The Reasons Digital Money Is Changing the Business World
Reading Time: 6 minutes The concept of digital money, digital currency or cryptocurrency is something completely unique in the history of the business world. For this very reason, a lot of people are intrigued or even concerned with all the ways in which digital money is changing the business world. So, here are several ways in which it is expected that this phenomenon (aka. Digital Money) will impact the business world – in both a good and a bad way.
Table of Contents
1. Streamlined transaction
You would be surprised to find out just how much money gets wasted in the business world on all sorts of transaction fees. Sure, some may argue that the term wasted isn’t necessarily accurate, seeing as how it goes to sustain the infrastructure of already existent financial infrastructures that make these transactions possible. We’re talking about banks and similar institutions. However, cryptocurrencies are completely digital. There’s no need for physical presence, large staff (like the banking system would require) and so much physical space and infrastructure.
So, what allows these transactions to require no fees or ask for lower fees. Well, simply the fact that they don’t have such an unnecessarily expensive physical infrastructure to maintain. So, what happens to all this extra money. It remains in the pockets of those who would otherwise have to pay them (seeing as how the recipient of the original payment doesn’t receive them either way). This gives them additional resources to invest, reinvest or use to improve their organization in any other way possible.
2. Expediency of transactions
Another thing you might have noticed is the fact that the cryptocurrency transaction tends to be a lot faster than those made through traditional banking systems. First of all, when it comes to online gateways and digital money, it doesn’t really matter what time of day it is or what day of the week. In a lot of countries, banks are closed on weekends, which creates scenarios in which a payment made on Friday (in some scenarios even Thursday) won’t come through until Monday (or even Tuesday). This kind of delay can make an incredible difference in the business world.
The difference here is particularly easy to notice when it comes to international transactions, which is, in today’s business world, an ever-growing concern. The present-day business world is hyper-connected and there are more and more businesses employing an international workforce (remote workers) or simply collaborating with foreign companies. The banking problem (traditional banking system) maybe even more inefficient, since, all of a sudden, you have all the national holidays, time-zone difference, etc. to take into consideration. In other words, other than the obvious advantage of expediency of transactions, what you also get is a degree of consistency and reliability.
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3. A passive source of income
One of the things that small businesses most commonly struggle with is the problem with cash flow. It takes an average business between 6 months and 2 full years to become completely self-sustainable, which creates a problem of its own. Also, the bulk of your profit will come in the form of account receivables. What this does is creates a scenario where, although you have the money on paper, you don’t have enough cash to cover operational expenses. This is one of the biggest reasons why so many startups fail.
The very concept of crypto mining gives you one more alternative to create a passive stream of revenue. You need the right miner and a suitable platform. Acquiring both is easier than you think and you’re ready to go. Sure, investing in real estate could also give you a similar result; however, ask yourself just how much more expensive it would be to become a real estate investor than a crypto miner? More options mean more flexibility, which always increases your odds of survival.
4. Diversifying your portfolio
When it comes to investing, it is important that you understand that there are four major asset classes – equities, fixed income, cash equivalents and alternative investments (such as real estate, art, etc.). It’s more than clear that digital currencies go under the category of cash equivalents. The reason why this is so important is due to the fact that it gives you one more option of diversifying your portfolio. You see, both equities and fixed income assets tend to be quite volatile (even though the risk-to-return rate greatly differs between the two), which is why it’s suggested that you keep about 10 to 20 percent of all your assets in cash equivalents.
In the past, this either meant in traditional currency or in commodity/precious metals (gold, silver, platinum, palladium, etc.). Nowadays, cryptocurrencies also qualify. Same as with the traditional currency and commodity, they have a potential store of value and serve the function as a potential medium of exchange. However, unlike commodities, they have a potential unit of account and, unlike traditional currency, they have a potential fixed supply. All of this makes them into one of the most flexible investment choices if your goal is the investment portfolio diversification.
5. Negative effects
So far, we’ve mostly discussed the ways in which cryptocurrencies can push the business world towards a brighter future, however, as with any other trend, there are some negative effects to be aware of, as well. For starters, regardless of how much attention they’ve got in the previous several years, the truth is that it’s still an unregulated currency environment. Second, the prices are still quite volatile and volatility is never a good thing for a small business. Putting your trust into something whose value can drastically change in a matter of days is never a wise move. In fact, it’s more of a gamble-like than a business-like behavior.
Sure, the above-mentioned can be said about many other trends as well, so… do your research, make an estimate of the risks, and figure out what’s best for your business. Avoid looking for ideal or risk-free solutions, seeing as how such a thing doesn’t really exist in the business world.
One last thing that we’ve failed to mention is the fact that with the rise of cryptocurrencies, there has also been a massive rise in a number of various other technological trends. Still, the way in which tech trends like the concept of blockchain, etc. will impact the business world is a topic for another time. For the time being, this is more than enough for you to contemplate.
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