(Picture: Leszek Soltys)
Bitcoin, the original crypto-currency has been a hot debate since its inception in 2009. This peer-to-peer digital payment has proven to be extremely versatile for purchasing goods online worldwide. It has been so widely used over the last couple of years that several top economic authorities have warned of its risks. Previously exploited for financial fraud, it’s considered the perfect currency for money laundering and black market transactions. Its value has also been extremely volatile.
Regardless of the risks, thousands of e-commerce sites worldwide are now using bitcoins, indicating a growing reputation as a viable online transaction. From small home grown coffee businesses in Malaysia to prominent New York investors, such as the Winkelvoss brothers, businesses from all sectors are increasingly open to its use. The Bitcoin appears to be on a fast track to proving its value for the long run.
Why do people want bitcoins?
Perhaps for some no further explanation is required. For most the advantages of this online currency may not be clear – yet. In brief, the use of Bitcoin holds several benefits for users:
Differences between Bitcoin and credit/debit payments
Traditional e-payment methods
|Transactions involve banks or third parties||Peer-to-peer transactions|
|Transactions require personal data including name, job, credit history and card numbers||Transactions are anonymous: no personal information is revealed|
|Transactions have intermediary fees (banks, third parties)||No transaction fee or a much lower fee than compared to traditional payments|
|Currency is regulated by governments||Not regulated by any government (and highly volatile)|
|Currency is stored in banks and insured by organisations like the FDIC||Currency is stored in a digital wallet and not insured by any organisation|
|Accounts can be frozen||Accounts can’t be frozen|
|Conversion fees and exchange rates apply when trading between different countries||Can be used as a commodity and traded in open markets, without fee or exchange rates|
As highlighted in the points raised any online user can generate bitcoins. The only requirement is solving some complex mathematical problems through a free open-source application. No currency creation process has ever been so broadly available before.
To be embraced by the online world?
Recent news indicates a growing interest in the use of bitcoins for monetary transactions globally. Germany, India, Hong Kong and Malaysia, all possess active and burgeoning Bitcoin exchange markets. In the Philippines, it’s said to be the solution for people without bank accounts (currently more than 60% of the country’s population)1. Despite previous regulation restrictions by the Chinese Government, from January 2014 Bitcoin Exchange BTC China – one of the world’s most robust Bitcoin exchange markets – started accepting deposits again. Additionally, Asia’s richest man, Li Ka-shing, announced his decision to invest in BitPay, a US startup similar to PayPal for bitcoins, indicating a long term interest in this currency’s infrastructure. Moreover, New York’s Finance Department has reportedly started regulating the coin too. Overall, more than 35,000 traders worldwide accept this currency as a form of payment to date.2
Regardless of recent events (Japan’s largest Bitcoin exchange Mt. Gox’s filed for bankruptcy after being hacked) the bottom line remains clear: interest in this transaction is still worth monitoring. Bitcoin may or may not be the future of e-commerce but, for now it seems to foretell the zeitgeist of the 21st century.
1 Tech in Asia: Ron Hose: Bitcoin is great for all the ‘unbanked’ people in the Philippines
2 Techcrunch: Coinbase rises 25m from Andreessen Horowitz / Coindesk: Get paid in Bitcoin with BitPay’s new payroll