New technologies are emerging constantly, in 2009 Bitcoin became one of them. Though controversial it has recently become much more popular, with an increase in both media coverage and uptake.
What is Bitcoin?
Bitcoin is a cryptocurrency, so named because it uses cryptography when creating and transferring money. It exists as a decentralised network, with no central authority or control, where participants verify one anothers transactions collectively. Bitcoin is used when buying and selling goods and services online (and occasionally offline) and can be traded for more established currencies through international marketplaces. As of writing this article the price stands at $853.55 (£518.78) per bitcoin, up from less than $20 in early 2013.
For a video description of Bitcoin, checkout What is Bitcoin? by WeUseCoins.
Who uses Bitcoin?
A recent announcement that Netflix are looking in to accepting Bitcoin has given increased legitimacy to the digital currency, after facing difficult times in the wake of Chinese Bitcoin restrictions. Other notable vendors include OkCupid, Reddit, and Virgin Galactic, along with a host of others. Even bricks-and-mortar shops are joining the wave of companies adopting the new payment method.
The use of Bitcoin hasn’t always been so squeaky clean though, in the past it has been associated with transactions of a nefarious nature, as a result of the increased anonymity gained through Bitcoin transactions vs more common methods.
Largely though it is used by companies selling technology services, where those looking to use Bitcoin, as an emerging technology itself, are more likely to make use of it. Many web hosting and VPN providers have been accepting Bitcoin since it first gained traction.
Should I use Bitcoin?
As an emergent technology Bitcoin is not yet stable, far from it, until now there have been 2 major bubbles and subsequent crashes in the market, both occurring in 2013.
The first crash came as a result of the formation of single point of a failure in the system, through the largest exchange at the time, MtGox (based in Japan, but trading in a range of different currencies). MtGox came under huge strain during the bubble that had begun to form and when it started to struggle panic selling caused the huge drop in price. The second crash came as a result of the previously mentioned restrictions placed on the currency in China. Both times the currency has recovered, never falling below it’s price before the bubbles formed, indicating some level of stability.
Only time will tell how viable it is to accept Bitcoin as a payment option, there is little risk if you are quickly selling them on in exchange for local currency, and there may well be money to be made in keeping hold of them. But there are also further concerns beyond market stability, including the lack of transaction reversal capabilities and potential security issues, considering the ease by which bitcoins can be stolen if not properly protected.
If you plan on adopting Bitcoin do your research and make sure you fully understand what you are getting into, adopting proper security measures is a must.