Okay, what is Bitcoin?
It’s not a real coin, it’s a “cryptocurrency”, a digital (“hurt”) mode of payment produced by many people around the world. It enables peer-to-peer transactions instantly, worldwide, for free or at very low cost.
Bitcoin software developer Satoshi Nakamoto (believed to be a nickname) invented it after research on cryptography, designed the algorithm and introduced it in 2009. His true identity remains a mystery.
This currency is not a tangible commodity (such as gold or silver); bitcoins are traded online, which in turn makes them available for sale.
Bitcoin is an open source product that can be accessed by anyone. All you need to do is enter your email address, internet access and money.
Where does it come from?
Bitcoin comes from a distributed computer network of users running specialized software; the network solves some mathematical tests, and when the BTC algorithm is applied, it searches for a specific data sequence (“block”) that creates a particular pattern. A match creates a bitcoin. It is complex and time and energy consuming.
Only 21 million bitcoins will ever be released (about 11 million are in circulation). The math problems that network computers solve are becoming more and more difficult to keep in control of mining operations and supply.
This network validates all transactions using cryptography.
How does Bitcoin work?
Internet users transfer digital assets (bits) to each other over a network. There are no online banks; on the contrary, Bitcoin has been described as a brochure distributed throughout the Internet. Users buy Bitcoin with Bitcoin cash or by selling a product or service. The Bitcoin wallet stores and uses this digital currency. Users can sell their Bitcoin from this virtual book by exchanging their Bitcoin for someone else who wants it. Anyone can do this anywhere in the world.
There are mobile phone applications for Bitcoin transactions, and Bitcoin exchanges are populating the Internet.
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 cannot devalue.
Instead, the value of Bitcoin lies in its acceptance among users as a means of payment and because its supply is limited. The values of its global currency vary according to supply and demand and market speculation; As more people create wallets and hold and spend bitcoins, and as more businesses support them, 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 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 for very low fees. Without a centralized centralized organization, there is no need for permission (and fee). This improves profit margin sales.
3. Eliminates the risk of fraud – Only the Bitcoin owner can send the payment to the intended recipient, as he or she is the only one who can receive it. The network knows that the transfer has taken place and that the transactions have been validated; they cannot be sued or dismissed. This is great for online merchants, credit card processors who often evaluate whether a transaction is fraudulent, or for businesses that pay a high price for credit card payments.
4. Data is secure – As we have seen with the latest hacks on national merchant payment processing systems, the Internet is not always a secure place for private data. With Bitcoin, users do not leave private information.
a. 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 public and private keys; a mathematical function is applied and a certificate is created proving that the user has started the transaction. Digital signatures are unique to each transaction and cannot be reused.
c. The merchant / recipient never sees your secret information (name, number, physical address), so it’s a bit anonymous, but it’s traceable (to the public key bitcoin address).
5. Convenient payment system – Merchants can fully use Bitcoin as their payment system; they don’t have to have Bitcoin currency because Bitcoin can be converted into dollars. Consumers or traders can trade Bitcoin and other currencies at any time.
6. International payments – Bitcoin is used worldwide; E-commerce merchants and service providers can easily accept international payments, which opens up new potential markets for them.
7. Easy to follow – The network keeps track of all Bitcoin blockchain (database) transactions and keeps track of them. In the event of a potential misdemeanor, it is easier for law enforcement officials to track these transactions.
8. Micro-payments are possible – Bitcoins can be split into hundreds of millions, so making small payments of one dollar or less is a free or near-free transaction. This could be a real benefit for convenience stores, coffee shops, and subscription websites (videos, publications).
Still a little confused? Here are some examples of transactions:
Bitcoin in a retail environment
When making payments, it uses a phone app to scan a QR code with all the transaction information needed to transfer it to the bitcoin merchant. Clicking the “Confirm” button will end the transaction. If the user does not own Bitcoin, the network converts their account dollars into digital currency.
If the retailer wants to convert that Bitcoin into dollars, there was no processing fee or it was very low (instead of 2 to 3 percent), the hacker cannot steal personal information from consumers and there is no risk of fraud. Very smooth.
Bitcoins in the hospitality industry
Hotels can accept Bitcoin at bed and breakfast on-premises, for guests who want to pay via Bitcoin using their mobile wallets, or to pay online for a reservation from the computer to the website. A third BTC merchant processor can help you manage transactions that clear the Bitcoin network. These processing clients are installed on tablets in retail stores or restaurants for users with BTC smartphone apps. (These payment processors are also available for desktops, integrated with retail POS systems and food service POS systems). No need to change credit cards or cash manually.
These cashless transactions are fast and the processor can convert bitcoin into currency and make a direct deposit to the bank’s bank account on a daily basis. It was announced in January 2014 that two Las Vegas hotel casinos will accept Bitcoin payments at the front, restaurants and gift shops.
Okay so what’s the catch?
Business owners should consider participation, security, and cost.
• A relatively small number of ordinary consumers and traders use or understand Bitcoin today. However, there is a growing popularity worldwide and tools and technologies are being developed to facilitate participation.
• It is the Internet, so hackers are threats to exchanges. The Economist reported that in September 2013 a Bitcoin exchange was hacked and $ 250,000 stolen in bitcoin from users ’online vaults. Bitcoin can be stolen like other currencies, so it is essential to take care of the security of your network, server, and databases.
• Users should carefully protect their bitcoin wallets with their private keys. Secure backup or printing is essential.
• Bitcoin is not regulated or insured by the US government, so there is no insurance on your account if the exchange is stopped or hacked by hackers.
• Bitcoins are quite expensive. Current rates and sales prices are available on online exchanges.
Virtual currency is not yet universal but it is gaining market awareness and acceptance. A business may decide to test Bitcoin to save on credit card and bank fees, as a customer convenience, or to see if it helps or hinders sales and profitability.
Are you thinking of accepting Bitcoin? Are you already using it? Share your thoughts and experiences with us.