Bitcoin vs. Altcoin: Which Is Best for Merchants?

You can't help but hear something about cryptocurrencies if you pay attention to financial news, stock markets, or follow technology developments. It is everywhere, being used by millions of people for transfers, remittances, and even as a speculative investment. You can use them for purchases at merchants and retailers that accept them as payment. But if you're a small business trying to keep up with how your customers want to pay, which ones should you accept? More importantly, how do you accept them?

Get a refresher on the differences between cryptocurrencies and learn more about accepting them as payment. Also, learn about new developments in payment systems that can help ease your worries.

Bitcoin vs. Altcoin: An Overview

Because cryptocurrency has become mainstream and people want to use it for purchases, merchants naturally need to accept it. However, learning how cryptocurrency transactions work, what a wallet is, and how to convert any cryptocurrency into the currency a merchant wants takes time. As a result, many do not accept cryptocurrencies because it is confusing, and stories about scams and bad actors are circulating. Additionally, many mechants don't understand cryptocurrency or the different types.

Definitions

Bitcoin appeared as the first cryptocurrency in 2009. As the "original" crypto, all other coins and tokens are referred to as alternative coins or altcoins. Some in the cryptocurrency community include Ethereum in the original coins, calling all others but Bitcoin and Ethereum altcoins.

Uses

Many cryptocurrencies were not designed to be used as payment methods. For instance, Ethereum was created to be a platform that allowed anyone to create blockchain-related products and services. Its native token, ether (ETH), is used to pay transaction fees to network participants. However, you can buy ETH on exchanges just like Bitcoin (BTC) or other cryptocurrencies.

Both Can Be Accepted

Regardless of what they are called or designed to do, cryptocurrencies carry value and can be used as a means of exchange because it's how people want to use them. Therefore, the most significant issue facing a merchant is how to accept cryptocurrency, how to receive money for products or services provided to customers, and how to ensure you are not being taken advantage of.

Bitcoin and Altcoin Payment Services

One of the central tenets behind the creation of cryptocurrency was to remove third parties from financial transactions and payment systems to reduce costs and make it faster. The problem with cryptocurrency is that it is new, not yet understood by established merchants, and many will want to convert any crypto they receive into fiat currency.

Because there is such a high demand to use cryptocurrency, and it isn't as well understood as fiat currency, many companies have stepped in to fill the gap to assist in transactions. Third-party involvement is less than ideal for those working to decentralize finances. However, it is necessary for third parties to be involved until cryptocurrencies fully mature. Until then, there are many methods for accepting Bitcoin or altcoins as payment.

Payment Gateway Providers

Cryptocurrency payment gateway providers let you accept cryptocurrency and pay out to you in the currency you choose. These service providers are similar to credit card gateway providers because they conduct the transactions for you. Some have been around nearly as long as Bitcoin itself. For instance, BitPay was founded in 2011 and provides crypto services to a global audience. With BitPay, you can access the markets in 229 countries and territories and have lower fees than traditional payment gateway providers.

Some other cryptocurrency payment gateway providers are Flexa, NOWPayments, PayCEC, Stripe, Block (previously Square), and Shopify.

Exchange Services

One of the most recent innovations in cryptocurrency is that users can link their cryptocurrency wallets to a debit card. These crypto debit cards communicate via established credit card networks like Visa or Mastercard, making the process easier for merchants and customers. In addition, some have partnered with currency eCommerce providers to make it easier.

For instance, Coinbase Commerce has developed a way to integrate with eCommerce platforms such as Shopify and WooCommerce to allow you to start accepting Bitcoin, Ether, Litecoin, DAI, Dogecoin, Bitcoin Cash, and USD Coin.

With a Coinbase Commerce account, you can choose to have incoming cryptocurrency payments converted to U.S. dollars automatically. The process converts payments after you reach a total of .001 BTC in your exchange account. Depending on the BTC price for the day, .001 BTC could be between $25 and $35.

Crypto.com is also an exchange that provides integration with existing eCommerce platforms. Crypto.com integrates with WooCommerce, Opencart, Ecwid, Loveit, nopCommerce, and PrestaShop. Crypto.com lets you settle in U.S. dollars and handles refunds for you as well.

What It Means for Merchants

Hundreds of businesses accept cryptocurrency as payment due largely in part to the services provided by intermediaries. For instance, Bath & Body Works, Bass Pro Shops, Chili's, Chuck E Cheese's, and many more accept cryptocurrency.

Using an intermediary to handle your Bitcoin or altcoin transactions makes it safer for you to accept cryptocurrency payments. It also makes it easier—you don't have to choose which to accept; you only need to decide which payment processor to use. The processor handles the rest for you, depositing the currency you want in your account.

For merchants, all of this means that it is possible to accept Bitcoin and altcoin as payment without worrying about which one is better. Your customers can use the payment method they want, and you can receive payment in the way you want.

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein.