These days, it almost feels like you can’t scroll through the major news headlines of the week without stumbling across a story or two about the benefits or pitfalls of cryptocurrency, or “crypto”. With these non-fiat currencies gaining so much momentum in trade and value alike in recent memory, it’s little surprise as to why, either.
What may be surprising, however, is the attraction to cryptocurrencies for many contractors and other vendors in the overall construction industry. Since these non-fiat currencies have generated such monumental traction over the past year or two, many construction industry professionals have begun adopting them as a viable, alternative form of payment from their clients. In doing so, these professionals—myself included—have found that cryptocurrency can not only expedite the receipt of payments from clients but also make it much easier for those clients to pay in full for the work they contract.
How Accepting Cryptocurrency Payments Can Reduce Risk and Speed Contract Payment
If you, like me (up until relatively recently, anyway) are unfamiliar with the concept or broader ways cryptocurrency can be best utilized to benefit your business and clients alike, don’t worry. Here are some insights into the ways your construction, concrete, or masonry business can best integrate cryptocurrency as a form of payment to provide additional value for both company and client.
Step 1
Understand Cryptocurrency
Before you can begin using cryptocurrency for the benefit of your business, you need to properly understand what cryptocurrency is and how it works. According to Investopedia, cryptocurrency is defined as, “a digital or virtual currency that is secured by cryptography...many [of which] are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers.”
Chances are high that you’ve at least heard of Bitcoin—one of (if not) the most commonly recognized and traded cryptocurrency. Like other currencies, cryptocurrency can be used to purchase products or services from vendors all over the world, so long as they accept a specific form of crypto payment for their business. Most cryptocurrencies, Bitcoin included, are still not a mainstream form of payment, so many businesses do not accept them as a viable payment method. That is, not yet, anyway.
However, there are some common benefits and caveats of using and trading cryptocurrency as a viable alternative form of payment:
Benefits. Get paid faster with fewer fees: unlike most credit card or bank wire transactions, cryptocurrency typically only charges users a fraction of a cent per transaction. Cryptos can likewise be turned into cash and deposited into your blockchain account instantly, rather than having to wait up to 90 days for a payment to come through from electronic payment methods or physical checks sent via mail.
Simplified international calculations: for construction businesses or vendors who operate internationally, cryptocurrency provides a huge benefit in their ability to bypass the exchange of different fiat currencies and exchange rate calculations, making international payments not only faster, but also much easier and more efficient as all parties involved are already using the same form of non-fiat crypto to do so.
Better financial control: unlike other traditional forms of payment, payments made using cryptocurrency cannot be reversed or disputed by the paying party, granting vendors and contractors better control of the funds that enter and exit their blockchain account. Instead, customers must request a refund directly from their contractor or vendor, who can then decide how to best reimburse the customer, better protecting contractors and vendors from customers who cancel their purchases or refuse to return any unused materials, tools, or other items related to their contracted project.
Caveats. Knowledge of cryptocurrency and their use: in order to fully integrate crypto into your business as a viable payment option, you will need to educate your customers or clients on how they can best use it themselves. The more customers or clients you have who want to use crypto as payment, the quicker you can start reaping the benefits of it for your business; however, if your customers are more hesitant to familiarize or use cryptocurrencies, the chances of benefiting off its integration into your business becomes heavily minimized.
No payment protection for transactions: there are a number of legal protections offered to customers when using a credit card, check, or other traditional forms of payment from their bank. These protections, unfortunately, do not carry over into the realm of crypto. Instead, customers and vendors must rely on mutual trust to receive proper timely payments, and because customers can only obtain a refund via directly requesting one from the vendor, this could shy a portion of your businesses’ clients away from adopting crypto as a form of payment.
Potentially high capital gains taxes: when money is received in a sale using cryptocurrency, that money is then taxable at the fair market cash value. As a result, contractors and vendors using crypto as a payment option must keep records of not only each separate transaction but also the monetary cash value of each separate crypto transaction each time a payment is received from that specific cryptocurrency. Furthermore, vendors and contractors will be subject to capital gains taxes on any increased income they receive as a result of their cryptocurrencies gaining market value.
Higher volatility means higher risk: perhaps the most commonly widespread concern regarding the use and purchase of goods or services using crypto is their volatility. For example, when Bitcoin was first introduced in 2010, each separate coin cost approximately $0.06. At the time of this article being written, one Bitcoin is valued at approximately $46,000, and the price continues to fluctuate by a few thousand dollars or more virtually every week. Regardless of how much value each cryptocurrency gains or loses, they are still considered taxable income by the IRS.
Now that we’ve covered the benefits and drawbacks of using crypto as a payment method, here’s how to get started integrating those payments into your construction, concrete, or masonry business.
Step 2
Obtain A Cryptocurrency Wallet
Once you’ve made the decision to utilize crypto as a payment method for your business, the next step is to create a wallet for your cryptocurrencies. This wallet will act as your hub for buying, selling, and storing your cryptocurrencies, as well as the focal point where you exchange them for cash.
Each wallet comes with a private key; an authentication code secret to everyone but you that is used to access the funds contained within the wallet itself. Depending on which wallet service provider you choose to go with, the wallet can then be stored on your personal computer, an external hard drive, or an online cloud. The major pitfall here is that if you lose your key, you subsequently lose access to your wallet and all the crypto funds it contains, as most service providers have no contingencies in the event that a user loses their private key.
After your wallet is created, the penultimate step is to sign up with a payment processor. This allows you to begin selling products or services using cryptocurrency as payment and acts as the point-of-sale focal point to create crypto transactions between your wallet and your customers'.
Step 3
Start Making Sales Using Crypto
After following each step outlined above, the final step in using cryptocurrency for your business is to start making sales using them. Simply open your payment processor’s mobile app or digital software, enter the necessary information regarding the sales transaction (which includes the local cash value of the sale and your customer’s information), and the processor will generate a QR code for your customer to scan using their own crypto wallet app.
Once the transaction is approved by the customer on their end, their cryptocurrency is transferred directly into your own wallet account, allowing you to either store funds in the hope that they will continue to increase in value, or transfer them instantly to your bank in exchange for their cash monetary value.
Overall, the benefits of using cryptocurrency in construction or similar work are clear—as are the downsides. By keeping updated on cryptocurrency trends, news, and values, you can better educate yourself, your employees, as well as your customers on the mutual benefit its use can bring.
Nonetheless, regardless of how you wish to be paid for a certain job or project, it is your responsibility to understand how crypto can impact your business and your clients. With more contractors adopting cryptocurrency as a viable payment option, however, it may be only a matter of time before it becomes more broadly utilized by the industry as a whole.
Matt DiBara is the owner and CEO of DiBara Masonry.
