Bitcoin: What Is It, and Is It Right for Your Business?

Well, then, what is Bitcoin?

It is not a real currency, it is "cryptocurrency", a form of digital payment produced ("extracted") by many people around the world. It allows peer-to-peer transactions instantly, anywhere in the world, for free or at very low cost.

Bitcoin was invented after decades of research in cryptography by software developer Satoshi Nakamoto (who is 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 commodity (such as gold or silver); Bitcoins are traded online, which makes them a product in themselves.

Bitcoin is an open source product, accessible to any 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 match produces a bitcoin. It is complex and consumes time and energy.

Only 21 million bitcoins can be extracted (there are currently around 11 million in circulation). The mathematical problems that network computers solve 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 an accounting book distributed throughout the Internet. Users buy Bitcoin in cash or selling a product or service for Bitcoin. Bitcoin wallets store and use this digital currency. Users can sell this virtual book by exchanging their Bitcoin to another person who wants to participate. Anyone can do it anywhere in the world.

There are smart phone applications to perform Bitcoin mobile transactions and Bitcoin exchanges are populating the Internet. 19659002] How is Bitcoin valued?

Bitcoin is not owned or controlled by a financial institution; It is completely decentralized. Unlike real-world money, governments or banks can not devalue it.

On the other hand, the value of Bitcoin lies simply in its acceptance among users as a form of payment and because its offer is finite. 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 companies 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 your profits?

There are benefits for consumers and merchants who wish to use this payment option

1. Fast transactions: Bitcoin is transferred instantly over the Internet.

2. No fees / low rates: unlike credit cards, Bitcoin can be used for free or very low. Without the centralized institution as an intermediary, authorizations (or 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 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 credit card processors' evaluations of whether a transaction is fraudulent or not, or companies that pay the high price of credit card chargebacks [19659002] 4. The data is secure: as we have seen in the latest tricks in the payment processing systems of national retailers, the Internet is not always a safe place for private data. With Bitcoin, users do not abandon private information.

a. 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 proves 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; They do not have to hold any Bitcoin currency since Bitcoin can be converted to dollars. Consumers or merchants can trade in and out of 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 track: the network tracks and permanently records each transaction in the Bitcoin block chain (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 into one hundredth of a millionth, so the execution of small payments of one dollar or less becomes a free or almost free transaction. This could be a real benefit for convenience stores, coffee shops and subscription-based websites (videos, publications).

Still a bit confused? Here are some examples of transactions:

Bitcoin in the retail environment

In the payment process, the payer uses a smartphone application to scan a QR code with all the transaction information necessary to transfer the bitcoin to the retailer . Touching the "Confirm" button completes the transaction. If the user does not own any Bitcoin, the network converts the dollars in his account to the digital currency.

The retailer can convert that Bitcoin into dollars if he so desires, there were no or very low processing costs (instead of 2 to 3 percent), no hacker can steal personal information from the consumer and there is no risk of fraud . Very ingenious.

Bitcoin in hospitality

Hotels can accept Bitcoin for hosting and meal payments on the premises for guests who wish to pay with Bitcoin with their mobile wallets or PC-to-website to pay for an online reservation. A third-party BTC merchant processor can help manage the transactions you make through the Bitcoin network. These processing clients are installed in tablets at the reception of establishments or in restaurants for users with applications for BTC smartphones. (These payment processors are also available for desktop computers, in retail POS systems and integrated in POS systems for food service). It is not necessary for credit cards or money to change hands.

These cashless transactions are fast and the processor can convert bitcoins into currency and make a direct daily deposit in the bank account of the establishment. In January 2014, it was announced that two Las Vegas casinos will accept Bitcoin payments at the front desk, in their restaurants and in the gift shop.

Sounds good, what's the problem?

Business owners should consider the issues of participation, safety 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 a threat 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 security of the network, the server and the database are vigilant.

• Users should carefully protect their bitcoin wallets that contain their private keys. Safe backups or prints are crucial.

• Bitcoin is not regulated or insured by the US government. UU., So there is no insurance for your account if the exchange is closed or 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, for the convenience of 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.

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