From Ether to Earnings: A Comprehensive Guide on how to accept Ethereum payments for your business
Ethereum has solidified its standing as a significant player in the advancing digital finance sector, marking its strength in cryptocurrency and blockchain technology. The increasing network of its developers, users, and enterprises has boosted Ethereum’s prominence, making it an attractive alternative to traditional payment methods. At Coinlabz, we understand and value the significance of staying ahead in the game and welcoming the potential of decentralized finance.
One of the most significant advantages of Ethereum is its flexibility and adaptability, which extend to a wide range of use cases. Among these, accepting Ethereum payments has become an increasingly popular option for businesses and individuals alike. By tapping into the power of Ethereum, you can enjoy faster, more secure, and cost-effective transactions while reaching a global audience with minimal obstacles.
In this article, we will guide you through the process of getting paid with Ethereum, providing valuable insights and practical advice every step of the way. Whether you’re a business owner, freelancer, or simply a crypto enthusiast, we will help you utilize the full potential of the Ethereum payment. If you run a charity organization or a non-profit, you may want to check our guide on How to accept donations in crypto, including Ethereum.
Why should you accept Ethereum payments?
If you want to start accepting crypto payments, Ethereum is a great option, to begin with. Everyone who accepts bitcoin payments is quite familiar with Ethereum, as it’s the second most popular cryptocurrency on the market for a reason. Let us tell you why.
Security
Ethereum offers the most secure payments among the cryptocurrencies. Its decentralized platform has created a secure system for financial transactions all over the world. Additionally, Ethereum’s blockchain hinders any manipulation and safeguards the network from inaccurate or false data. After the PoS protocol was introduced to Ethereum on 15.09.2022 a fork-choice algorithm was implemented to add an extra layer of security and make certain sophisticated types of attacks more difficult.
Transaction speed
One of the main advantages of accepting Ethereum payments is the speed at which transactions are processed. Unlike traditional payment methods that can take hours or even days to settle, Ethereum transactions are typically confirmed within minutes. This allows for quicker access to funds and a more smooth payment experience for your customers, ultimately enhancing your business operations and customer satisfaction.
No chargebacks
Card issuers usually tend to rule in favor of the consumers rather than the merchants. Cryptocurrency transactions are irreversible, which means that once the crypto transactions have been completed, they cannot be disputed. When cryptocurrencies were created, they were intended in part to function like virtual cash, while the transactions were made to be permanent and next to impossible to trace. The merchant has complete control over the crypto that has been transferred, and no authority can step in or reverse it.
Regulations
If you decide to accept the Ethereum payment method or to accept crypto, you will be able to accept payments from countries where specific industries are forbidden. For example, gambling is forbidden in Arabic countries, and in Argentina, people pay huge taxes with their credit/debit cards when purchasing goods from other countries. Ethereum gives you a way to go around all of this. However, before accepting payments in Ethereum or any other cryptocurrency, make sure to comply with local regulations and laws.
Privacy
In today’s world, privacy is a significantly valued asset as it shields you from scrutiny, prejudice, pressure, exploitation, and judgments of others. On the blockchain network, only the wallet addresses of the client and the merchant are visible, but it’s quite challenging to find out who is behind the purchase and what has been bought. If you don’t want certain activities to appear on your bank statement, you can use Ethereum to preserve your privacy. This is a great advantage for merchants that operates in Health, Adult, Dating or Gaming industries.
Access customers worldwide
Another significant benefit of accepting Ethereum payments is the global accessibility it offers. Cryptocurrencies like Ethereum are not restricted by geographical boundaries, enabling you to tap into a vast customer base spanning the world. Plus, your international customers will feel more connected to you if they don’t have to worry about the costs of currency conversion.
Lower transaction fees
One of the compelling reasons to accept Ethereum payments is the cost-effectiveness of transaction fees. Traditional payment methods, such as credit cards and bank transfers, often come with high processing fees that can eat into your profits. In contrast, Ethereum transactions generally incur significantly lower fees, making it a more attractive option for both businesses and customers.
By choosing to accept Ethereum, you can reduce the costs associated with payment processing, ultimately boosting your bottom line and offering competitive pricing to your clients. This cost-effective approach not only enhances your business’s profitability but also creates a more appealing and accessible payment experience for your customers.
After Ethereum went from PoW to PoS consensus mechanism on 15 September 2022, transactions have become considerably cheaper, and more and more users would be able to benefit from using it compared to traditional payment solutions. Transaction fees can be even lower if payment channels are utilized.
Add one more payment option
Incorporating Ether as a payment option broadens your business’ horizons and lets you take advantage of the crypto-sphere. Offering an extra payment choice is unlikely to harm your company since it benefits your operations and gives customers more freedom.
Setting up an Ethereum Wallet
Before starting to accept Ethereum payments, you need to have a secure crypto wallet that is compatible with ETH.
Ethereum wallets basics
An Ethereum wallet is an application or device that lets people communicate with the Ethereum blockchain, monitor their accounts on the network, and transfer ETH. Wallets also let users create and utilize smart contracts and decentralized apps. An Ethereum account can have numerous Ethereum addresses, each of which is a public combination of letters and numbers that begins with “0x.”
