Avnet Inc., a multibillion-dollar global distributor of electronic components and provider of product design and development services, is making it possible for customers awash in Bitcoin, such as Bitcoin miners looking to build their technology infrastructure, to pay for purchases using the cryptocurrency.
Avnet says Bitcoin acceptance is a way to position itself as a full-service, end-to-end provider of product design, marketing and supply chain expertise across the product lifecycle, and make it easier for buyers preferring to pay with cryptocurrency to purchase goods and services. Avnet is accepting Bitcoin and Bitcoin Cash through the BitPay platform.
“We do business with Bitcoin miners that have a growing need for more hardware and want to pay for their purchases in Bitcoin, because they get paid in Bitcoin,” says Sunny Trinh, vice president of demand creation for Avnet.
Bitcoin miners use supercomputers to solve complex algorithms to generate new Bitcoins. Miners are paid in the cryptocurrncy for their services and for maintaining the blockchain, the immutable up-to-the minute internet-based ledger that verifies all transactions made with the cryptocurrency.
Transactions valued up to $1 million
During the pilot phase, which lasted about three months, Avnet saw Bitcoin transactions ranging in value-between $100,000 to more than a $1 million. “As the number of new Bitcoins to be mined become fewer, mining itself becomes more expensive,” says Trinh. “We develop components that help miners perform their work more efficiently.”
As each new Bitcoin is mined, the generation algorithms become hard to solve, requiring miners to deploy more advanced computing power. The number of Bitcoins is capped at 21 million and an estimated 3.3 million unmined Bitcoins remain.
To hedge against the fluctuating value of Bitcoin, which can rise or fall in an instant on trading exchanges, BitPay, Avnet and the buyer first agree on the value of each Bitcoin before a purchase. BitPay then locks-in that value for 15 minutes, during which time the buyer must complete the transaction.
Next, Avnet sends the buyer a digital invoice and the buyer transfers Bitcoin from its wallet to BitPay, which converts the cryptocurrency into U.S. dollars at the agreed upon exchange rate, then deposits the funds in Avnet’s account. Transactions not completed within the designated window are voided and all parties must agree upon a new value before initiating another transaction.
Bitcoin works well in B2B commerce
“In a closed environment where all the parties are known to one another, such as B2B, the volatility of cryptocurrency can be better managed, because all parties can agree upon its value,” says Enrico Camerinelli, a senior analyst for Aite Group. “That makes it possible to complete transactions quickly and securely, and reduce bank processing fees typically associated with B2B transactions.”
BitPay, which process more than $1 billion in cryptocurrency transactions annually, also provides the ability for Avnet to sell to buyers outside the United States. Accepting cryptocurrency for cross-border sales can eliminate fees for currency conversion and remittance. Settlement can also take place same day, which is not guaranteed with bank remittances for cross border transactions.
Buyers will be charged a 1% transaction fee, which is considerably less than the fee for a bank transfer, Trinh says. “When you look at the dollar value of the invoices, shaving a percentage point or two off the fees can result in a big savings for buyers and improve their cash flow,” Trinh adds.
Avnet expects cryptocurrency transactions to total about 1% of its overall transaction volume. Despite the small volume, the company still wants to provide the payment option, because it can help grow its customer base, says Trinh.
Besides Bitcoin miners, Avnet sells to companies in multiple industries, including aerospace, communications, energy and security.
Developing a cryptocurrency wallet
In addition to accepting Bitcoin, Avnet is working with Bitcoin.com, a provider of Bitcoin and Bitcoin Cash services, to develop a cryptocurrency wallet to improve cryptocurrency storage and security. Bitcoin.com is also an Avnet customer.
Developing closer ties to B2B buyers in the cryptocurrency space could open the door for sellers to utilize the blockchain for B2B payments in new ways, such as the exchange of non-monetary assets.
“The currency can be an asset or service traded between two companies with the blockchain serving as the record of the transaction,” Camerinelli says.
To trade asset or service, a utility company providing electricity to a telecom company, for example, can trade electricity for phone service. The transaction is verified, then embedded, in the blockchain. “To exchange an asset, all the parties involved need to agree upon the value of the asset,” says Camerinelli. “Enabling these types of transactions is the real value of the blockchain.”
Peter Lucas is a Highland Park, Illinois-based freelance writer covering business and technology.
Sign up for a complimentary subscription to B2BecNews, published 4x/week, covering technology and business trends in the growing B2B ecommerce industry. B2BecNews is published by Vertical Web Media LLC, which also publishes DigitalCommerce360.com, Internet Retailer and Internet Health Management. Contact B2BecNews editor Paul Demery at [email protected] and follow him on Twitter @pdemery.
Follow us on LinkedIn and be the first to know when new B2BecNews content is published.