Bitcoin is the world’s first internet-based currency. It’s worth knowing about, but is it worth accepting as a method of payment?
What exactly is Bitcoin?
Imagine a currency that has no central bank owning or underwriting it, and its value can double within a few months. Imagine a currency that doesn’t exist in any physical form, with ATMs that only allow you to pay in funds instead of paying out. Imagine a currency where every transaction is recorded in an open source ledger, yet those transactions are completely anonymous, with no proof of who bought what from whom.
Sounds ridiculous, doesn’t it? Yet Bitcoin is already with us. It was launched in 2009, though nobody has ever admitted to developing it. It can be bought, exchanged for goods and services, or earned by volunteering to host payment processing software. Known as blockchain, the software creates an indelible and publicly-visible ledger of transactions. In theory, tracking the movement of each Bitcoin transaction eliminates fraud, though there have been a couple of high-profile bitcoin thefts in recent years.
A Full Purse
With no physical evidence of ownership, Bitcoin is stored in an electronic wallet. It’s important to choose your wallet carefully, since some of the advertised options are elaborate scams designed to fleece unwary people out of their money. Such mystique has made bitcoin the payment method of choice for the internet’s more disreputable citizens. Each transaction is secured with cryptographic keys that preserve the anonymity of each party, much like the end-to-end encryption on normal ecommerce transactions.
Each Bitcoin has been divided into one hundred million fragments. A fragment is known as a Satoshi, after bitcoin’s reputed founder. That means a Satoshi is presently worth just 0.00265 cents. Nobody knows why 100,000,000 was chosen to be bitcoin’s subunit, and there’s also confusion over a rumor that there will only ever be 21 million bitcoin in circulation. One form of speculation has led to another, with bitcoin’s value fluctuating wildly on global stock markets. In May, it lost 19%t of its value in four days. Yet two days later, one financial analyst predicted it could increase in value by almost 3,500%t within a decade. That would make one bitcoin worth $100,000, compared to its current value of around $2,650.
Investing in Bitcoin – As a Buyer and Seller
So, a virtual currency with no underwriters, associations with criminals, a dubious past and no market controls on its value beyond speculative shareholders. You might think Bitcoin is best avoided. Yet it actually offers some fairly compelling advantages. With new currency gradually released as blockchain calculations payout for work completed, it’s protected from state-level tinkering like devaluation or quantitative easing.
In terms of ecommerce, Bitcoin is a great option. It incurs no processing fees, unlike credit cards. It’s a global currency with no exchange rates, which means customers on any continent pay the same price. Because it’s entirely digital, it dovetails with the internet much better than unwieldy paper currencies. Bitcoin’s anonymity means there’s no need to handle or store sensitive customer data. And transactions can’t be reversed, so a sale is guaranteed.
Perhaps most significantly, accepting Bitcoin on an ecommerce site gives your company a real USP. In today’s mature ecommerce marketplace, it represents a great way to attract new customers – while outshining less forward-thinking rivals…