Okay, so what is Bitcoin?
It is not a real currency, it is a “cryptocurrency”, a form of digital payment that is produced (“mined”) by many people around the world. It enables peer-to-peer transactions instantly, worldwide, for free or at very low cost.
Bitcoin was invented after decades of crypto research by software developer, Satoshi Nakamoto (believed to be a pseudonym), who designed the algorithm and introduced it in 2009. Its true identity remains a mystery.
This coin is not backed by a tangible product (such as gold or silver); Bitcoins are traded online, which makes them a commodity in their own right.
Bitcoin is an open source product, accessible to any user. All you need is an email address, Internet access, and money to get started.
Where does it come from?
Bitcoin is mined from 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 time and energy consuming.
Only 21 million bitcoins will be mined (around 11 million are currently in circulation). The mathematical problems that network computers solve are becoming increasingly difficult to keep mining operations and supply under control.
This network also validates all transactions using cryptography.
How does Bitcoin work?
Internet users transfer digital assets (bits) to each other on a network. There is no online bank; rather, Bitcoin has been described as a distributed ledger on the internet. Users buy Bitcoin for cash or by selling a product or service for Bitcoin. Bitcoin wallets store and use this digital currency. Users can sell outside of this virtual ledger by exchanging their Bitcoin to another person who wants to enter. Anyone can do this, anywhere in the world.
There are smartphone apps for mobile Bitcoin transactions and Bitcoin exchanges are populating the internet.
How is Bitcoin valued?
Bitcoin is not controlled by a financial institution; it is completely decentralized. Unlike real world money, governments or banks cannot devalue it.
Instead, the value of Bitcoin lies simply in its acceptance among users as a form of payment and because its offer is finite. The values of your global currency fluctuate based on supply and demand and market speculation; As more people create wallets and store 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 one 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. Fast transactions: Bitcoin is instantly transferred over the Internet.
2. No Fees / Low Fees: Unlike credit cards, Bitcoin can be used for free or at very low fees. Without the centralized institution as an intermediary, no authorizations (or fees) are required. This improves profit margins on sales.
3. Eliminate the risk of fraud: only the owner of Bitcoin can send the payment to the intended recipient, who is the only one who can receive it. The network knows that the transfer has occurred and the transactions are validated; they cannot be challenged or withdrawn. This is important for online merchants who are often subject to credit card processor evaluations of whether or not a transaction is fraudulent, or for businesses that pay the high price of credit card chargebacks. credit.
4. Data is safe: As we have seen with recent attacks on national retailers’ payment processing systems, the Internet is not always a safe place for private data. With Bitcoin, users do not give away private information.
To. They have two keys: a public key that serves as a bitcoin address and a private key with personal data.
B. Transactions are digitally “signed” by combining the public and private keys; A mathematical function is applied and a certificate is generated that certifies that the user initiated the transaction. Digital signatures are unique to each transaction and cannot be reused.
vs. Your secret information (name, number, physical address) is never seen by the merchant / recipient, so it is somewhat anonymous but traceable (down to the bitcoin address in the public key).
5. Convenient payment system: merchants can fully use Bitcoin as a payment system; they do not have to have any Bitcoin currency, as 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 all over the world; E-commerce merchants and service providers can easily accept international payments, opening up new potential markets for them.
7. Easy to Track – The network permanently tracks and records every transaction on the Bitcoin blockchain (the database). In the event of potential wrongdoing, it is easier for law enforcement officials to trace these transactions.
8. Micropayments are possible: Bitcoins can be divided into a hundred millionth, so executing small payments of a dollar or less becomes a free or almost free transaction. This could be a real boon for convenience stores, coffee shops, and subscription-based websites (videos, posts).
Are you still a little confused? Here are some examples of transactions:
Bitcoin in the retail environment
At checkout, payment uses a smartphone app to scan a QR code with all the transaction information needed to transfer the bitcoin to the retailer. Tapping the “Confirm” button completes the transaction. If the user does not own any Bitcoin, the network converts dollars in his account to the digital currency.
The retailer can convert that Bitcoin into dollars if they want, there were no or very low processing fees (instead of 2-3 percent), no hacker can steal consumer personal information, and there is no risk of fraud. Very slippery
Bitcoins in hospitality
Hotels can accept Bitcoin for on-site dining and room payments for guests who wish to pay with Bitcoin using their mobile or PC-to-website wallets to pay for a reservation online. A third-party BTC trading processor can help handle the transactions you clear through the Bitcoin network. These processor clients are installed on tablets at the reception of establishments or in restaurants for users with BTC smartphone applications. (These payment processors are also available for desktop computers, in retail POS systems, and integrated into foodservice POS systems.) No need to change hands or credit cards or money.
These cashless transactions are fast and the processor can convert bitcoins into currency and make a daily direct deposit to the establishment’s bank account. In January 2014 it was announced that two Las Vegas hotel-casinos will accept Bitcoin payments at the front desk, at their restaurants and at the gift shop.
Sounds good, so what’s the catch?
Business owners must consider participation, security, and cost issues.
• A relatively small number of ordinary consumers and merchants use or understand Bitcoin today. However, adoption is increasing globally and tools and technologies are being developed to facilitate participation.
• It is the Internet, so hackers are threats to exchanges. The Economist reported that a Bitcoin exchange was hacked in September 2013 and $ 250,000 worth of Bitcoins were stolen from users’ online vaults. Bitcoins can be stolen like any other currency, so network, server, and database security is paramount.
• Users must carefully protect their bitcoin wallets that contain their private keys. Backups or secure printing is crucial.
• Bitcoin is not regulated or insured by the US government, 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 on online exchanges.
Virtual currency is not yet universal, but it is gaining awareness and acceptance in the market. A business may decide to try Bitcoin to save on credit cards and bank fees, for customer convenience, or to see if it helps or hinders sales and profitability.
Thinking of accepting Bitcoin? Do you already use it? Share your thoughts and experiences with us.