Ethereum wallets are controlled through a private key, which functions as a “password” for accessing the wallet’s funds. It’s crucial to keep your private key confidential, as anyone with access to it can control your wallet and the assets stored within it.
There are several types of Ethereum wallets to choose from, including desktop, mobile, and offline wallets (such as paper, titanium, or hardware wallets). You can find more information on Ethereum wallet at ethereum.org/en/wallets/.
Choosing a wallet: hardware, software, and mobile options
Hardware wallets are physical devices that securely store your private keys offline. They offer the highest level of security and are ideal for those with significant crypto equity. Popular hardware wallets compatible with ETH are Trezor and Ledger.
Software wallets are computer programs that can be installed on your desktop or laptop. They provide a balance between security and convenience but require protection from malware and other security threats.
Mobile wallets are smartphone apps that offer on-the-go access to your Ethereum funds. They prioritize convenience but may not be suitable for storing large amounts of crypto due to device security concerns. One of the most convenient and easy to use mobile wallets compatible with Ethereum is Metamask, which is available as a free-of-charge browser extension for Chrome and Mozilla users.
After you choose your ETH wallet, you need to create an account by following the provider`s instructions and secure your private key in a safe location. Locate your wallet’s public address (starting with “0x”) to receive payments, and remember to keep your private key confidential while sharing your public address freely.
How to accept Ethereum payments?
Now that you have set up your ETH wallet, you need to decide if you are going to manage Ethereum payments by yourself or use a crypto payment gateway.
Accept ETH payments without 3rd party or an intermediary
Avoiding 3rd parties or intermediaries in the payment process is at the core of cryptocurrency ideology. However, being able to collect payments only by yourself doesn’t mean it is practical.
Yes, you can simply put your wallet address on your website, and your clients should be able to transfer ETH to your address easily, but before doing that, make sure to ask yourself these questions:
- To make sure your payments are secure and private, it’s suggested to generate a new address for each payment. Would you like to automate this process? Or would you be comfortable with people being able to view your payment history?
- What’s the process for connecting a particular order with its payment? Do you need to set up an automated system for that? How many orders are you looking at?
- What’s the plan for handling reimbursements, overpayments, and underpayments? Are you prepared to cover any associated fees when that happens?
- How are you going to keep track of and store data for both earnings and profits from cryptocurrency?
- Do you plan to accept other currencies, such as Stablecoins and BTC, or will you stick only to ETH?
Use a payment gateway to accept Ethereum payments
The other option to accept payments in Ethereum is to use a payment gateway that supports ETH.
A crypto payment gateway is a platform that enables merchants to receive payments in digital currencies. It serves as an intermediary between the merchant and the customer. Such services take care of the security, reporting, KYC and AML regulations, real-time conversion of the crypto and more. Since Ethereum is the second most popular cryptocurrency in the world, most of the gateways support it.
Popular crypto payment gateway providers that accept ETH payments are Bitpay, NOWPayments, Coingate and more. Most of them offer seamless integration with websites built on WordPress, Shopify, Magento and more, and at the same time, offer crypto Point of Sale terminals (POS) with which you can accept Ethereum payments in your local store too.
What to consider when choosing an Ethereum payment gateway?
It’s crucial to carefully evaluate different providers based on their features, fees, white label solutions and security measures to ensure a straight-forward experience for both you and your customers.
Integrations – make sure that the payment gateway is suitable for your website or type of business. If you run both a website and a brick-and-mortar store and want to accept Ethereum payments in both, it is better to go for a provider that supports both options.
Transaction costs– most of the payment gateways don’t require monthly subscriptions but charge a transaction fee of between 0.5% – 1%. Make sure to check for any hidden fees and costs carefully.
Compliance with regulations – KYC regulations require businesses to verify the identity of their customers to prevent fraud and other illegal activities. This typically involves collecting and verifying customer information such as name, address, and government-issued identification. AML regulations, on the other hand, aim to prevent the use of financial systems for money laundering or financing criminal activities. A reputable Ethereum payment gateway should have robust KYC and AML processes in place to protect both your business and your customers.
Security – it is one of the most important things to consider when choosing an Ethereum payment gateway. Ensure the provider uses strong encryption protocols, offers secure wallet storage options, and has advanced fraud detection and prevention systems. Features like two-factor authentication and regular security audits further enhance the safety of your funds and customer data, helping you maintain a secure and trustworthy transaction environment. If you are not sure how they handle this don`t be afraid to ask their support about how they take care of the security measures.
Customer Support – prompt, knowledgeable, and friendly support ensures that any potential issues with transactions or integration are resolved quickly and efficiently, minimizing disruptions to your business and enhancing the overall customer experience. It is best to check their reviews on 3rd party platforms such as Trustpilot or G2. Good customer support may be the difference between a seamless experience and an excellent one.
