With more than 12.7 million bitcoins now in circulation, it’s no surprise that Overstock, eBay, and Virgin have all started to accept the controversial online currency as a form of payment.
In extraordinary, futuristic news, the Winkelvoss twins recently paid for a Virgin Galactic spaceflight in bitcoins. Meanwhile, back on Planet Earth, more and more major retailers are set to jump aboard the bitcoin-accepting bandwagon this year.
In April 2014 business directory Yelp started flagging up businesses which accept bitcoins. Even a Canadian nudist colony now accepts the currency. All of this activity can’t help but prompt the question: Should my business be getting bitcoin-ready too? Some of the biggest business moguls out there certainly seem to think so:
There’s a whole lot of buzz going on in the weird and wonderful world of bitcoin at the moment and, if you’re a tech-forward business, it may prove worth your while to understand the landscape and the effect bitcoin acceptance could have on your enterprise.
Here’s a quick guide to bitcoin to help you get a handle on the web’s most notorious currency.
Let’s start with the basics. Bitcoins seem to be one of those things which everyone nods along with, but not many of us actually know that much about. Here are the need-to-know basics:
Bitcoin is the world’s very first decentralized digital currency.
They can be transferred directly from person to person, anywhere in the world, with no need for banks or clearing houses.
This means that they are not susceptible to high transfer fees, frozen accounts, arbitrary limits, or many of the other issues regular banking entails.
Nobody knows. The creator is believed to use the alias “Satoshi Nakamoto” and is rumored to live in Los Angeles, but details of his identity are largely speculative and many believe even the alias Mr. Nakamoto is a myth.
More or less, yes. Only China and Brazil have specific legislation regarding bitcoin. Most other countries are waiting to see how the phenomenon plays out before taking any definitive steps.
Bitcoins come from bitcoin mines. Yes, that’s right. Virtual mines.
Bitcoin mining can be undertaken by anyone with an Internet connection, a decent processor, and a (free) bitcoin miner application.
Equipped with these tools, it’s time to mine and generate bitcoins. Every “block of coin” you mine requires a certain amount of work to (metaphorically) crack open. This work takes the form of complex algorithms, which require significant processing power from your computer to crack.
The beauty of this system is that the amount of work required to mine each individual bitcoin can be automatically adjusted by the network to ensure bitcoins are always created at a “predictable and limited rate.” This system is integral to how bitcoin works, ensuring the currency remains stable, fair, and secure.
In your digital wallet, of course. This online wallet is very similar to how your PayPal account or online bank account look. When bitcoins are transferred, they’re given an electronic signature before being verified by a registered bitcoin miner. The whole process takes no more than a few minutes and–presto–your transfer is complete.
Yes, it certainly can. If you want to set up your business to accept this digital currency, there are a few things you may need:
If you’re not expecting a surge of bitcoin payments, simply add a button to your website and encourage bitcoin users to contact you directly if they want to pay using the currency.
If you’re planning to get serious about accepting bitcoin, you’ll want to implement a merchant solution which allows you to process these payments and then convert them into your preferred currency. Here’s a helpful list of solutions to choose from.
You can find accurate, up-to-date exchange rates at bitcoinprices.com.
Herein lies the rub: It might be fashionable, stable, high-tech, fascinating, and potentially revolutionary, but should your business be getting into bed with bitcoin just now? Ultimately it depends on how adventurous you are.
Why You Should Accept Bitcoin
An advantage that holds some serious weight post-economic crisis. There are also no transaction fees, limits, frozen accounts, etc.
So far only a few businesses accept bitcoin. Accepting the currency could make your business attractive to a future-facing, often moneyed customer base.
Bitcoin could be about to revolutionize finance. The adventurous among you may want to be leading the charge!
In theory, bitcoin is less risky that any other currency. On paper it’s more stable and less susceptible to fluctuations cased by political change.
Why You Shouldn’t Accept Bitcoin
This currency is not yet officially recognized anywhere in the world. There are still lots of questions surrounding the currency and a lot of gray areas still to be worked out.
How do you pay tax on an untraceable currency? Should you? What’s the best way to do this? Bitcoin pose a bit of a problem for your books…
Bitcoin is just five years old. With such a young and unique currency, there’s no real telling what’s coming next. It’s hard to discuss bitcoin and its future with any degree of certainty.
—Sean O’ Farrell is the managing director of Choice Loans, specialists in alternative finance options for businesses big and small.