Bitcoin: What Is It, and Is It Right for Your Business?
OK, then, what is Bitcoin?
It is not a real currency, it is “cryptocurrency”, a form of digital payment that is produced (“mined”) by many people around the world. It allows point-to-point transactions instantly, worldwide, for free or at very low cost.
Bitcoin was invented after decades of research in cryptography by software developer Satoshi Nakamoto (believed to be a pseudonym), who designed the algorithm and introduced it in 2009. His true identity remains a mystery.
This currency is not backed by a tangible asset (such as gold or silver); bitcoins are marketed online, which makes them a commodity in themselves.
Bitcoin is an open source product that can be accessed by anyone who is a user. All you need is an email address, Internet access and money to start.
Where does it come from?
Bitcoin is extracted in a distributed computer network of users running specialized software; the network solves certain mathematical tests and looks for a particular data sequence (“block”) that produces a particular pattern when the BTC algorithm is applied to it. A coincidence produces a bitcoin. It is complex and requires a lot of time and energy.
Only 21 million bitcoins are going to be exploited (around 11 million are currently in circulation). Mathematical problems solved by network computers become increasingly difficult to keep mining operations and supply under control.
This network also validates all transactions through cryptography.
How does Bitcoin work?
Internet users transfer digital assets (bits) to each other in a network. There is no online bank; rather, Bitcoin has been described as a ledger distributed on the Internet. Users buy Bitcoin with cash or by selling a Bitcoin product or service. Bitcoin wallets store and use this digital currency. Users can sell this virtual book by selling their Bitcoin to another person who wants to enter. Anyone can do it, anywhere in the world.
There are smartphone applications to perform Bitcoin mobile transactions and Bitcoin exchanges are occupying the Internet. 19659002] How is Bitcoin valued?
Bitcoin is not controlled or controlled by a financial institution; It is completely decentralized Unlike real-world money, it can not be devalued by governments or banks.
On the other hand, the value of Bitcoin lies simply in its acceptance among users as a form of payment and because its supply is limited. Their global monetary values fluctuate according to supply and demand and market speculation; as more people create wallets and keep and spend bitcoins, and more businesses accept it, the value of Bitcoin will increase. Banks are now trying to value Bitcoin and some investment websites predict that the price of a bitcoin will be several thousand dollars in 2014.
What are its benefits?
There are benefits for consumers and merchants who want to use this payment option.
1. Quick transactions: Bitcoin is instantly transferred through the Internet.
2. No fees / low fees: unlike credit cards, Bitcoin can be used with free or very low rates. Without the centralized institution as an intermediary, authorizations (and fees) are not required. This improves sales of profit margins.
3. Eliminates the risk of fraud: only the owner of Bitcoin can send the payment to the desired recipient, who is the only one who can receive it. The network knows that the transfer has occurred and the transactions are validated; They can not be challenged or returned. This is important for online merchants who are often subject to evaluations from credit card processors if a transaction is fraudulent or from companies that pay the high price of credit card returns.
4. The data is safe: as we have seen with recent attacks on the payment processing systems of national retailers, the Internet is not always a safe place for private data. With Bitcoin, users do not give up private information.
to. They have two keys: a public key that serves as the bitcoin address and a private key with personal data.
b. Transactions are digitally “signed” by combining public and private keys; a mathematical function is applied and a certificate is generated that shows that the user initiated the transaction. Digital signatures are unique to each transaction and can not be reused.
c. The merchant / recipient never sees your secret information (name, number, physical address) so it is somewhat anonymous but it is traceable (to the bitcoin address in the public key).
5. Convenient payment system: merchants can use Bitcoin completely as a payment system; You do not have to have any Bitcoin currency since Bitcoin can be converted to dollars. Consumers or merchants can trade Bitcoin and other currencies at any time.
6. International payments: Bitcoin is used throughout the world; Merchants and e-commerce service providers can easily accept international payments, which opens up new potential markets.
7. Easy to trace: the network tracks and permanently records each transaction in the chain of Bitcoin blocks (the database). In the case of possible irregularities, it is easier for law enforcement officials to track these transactions.
8. Micropayments are possible: bitcoins can be divided up to one hundredth millionth, so making small payments of a dollar or less becomes a free or almost free transaction. This could be a great help for convenience stores, coffee shops and subscription-based websites (videos, publications).
Are you still a bit confused? Here are some examples of transactions:
Bitcoin in the retail environment
When paying, the payer uses a smartphone application to scan a QR code with all the transaction information necessary to transfer the bitcoin to the retailer. Pressing the “Confirm” button completes the transaction. If the user does not have any Bitcoin, the network converts dollars into his account to the digital currency.
The retailer can convert that Bitcoin into dollars if desired, there were not very low processing fees (instead of 2 to 3 percent), no hacker can steal personal information from the consumer, and there is no risk of fraud. Very skillful
Bitcoins in hospitality
Hotels can accept Bitcoin for room and meal payments at the property for guests who wish to pay with Bitcoin using their mobile wallets, or from PC to website to pay for an online reservation. A commercial BTC processor from a third party can help you handle the transactions you delete over the Bitcoin network. These processing clients are installed in tablets at the reception of the establishments or in the restaurants for users with applications for smartphones of BTC. (These payment processors are also available for desktops, on retail POS systems and integrated into POS food service systems.) It is not necessary to change owners or credit cards.
These transactions without cash are fast and the processor can convert bitcoins into currency and make a direct deposit daily in the bank account of the establishment. In January 2014, it was announced that two casino-hotels in Las Vegas will accept Bitcoin payments at the reception, in their restaurants and in the gift shop.
Sounds good, what’s the trap?
Business owners should consider the problems of participation, security and cost.
• A relatively small number of ordinary consumers and merchants currently use or understand Bitcoin. However, adoption is increasing worldwide and tools and technologies are being developed to facilitate participation.
• It’s the Internet, so hackers are threats to exchanges. The Economist reported that a Bitcoin exchange was hacked in September 2013 and $ 250,000 in bitcoins were stolen from users’ online vaults. Bitcoins can be stolen like any other currency, so the vigilant security of the network, the server and the database is paramount.
• Users should carefully protect their bitcoin wallets containing their private keys. Secure or printed backups are crucial.
• Bitcoin is not regulated or insured by the US government. UU So there is no insurance for your account if the exchange stops working or is stolen by hackers.
• Bitcoins are relatively expensive. Current rates and sale prices are available in online exchanges.
The virtual currency is not yet universal, but it is gaining awareness and acceptance in the market. A company may decide to try Bitcoin to save on credit cards and bank fees, as a convenience to the customer, or to see if it helps or hinders sales and profitability.
Are you thinking about accepting Bitcoin? Do you already use it? Share your thoughts and experiences with us.