What is Bitcoin, and is it right for your business?
Bitcoin, often described as a cryptocurrency, a virtual currency or a digital currency – is a type of money that is completely virtual.
It’s like an online version of cash. You can use it to buy products and services, but not many shops accept Bitcoin yet and some countries have banned it altogether.
The physical Bitcoins you see in photos are a novelty. They would be worthless without the private codes printed inside them.
How does Bitcoin work?
Each Bitcoin is basically a computer file which is stored in a ‘digital wallet’ app on a smartphone or computer.
People can send Bitcoins (or part of one) to your digital wallet, and you can send Bitcoins to other people.
Every single transaction is recorded in a public list called the blockchain.
This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undo-ing transactions.
How do people get Bitcoins?
There are three main ways people get Bitcoins.
You can buy Bitcoins using ‘real’ money.
You can sell things and let people pay you with Bitcoins.
Or they can be created using a computer.
Why are Bitcoins valuable?
There are lots of things other than money which we consider valuable like gold and diamonds. The Aztecs used cocoa beans as money!
Bitcoins are valuable because people are willing to exchange them for real goods and services, and even cash.
Why do people want Bitcoins?
Some people like the fact that Bitcoin is not controlled by the government or banks.
People can also spend their Bitcoins fairly anonymously. Although all transactions are recorded, nobody would know which ‘account number’ was yours unless you told them.
Is it secure?
Every transaction is recorded publicly so it’s very difficult to copy Bitcoins, make fake ones or spend ones you don’t own.
It is possible to lose your Bitcoin wallet or delete your Bitcoins and lose them forever. There have also been thefts from websites that let you store your Bitcoins remotely.
The value of Bitcoins has gone up and down over the years since it was created in 2009 and some people don’t think it’s safe to turn your ‘real’ money into Bitcoins.
As a business, when thinking about payment methods, your mind will automatically go to cash, credit cards, and bank transfers – as well as more recent options like PayPal and Apple Pay. This is unsurprising, as they offer both a low level of risk to your business, and a high level of convenience to your customers.
Indispensable though it may have become, PayPal really hasn’t been around that long. And once upon a time, accepting payments through an intermediary service – which is, essentially, what the likes of PayPal and Apple Pay are – was considered risky and expensive.
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