While the term may sound like something straight out of an episode of Star Trek, bitcoin is actually not that futuristic and has even gained popularity as a payment method.
Since its introduction in 2009, bitcoin has garnered a significant following. In fact, large businesses around the world are changing the payment options they’re offering their customers to include bitcoin; major online retailers like Overstock, TigerDirect, and Subway have started accepting bitcoin payments to boost their global sales.
Many believe it is a revolutionary movement, disrupting traditional banking systems as we know them, but for any consumer, bitcoin is simple to setup and use.
What is bitcoin?
Bitcoin is a form of digital currency, or “cryptocurrency”, stored electronically in bitcoin wallets that allow you to buy and use bitcoin securely. Since e-currency is entirely digital, bitcoin wallets are accessible on devices such as mobile phones and laptops. Coinbase, AirBitz, and Copay are popular examples of a bitcoin wallet.
The currency was originally created by a software developer under the pseudonym Satoshi Nakamoto. The goal was to produce a currency that was independent of any central authority, meaning no single institution (bank) would be able to control how people use their bitcoins.
Bitcoin can be considered the currency of the people because it shifts the monopoly of power and flow of currency into the hands of consumers. Users can instantly send and receive bitcoin payments of any size from anywhere in the world.
Payment methods have changed over the years; if it hadn’t, we would still be paying with cattle. The evolution of money has occurred in phases. First was the physical, where we had tangible currency such as paper and metal. Next came the electronic, where we paid with credit cards through simple digital signals. Now, we are entering the virtual sphere with cryptocurrency, where we use complex digital signals that are encrypted.
How does bitcoin work?
Bitcoin is operated through a direct peer-to-peer payment community. Rather than the main Visa and Mastercard networks that credit cards use, bitcoin has a decentralized community of servers that are managed by individuals and businesses that carry out transaction matching and data transfer. This means there is no need for a middle-man like a bank or credit agency. Unlike banks, governments, and other corporations who have the ability to freeze your funds at their discretion, bitcoin users store the value of the electronic payment on their servers and thus have more control over their funds.
How are bitcoins created?
Bitcoin is a digital currency which means instead of being printed, it is created through the calculation of complex mathematical formulas in a process known as “mining”.
Bitcoin miners are people who have built software programs that perform highly complex calculations to solve the mathematical formulas. When these formulas are solved, transactions between different people are realized and new bitcoins are created.
Transparency is a fundamental attribute of bitcoin, so every transaction is recorded and stored in a master list called the blockchain and is publically available. Although the transactions are recorded, bitcoin is a secure form of payment because accounts are not linked to any personal information.
Who can accept bitcoins?
In Allentown, Pennsylvania, one Subway restaurant allows patrons to pay for their sandwiches via bitcoin. For a few consumers, the opportunity to use their bitcoins to buy something as ordinary as a Subway sandwich was too exciting to pass up; some customers drove over 2 hours to try it out.
With bitcoin slowly but surely replacing other forms of payment, implementation is possible with any merchant accepting payment for products or services.
As more consumers become educated and informed, the demand for bitcoin will increase, so it’s worth considering for your business. Don’t be afraid to adapt in order to allow your customers to pay how they want. Bitcoin is not as complex as it may seem, and the potential benefits for your business are massive.
Payfirma is committed to helping merchants accept any type of payment, so we’re launching a beta program for the bitcoin API. If you’re interested in being on the frontline of newest way to pay and contribute to making Payfirma Bitcoin API the best in the industry, pre-qualify for the beta today.
Want to know more?
Download this free white paper to learn where cryptocurrency came from, how it is changing the way we exchange goods and services, and why it continues to grow in popularity.