What is Bitcoin?
Bitcoin is a digital currency, which has no tangible form, notes or coins to distribute. You can trade it through what is called a blockchain, a digital ledger which records every purchase and sale of Bitcoin on a peer-to-peer (P2P) network. There are only 21 million Bitcoin in existence, which are the highest form of the currency, and as it grows in value individuals begin to trade in divisions of Bitcoin, with the smallest possible amount at one hundred millionth of a Bitcoin.
How Does It Work?
With no central authority and currently very little regulation, people are very sceptical about the legitimacy of the currency, however it is worth noting that Bitcoin is an electronic payment system that has been built entirely on the premise of mathematical proof, with every transaction recorded in the blockchain. With no central authority it also means there are very low transaction fees.
The currency is incredibly open and the blockchain (the ledger that record every transaction) is able to be viewed by anybody, in order to protect your identity the address that it is attributed to (your digital wallet) is a string of numbers and digits.
How does this fit into your business?
As a business owner, you are free to accept it as payment for any goods or services you provide. There are several secure mobile applications that allow you to transfer Bitcoin instantly, and also several applications which allow you to store it safely.
The risk of accepting Bitcoin is the volatile nature of its value. The graph below shows the value of Bitcoin against the dollar since its inception. In December 2013, Bitcoin was valued at just over $1000 (At the time over £700). Now Bitcoin is currently valued at £154, a massive contrast.
Don’t upset the banks
A Bitcoin entrepreneur, who gave an interview to the popular Bitcoin news site (www.coindesk.com) said, “Banks in the UK are unwilling to bank any company trading bitcoins but more importantly if you have the word “bitcoin” in your business plan you are effectively written off without any consideration. This has been a huge issue for bitcoin entrepreneurs in the UK and is stifling growth and investment in this market”.
The current Conservative government, recently re-elected in 2015, have pledged to look at implementing anti-money laundering regulations to digital currency exchanges early into their second tenure, to support innovation in the industry. It looks as though banks however, will stifle and hinder any major breakthrough in the industry and for that reason the value is unlikely to rise to its peak anytime soon.
It’s not all bad news, there is hope yet
Taking aside the negative reception from the banks, there is hope for the digital currency, and a lot of its success will depend on public perception and widespread acceptance.
The main benefit to using Bitcoin is that you own it, no central bank has any authority over it. There won’t be any need to for you to fund bank bailouts or pay large transaction fees to credit card companies. Bitcoin also isn’t subject to inflation, as there are only ever going to be the 21 million in existence, there isn’t any option to create more if the economy falls into troubled times.
Bitcoin is an interesting development and the idea of cryptocurrency is one which is gaining track with some of the world’s largest companies. The banks and the US Government have both invested in Bitcoin and it is something to watch out for in the future. Right now, there isn’t enough ease of access to Bitcoin, the software and the premise is too complicated to the mass population so it is something to consider, and will be a good USP and differentiator which will encourage Bitcoin fans to do business with you but it’s not yet ready to replace the pound.