From Where I Stand — This is the first time I am writing about
cryptocurrency. I’ll bet you a Bitcoin, it won’t be the last. Cryptocurrencies (or “cryptos”) have dominated the news the past six months. Most recently, Dogecoin, a crypto developed as a complete joke, based on a meme, featuring an adorable photo of a Shiba Inus dog, being promoted by an eccentric billionaire who builds electric cars and rocket ships, reached a market cap of $80 billion. If none of that sentence makes any sense, you are not alone. This is our economy, now. Finally, the currency of Ukrainian arms dealers, drug cartels, contract killers, dodgy billionaires, and stock trolls is going mainstream. This column is going to examine what cryptocurrency is, if your business should care about it, and if your employees will care about it before you do. Cryptocurrencies started with the premise that if you were to completely redesign currency to deal with a global, digital market, how should it be done? We used to hunt and gather. Then we bartered. Finally, we created coins and paper before those became ones and zeroes. Cryptocurrency may seem futuristic, but it is really a postmodern concept. When we used to barter, both parties walked away with items of utilitarian value. Money, on the other hand, has no actual value. Its value is entirely symbolic. It is merely a promissory note provided by the buyer to the seller that says, one day, the value of that utilitarian item that was just sold can be realized. On its surface, money is a leap of faith, crypto is no different. Let’s look at cryptos through the lens of Bitcoin. Bitcoin is the most famous and enduring of the cryptos. Bitcoin is the closest crypto to being a household name even though most households don’t own any. Bitcoin actually leans closer to the original ideas of monetary policy than the US dollar. Bitcoin is tied to a fixed cap of 21 million Bitcoins. That is its gold standard. It will never release more than 21 million Bitcoin to guard against inflation. As of today, one Bitcoin is worth $43,000 US dollars. To put that into perspective, in 2010, one Bitcoin was worth 8 cents. So how does it work? No one has ever held a Bitcoin in their hand. No one has ever found one tumbling around the dryer at the laundromat. No one has ever skipped one into a fountain. Bitcoin uses a decentralized banking model. Essentially, consumers who possess and accept Bitcoin agree that it has monetary value. Their personal Bitcoins are tied to identification numbers, but those numbers are entirely anonymous and transferable. An entirely digital currency opens itself up to fraud, hacking, and manipulation. Bitcoin guards against this using a concept called blockchain, which is a global computer network that records the valuation and transactions of Bitcoin. independent, decentralized networks all agree on the current amounts and value of Bitcoin just like your bank tells you how much money you have on a deposit receipt. These blocks are constantly pinging data back and forth as the monetary system is always in flux. As the system grows, the need for more blocks in the Blockchain becomes apparent. People who set up these blocks are called miners. Miners create new blocks that then become part of the Blockchain. These miners are incentivized to do this by receiving new Bitcoin
as payment. When new blocks are added, new Bitcoin is released to the miners who created the block. This will happen until a total of 21 million Bitcoin are finally mined and released. After that, that’s it. That is the entire amount of Bitcoin on the market and its value will ebb and flow based on market demand. The other quirk is that cryptos fluctuate in value. Yes, anyone who has ever used a foreign ATM on vacation knows there are exchange rates. US dollars are worth more or less, depending on the day, than their international counterparts. However, the dollar itself rarely surges and falls like an equity. Cryptos constantly fluctuate. It is the marriage of a fixed asset and an equity. One month, a Bitcoin user’s wallet could be worth $100, the next month it could be worth $35,000 all with the exact same amount of Bitcoin. It all sounds complicated and insane. Yet, replace a few words and it sounds a lot like our current system. Instead of dead presidents and queens, the money is covered in dogs and rocket ships. I get it. We are more comfortable using currency that flows out of nations with borders and flags and militaries. For now. More and more businesses are accepting cryptos as payment. Technologically, it is fairly easy to transfer cryptos using online apps from one wallet to the next. The buyer and seller transfer the requisite amount to seal the transaction. Crypto transactions are irreversible. There is never an opportunity for the buyer to run to the credit card company to cry fraud or for the client to kite a check. Any business that has been burned by a chargeback knows the power that consumers have when they cry foul. In addition, there are no credit card fees which is especially important when securing payment for a large ticket item. Finally, it diversifies payment options for clientele. I am sure every landscape company has worked for a few clients where no one knows how they made their money and no one is going to dare ask. Crypto is the currency of choice for keeping payments on the down low. A landscape company that accepts crypto may be surprised at how many high-net-worth clients are parking cryptos in offshore accounts due to the simplicity of moving money. The biggest drawback for businesses that accept crypto is that the IRS treats crypto as property, not money. Therefore, the business needs to valuate the price difference between the day it was bought and the day it was sold and then pay capital gains on the difference. Further, since crypto fluctuates, it would be best to cost the payment in US dollars and then accept the payment with crypto. If you cost the payment in crypto when a landscape job is bid, that fluctuation could either massively increase or decrease the cost of the job in even a few short months. Lastly, there is already a currency for businesses who want to remain anonymous and keep as much money as possible from the taxman. It is called cash. Most enduring and reputable landscape businesses have moved away from all cash payments. There is simply too much risk. I don’t see the unscrupulous end of the market accepting crypto when cash is available without the technical complexity. As of today, with the small number of consumers using crypto, there does not seem to be much need for small businesses to change payment operations beyond cash, check, or charge. As crypto matures, that will certainly change.
Shave and a Haircut,
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The Landscape Contractor June 2021
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