Foods have integrated Flexa payments as an in-store purchase option. Flexa supports cryptocurrencies like bitcoin, ethereum, litecoin, and bitcoin cash — and works by instantly converting cryptocurrencies into traditional fiat currency at the point of sale.
This eliminates almost all of the risk related to price volatility, while still providing your customers with the option of cryptocurrency payment.
Tools like Coinbase also allow you to easily accept crypto payments without converting them into traditional cash. However, they collect a 1% fee on all transactions conducted on the app.
Best Practices for Getting Started
If you’re thinking about offering customers the option to pay with cryptocurrencies, there are a few quick tips to consider before you begin.
1. Develop Clear Customer Service Protocols and Expectations
Consider this: A customer pays you one bitcoin for your company’s most luxurious product — a value, at the time of this writing, of approximately $20,000. A month later, an unexpected crash causes the price of bitcoin to stumble 35%, down to the equivalent of just $13,000.
The customer returns within your 90-day return policy — unsatisfied with your product — looking for a refund. But what amount should they receive? Refunding a single bitcoin now would still result in a $7,000 loss for them while refunding $20,000 in cash would leave you in a similar predicament.
Thus, it’s important to consider the ways accepting crypto can complicate some of the most basic assumptions about retail sales.
Make sure your staff is trained (and your customers are fully informed) about how you’ll handle refunds and other customer service requests. This can be especially reassuring for your savvier crypto customers who are probably aware that these transactions lack the consumer protections afforded to credit or debit card purchases.
2. Check Local Regulations and Laws
While cryptocurrency is broadly legal to use in most countries, make sure you familiarize yourself with the local rules and regulations of your market before getting started.
For example, in the U.S., cryptocurrency holdings are taxed differently than traditional currency. Make sure you’re prepared for any kind of tax liabilities or other possible legal quandaries that might present themselves.
3. Carefully Consider How To Allocate Cryptocurrency Revenue
As mentioned, many approaches allow vendors to simply convert cryptocurrency to fiat currency at the point of sale. But, if your company adopts a hybrid or classic model, there’s a big question hanging over your strategy: What should you do with all this crypto?
Consulting with a professional who specializes in digital currencies is a smart move for any enterprise exploring crypto holdings. Most importantly, you don’t want so much of your revenue wrapped up in cryptocurrency that a downward price fluctuation interferes with your ability to meet operating costs.
A Slow, But Steady, Adoption of Crypto
While it still might be the early days of companies choosing to accept crypto payments, interest in these markets continues to grow worldwide.
Whether free, nation-less digital currency will replace — or even greatly compete with — the present monetary system remains to be seen. However, used effectively, the space provides some opportunities for brands willing to take (and strategically mitigate) the risk.
Omnichannel shopping habits are transforming the world of commerce, and brands and retailers need to stay savvy to remain ahead of the competition. Check out Salsify’s “Complete Guide to Omnichannel Strategy for Commerce” for expert insights on building an effective omnichannel commerce strategy.
- Posted in: Australian eCommerce