Last week we discussed the basics of Bitcoin and some advantages of accepting it as payment in your property management business. But there are also disadvantages of using this and other microcurrencies or cryptocurrencies. In the second part of our series on Bitcoin, we’ll go over potential problems and ways to protect yourself from Bitcoin thefts, as well as ways to exchange Bitcoin for other types of currencies.
- What are the disadvantages of using Bitcoin in your property management business?
Despite Bitcoin’s increasing popularity, there are also some disadvantages of using the cryptocurrency in your property management business. Not every business accepts Bitcoin as payment. If you can’t spend it, you either have to hold onto Bitcoins or trade them for dollars on one of several Bitcoin exchanges. Since Bitcoin is not a government-backed currency, its value can change drastically at any time. To reduce risk, you can choose to immediately exchange any Bitcoin money you receive for another currency, as long as there is someone interested in buying them.
For tax purposes, you need to keep track of all Bitcoin transactions related to your property management business, including a way to document Bitcoin exchanges. Bitcoin transactions do not leave a paper trail, and you should carefully analyze your Bitcoin transfers and receipts to make sure that you have declared all income you have received.
Because Bitcoin has been used for money laundering and other illegal activities and isn’t regulated, it carries increased risk. There is limited consumer protection for Bitcoin users. If your Bitcoin money storage is hacked – or if you accidentally delete your Bitcoin wallet – there often no way for you to recover your funds. For this reason, you should take additional security precautions when storing your Bitcoins.
- How can you store your funds and protect yourself from Bitcoin currency thefts?
You need to create a Bitcoin wallet to be able to send and receive Bitcoin funds. Bitcoin.org’s extensive tips for securing your wallet, including limiting much money you store in it, encrypting your wallet, and backing it up, should help you learn how to take appropriate precautions.
Since all Bitcoin transactions are public and stored online, anyone can view the balance of Bitcoins at a specific Bitcoin address. You should use different Bitcoin addresses when you receive payments, and consider using a Bitcoin client that can change your address each time you make a transaction. In addition, be careful not to reveal any details about your Bitcoin address on a website or social media since that could compromise your funds’ security. We’ll discuss security measures more in Part III.
- How can you exchange Bitcoin for other currencies?
You can check the Bitcoin exchange rate and buy other currencies with Bitcoins at one of the many Bitcoin exchanges.
For additional resources on Bitcoin for property managers, you can go to the following links:
https://bitcoin.org/en/protect-your-privacy
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