I’m willing to bet you’ve heard of bitcoin, but you may be hard pressed to explain what it really is. Many people have vague ideas around bitcoin, but not every business owner is aware of how popular of a payment platform it’s becoming.
In this episode of 5 Business Rules, Monika Jansen and I sat down to talk about bitcoin and the top 5 things to know. Spend 4 minutes with the video or read on for your primer.
#1 Bitcoin is a cryptocurrency
In fact, it’s one of 800 cryptocurrencies. Currently bitcoin is the most widely used, but other cryptocurrencies are quickly growing including Etherium, Litecoin and Ripple.
Many analysts believe that cryptocurrency is here to stay, but there are differing opinions on which one will be dominant. Think in terms of social media: MySpace was offered one of the earliest social networks, but is now obsolete. Bitcoin was the first cryptocurrency to gain prominence and had about 85% market share in the beginning of 2017. Yet by the end of June, that had dropped to 40%.
Each variation of cryptocurrency has a slightly different use, but they are all considered commodities. That means their value fluctuates in the same way stocks do. You can use a cryptocurrency converter to understand how to translate dollars into cryptocurrency.
#2 Bitcoin runs on Blockchain
Blockchain, the technology behind bitcoin and other cryptocurrencies, is considered to be distributed ledger technology. This means there’s no central data storage system or single administrator, it’s created on a peer-to-peer network and requires consensus algorithms to validate transactions.
This might seem scary (and confusing), but the fact that there are many copies of each blockchain record is what makes this technology secure. Some actually call it hack-proof.
#3 Peer-to-peer payments
Bitcoin was developed to eliminate the need of a third-party financial institution (banks and credit cards), as it often slows down transactions. That means using cryptocurrency can be faster and more secure than payments through a traditional credit card.
While this may be why bitcoin has been associated with some unsavory activities, it also has the potential to help an underserved population that is not able to obtain credit from a traditional page.
#4 Lower transaction fees
Because it is a peer-to-peer payment system, if I pay Monika in bitcoins, it is a direct payment that does not incur processing fees. However, if Monika chooses to exchange her bitcoins for US dollars, she will pay an exchange fee.
#5 Wide acceptance
It’s common practice to use a bitcoin wallet like Coinbase for transactions, however, if you are using a payment processor like Stripe it’s easy to add bitcoin payments to your website. So easy in fact that I take bitcoin payments!
You might also be surprised to know that a variety of business are accepting bitcoin including: Amazon, Dell, Sears, Home Depot, Subway, Target, Zappos.
Have more questions? Give us a shout!
