What is Bitcoin?
Bitcoin! It’s everywhere. For years you may have heard whispers, clamorings of a digital currency that would revolutionize the world but in 2017 Bitcoin became the belle of the ball. In January of 2017 Bitcoin was valued at about $800-$1,000 USD and just 11 months later it is currently valued at somewhere between $16,600-$17,000 USD! Bitcoin’s explosive growth has thrust it and other cryptocurrencies into the mainstream. Once thought of as a fringe idea, traditional banking institutions are now taking the concept very seriously. With all of the sensation surrounding Bitcoin, you may find yourself asking, what actually is a Bitcoin? Understanding Bitcoin, cryptocurrency, and the underlying blockchain technology will be part of an ongoing series here on BeeKash Insights, but today we dive into the very basics of Bitcoin.
Bitcoin is one of the first types of cryptocurrency. It was created in 2009 by Satoshi Nakamoto, an alias for the mysterious creator or creators. In its simplest terms, Bitcoin is a decentralized digital currency that is created and managed electronically. There is no central bank or intermediary that controls the creation of Bitcoin. Instead all Bitcoin transactions occur on a peer-to-peer network and are recorded in an unalterable public ledger, called a blockchain.
As more merchants and major companies consider accepting Bitcoin, you may be asking yourself if Bitcoin is right for your business. Before accepting Bitcoin there are various aspects of Bitcoin to consider.
What makes Bitcoin different from other forms of payment?
Bitcoin is a decentralized currency
Bitcoin is unusual in that it is not tied to a specific country or central bank. New Bitcoins are created or “mined” at a set rate by the peer-to-peer network. Additionally, because no particular government and organization controls the supply Bitcoin, it cannot be devalued as easily.
Bitcoin is a finite currency
Bitcoin will never be susceptible to inflation because the network cannot arbitrarily flood the market with more Bitcoins. In fact, part of the design of the Bitcoin network is built in scarcity. Only 21 million Bitcoins can ever be created and thus cannot be devalued in the same way that traditional currencies can. A good analogy is to think of Bitcoin as a digital resource akin to gold. There is only so much gold available on planet Earth and you can’t just print more, just like Bitcoin.
Bitcoin’s value can be extremely volatile
When considering accepting Bitcoin as a payment option, it is important to recognize that Bitcoin’s value can vary greatly from day to day. For most currencies, the value doesn’t fluctuate significantly on a daily, monthly, or even yearly basis, Bitcoin on the other hand can gain and lose value minute to minute. This fact can either benefit a merchant greatly or result in a huge loss.
Bitcoin is chargeback proof
For traditional payments it is possible for a customer to dispute charges on their credit card, via check, etc., however with Bitcoin there is no dispute process because there is not intermediary. While this may seem off putting to the consumer, it is highly beneficial for merchants. Bitcoin may have particular appeal to conventionally high-risk merchants.
Bitcoin is new, exciting, and definitely complicated. It is making waves in finance and payment processing but as you can see there are both pros and cons to accepting or using Bitcoin. Is Bitcoin right for you and your business? Let BeeKash help you find the answer.