Additional features – some providers offer additional features such as settlement in FIAT currency or Stablecoins of your choice. It is a great option to take advantage of the crypto payment benefits while avoiding its volatility. Also, detailed and easy-to-read reporting can be very helpful when evaluating the impact of implementing ETH payments for your business. Bear in mind that some cryptocurrency payment gateway providers offer white label solutions which allows you to brand and customize the entire check-out process.
Which is better – accept crypto payments by yourself or use a crypto payment gateway?
Both options for accepting Ethereum payments have their pros and cons, but at Coinlabz, we recommend using a payment gateway for most businesses. Managing payments by yourself aligns with the core cryptocurrency ideology of avoiding intermediaries, but it can be impractical and challenging to handle security, privacy, order matching, and accounting.
On the other hand, a crypto payment gateway takes care of the security, reporting, KYC and AML regulations, and real-time conversion of cryptocurrencies, providing a more seamless experience for both you and your customers. While fees and integration requirements might vary between providers, choosing a reputable gateway with robust security measures, excellent customer support, and additional features tailored to your needs will likely provide a more reliable and user-friendly solution for accepting Ethereum payments.
Not to mention that some cryptocurrency payment gateway providers, such as Nowpayments, are non-custodial, meaning they do not hold your crypto gains. Rather than that, they act as an intermediary between your business and your clients. All payments processed by such providers go straight to your wallet address, so you still have full control over your coins.
What to consider before accepting payments in Ethereum for your business?
If you want your customers to be able to pay with Ethereum, there are a few things you have to consider.
Taxes when getting paid in ETH
Make sure to understand the tax implications of receiving Ethereum payments in your jurisdiction. Consult with a tax professional to ensure you comply with income tax, capital gains tax, or other applicable tax regulations. For example, in the USA, the IRS taxes cryptocurrency like property and investments, not currency. This means all transactions, from selling coins to using cryptos for purchases, are subject to the same tax treatment as other capital gains and losses.
If you held a particular cryptocurrency for more than one year, you’re eligible for tax-preferred, long-term capital gains, and the asset is taxed at 0%, 15%, or 20%, depending on your taxable income and filing status.
- If you’re in the 10% or 12% tax brackets based on your filing status, you’ll generally pay a 0% capital gain rate.
- If you’re in the 22%, 24%, or 32% tax brackets based on your filing status, you’ll generally pay a 15% capital gain rate.
- If you’re in the 35% and 37% income tax brackets, you’ll generally pay a 20% capital gain rate.
Regulations
Stay informed about the evolving regulatory landscape around cryptocurrencies. Ensure that your business complies with any Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements. Keep in mind that such regulations are subject of rather frequent change so you need to keep an eye on them.
The volatility of ETH
Even though Ethereum is considered a reliable cryptocurrency, be prepared to manage its price volatility. Ethereum reached its all-time high on the 9th of November 2021, when it was valued at $4815, compared to March 2023, when its price is around $1780. Consider using stablecoins or converting ETH to local currency to minimize the impact of market fluctuations on your earnings.
The unpredictable future of Ethereum
Ethereum’s transition to Proof of Stake (PoS) on September 15, 2022, combined with the crypto bear market, has created some uncertainty about its future. Stay informed about Ethereum’s development and be prepared to adapt your business practices as needed.
Customer education
Educate your customers about the benefits and risks of using Ethereum as a payment method. Provide clear instructions on how to make payments and handle any potential issues, such as refunds or underpayments.
Record-keeping
Maintain accurate records of your Ethereum transactions, including dates, amounts, wallet addresses, and any conversions to local currency. Proper record-keeping will help you stay compliant with tax regulations and provide valuable insights into the impact of accepting Ethereum payments on your business.
How to spend your ETH
You have to consider what to do with your ETH carefully. Staking, holding, converting to FIAT, or acquiring other cryptocurrencies with it are the main options. It can be gathered into staking pools, or you can think of a way to pay directly with ETH, settle with your business partners, or cover your expenses. Check our guide on What to buy with Ethereum
Final thoughts
As we’ve explored throughout this article, accepting Ethereum payments offers numerous advantages for businesses. These benefits include lower transaction costs, faster payment processing, increased accessibility to a global customer base, and the potential to tap into the growing popularity of cryptocurrencies.
By embracing Ethereum payments, you are positioning yourself at the forefront of an emerging financial revolution. The world of digital currencies is evolving rapidly, and integrating crypto payments into your operations now can give you a competitive edge in the market. As more people adopt cryptocurrencies and blockchain technology, businesses and individuals that accept Ethereum will be better positioned to benefit from this growing trend.
The financial landscape is changing, with cryptocurrencies like Ethereum playing an increasingly significant role in shaping the future of money and commerce. Ethereum’s innovative technology, such as smart contracts and decentralized applications, has the potential to transform industries and create new opportunities for growth and prosperity. By accepting Ethereum payments today, you are not only preparing for the future of finance but actively participating in its development.
Zornitsa is the Editor-in-chief at Coinlabz. She is involved in researching the impact of blockchain technology and the way crypto is transforming peoples’ perceptions of finances.
