Bitcoin is digital ‘crypto-currency’ that allows users to transfer money from one wallet to another with little no transaction fee. It is essentially an open source currency that is available to anyone and can be transferred to anyone. Bitcoin is secure and anonymous, transactions are public but parties involved in the transaction are not identified. For this reason, bitcoin has been the subject of much controversy and has led to the open purchase of drugs and weapons online with absolutely no regulation.
How does bitcoin affect how we do business?
Currently the answer is that it doesn’t. Not enough people have adopted this new ‘currency’ for it to reach a point where people need to use it. Some of the benefits of using bitcoin to purchase and sell goods or services are:
1. Transactions are either low cost or completely free.
2. Transactions are completely anonymous.
3. The supply of bitcoin is fixed and predictable.
There are a few main benefits to using bitcoin; however the anonymity has tarnished bitcoin’s legitimacy as it is now almost entirely associated with drugs and firearms. So do the negatives outweigh the positives for businesses looking to adopt bitcoin?
Well besides from the terrible reputation there are a few things that could go wrong:
1. Governments put a ban on bitcoin due to black market issues.
2. Bitcoin is highly volatile and will almost always be highly volatile until it is backed by something of inherent value (possibly gold).
3. While bitcoin is incredibly secure from an encryption point of view, your wallet is stored on your harddrive and can therefore be completely erased. You can also have all of your BTC (bitcoin) stolen if someone is able to login to your account.
At this moment in time it is implausible for a business to take on such a risk. However in some instances bitcoin opens access to markets that were otherwise blocked. Bitcoinpoker.org has listed various bitcoin poker sites that have popped up over the last year or so; and this particular bitcoin market has seen a surge of growth in the US as the currency provides a convenient a ‘loophole’ to gambling online. Of course the legality of such a loophole is not entirely clear, but it pales in comparison to some of the more immoral uses of bitcoin (anonymously purchasing guns/drugs and money laundering!). But bitcoin poker in particular has sparked a lot of debate, with conversations appearing on many message boards along the lines of “what poker sites accept US players?”
While bitcoin is certainly an interesting development and is clearly showing moderate success, it is still too hard to say whether it will gain credibility and become popular enough to change the way we do business.