Ok, so what is Bitcoin?

It is not a real currency, it is a “cryptocurrency”, a form of digital payment that many people produce (“mine”) around the world. It enables peer-to-peer transactions instantly, worldwide, for free or at a very low cost.

Bitcoin was invented after decades of cryptographic research by software developer Satoshi Nakamoto (believed to be a pseudonym), who designed the algorithm and introduced it in 2009. His true identity remains a mystery.

This currency is not backed by a tangible commodity (such as gold or silver); Bitcoins are traded online, making them a commodity in themselves.

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 on a distributed computing 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 applied to it by the BTC algorithm. A match produces a bitcoin. It is complex and consumes time and energy.

Only 21 million bitcoins will be mined (around 11 million are currently in circulation). The mathematical problems that network computers solve become progressively more 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 banking; rather, Bitcoin has been described as a distributed ledger on the Internet. Users buy Bitcoin with cash or by selling a product or service for Bitcoin. Bitcoin wallets store and use this digital currency. Users can sell this virtual ledger by exchanging their Bitcoin with another person who wants to participate. 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 owned or controlled by a financial institution; it is completely decentralized. Unlike real-world money, neither governments nor banks can devalue it.

Instead, the value of Bitcoin lies simply in its acceptance among users as a form of payment and because its supply is finite. Its global currency values ​​fluctuate according to supply and demand and market speculation; As more people create wallets and hold and spend bitcoins, and as more businesses accept it, the value of Bitcoin will increase. Banks are now trying to value Bitcoin and some investment websites are predicting 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 transferred instantly over the Internet.

2. No Fees/Low Fees: Unlike credit cards, Bitcoin can be used for free or with very low fees. Without the centralized institution as an intermediary, no authorizations (or fees) are required. This improves the profit margin on sales.

3. Eliminate the risk of fraud: Only the Bitcoin owner 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 processors’ evaluations of whether or not a transaction is fraudulent, or for businesses that pay the hefty price for credit card chargebacks. .

4. Data is safe: As we’ve seen with recent attacks on national retailers’ payment processing systems, the internet isn’t always a safe place for private data. With Bitcoin, users do not give out private information.

has. 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 proves that the user initiated the transaction. Digital signatures are unique to each transaction and cannot be reused.

against The merchant/recipient never sees your secret information (name, number, physical address), 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 hold any Bitcoin currency as Bitcoin can be converted to dollars. Consumers or merchants can trade 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: Every transaction is permanently tracked and recorded by the network on the Bitcoin blockchain (the database). In the case of possible irregularities, it is easier for law enforcement officials to trace these transactions.

8. Micropayments are possible: Bitcoins can be divided to the hundredth millionth, so making small payments of a dollar or less becomes a free or almost free transaction. This could be a boon for convenience stores, coffee shops, and subscription-based websites (videos, posts).

Still a bit confused? Here are some examples of transactions:

Bitcoin in the retail environment

At checkout, the payer 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 the dollars in their account into 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 to 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 room and dining payments for guests who wish to pay with Bitcoin using their mobile wallets or PC to website to pay for an online reservation. A third party BTC merchant processor can assist in handling the transactions you clear through the Bitcoin network. These processing clients are installed on tablets at the front desk of establishments or in restaurants for users with BTC smartphone apps. (These payment processors are also available for desktop computers, in retail POS systems, and integrated into foodservice POS systems.) There is no need for credit cards or money to change hands.

These cashless transactions are fast and the processor can convert bitcoins into currency and make a daily direct deposit to the merchant’s bank account. In January 2014 it was announced that two Las Vegas hotel-casinos will accept Bitcoin payments at the front desk, in their restaurants and in the gift shop.

Sounds good, so what’s the problem?

Business owners should consider participation, security, and cost issues.

• A relatively small number of ordinary consumers and merchants currently use or understand Bitcoin. However, adoption is increasing globally and tools and technologies are being developed to facilitate participation.

• It’s 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 bitcoin was stolen from users’ online vaults. Bitcoins can be stolen just like any other currency, so network, server, and database security is paramount.

• Users should carefully safeguard their bitcoin wallets that contain their private keys. Backups or secure prints are crucial.

• Bitcoin is not regulated or insured by the US government, so there is no insurance for your account if the exchange goes out of business or is stolen by hackers.

• Bitcoins are relatively expensive. Current rates and sales prices are available from online exchanges.

Virtual currency is not yet universal, but it is gaining recognition and acceptance in the market. A business may decide to try Bitcoin to save on credit card 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.