Introduction to Crypto

To know what Cryptocurrency is, it is important to understand the tech behind it. Blockchain is a data structure, creating a sort of digital ledger to share across a network of independent parties, there are many different types of blockchains. Data recorded in blockchains can be removed, but with difficulty. This can be transparent & secure.

DISCLAIMER: This deliverable constitutes student research as part of coursework for LITE Lab@HKU and nothing contained should be construed nor relied upon as legal advice by HKU nor its students nor instructors.

Traits of Crypto

A decentralized model
Not backed by a central bank

Being decentralized means that crypto differs from fiat currencies (USD, GBP, HKD) which are backed by central banks like FED, ECB, BOE. Crypto has no centralized authority, resulting in no third parties in transactions.

Although well known, Bitcoin isn’t the only cryptocurrency available in the market.

Other cryptocurrencies are on offer with their own blockchain systems.

Why should you incorporate a blockchain payment method?

Blockchain tech is modernizing institutions. BMW, Home Depot, and even Starbucks accept Bitcoin as a payment method.

Cryptocurrency is independent, outside of the central monetary authority that fiat currency is under the jurisdiction of, like banks and governments.

So how is it secure and verified?

Cryptography makes counterfeit and double spending as difficult as it is in regular currency.

Blockchain tech ensures that the data recording transactions is recorded in a sequential order, which is secured with each transaction, which means it is difficult to alter prior transactions.

Coins can be converted into fiat currency with the use of third-party processors. So crypto payments can either be saved, used to purchase other products, or converted to fiat currency.

Despite this, there are risks to be aware of before incorporating cryptocurrency as a payment.

What are the risks?

There are risks to be aware of before incorporating cryptocurrency as a payment.

Cryptocurrencies can experience rapid appreciation and depreciation, differing to fiats

Depending on the jurisdiction, there are laws in place that may regulate how to report crypto income

Eg the IRS views crypto as property, but receiving in a transaction means reporting it as gross income, converted to USD, same-day.

There are also a wide variety of options to consider, possibly too many.

Although the mainstream currencies for Ecommerce are Bitcoin and Etherum, there are emerging cryptocurrencies regularly, some promising – but this brings added difficulty when deciding on one which suits the needs of your business.

That being said, these hurdles can be overcome by hiring a financial advisor who specializes in cryptocurrency.

Despite the previous hurdles being overcome when provided with correct information and specialist help, there are some factors which are unavoidable.

Cryptocurrency is not a mainstream method of payment, so completely altering your businesses payment method would result in a narrower consumer demographic, and possible loss in profit.

Because crypto is an emerging currency and method of payment, this new technology previously lacked legislation. This means that pending legislation could alter or restrict its usage.

For example, China has banned crypto.

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and learn more about Crypto and Crypto Wallets and how to make one for your business.