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Why We Accept Bitcoin

 

business accepting bitcoin

Our company is now accepting Bitcoin as a valid form of payment and will soon be offering our publishers a Bitcoin payout if they desire. While the future of Bitcoin is still undecided, we did our research and decided to accept them after speaking to a number of experts. Bitcoin is quite complex, but while understanding TCP/IP is exciting, it is not needed in order to send an email; understanding the underlying mathematics and cryptography is unnecessary, although quite fascinating: Bitcoin and other related crypto currencies just work. We summarize the top five reasons that we heard consistently from our pundits.

1. Lower transaction costs.  The obvious and short-term benefit to using Bitcoin compared with other clearinghouses like credit card companies, PayPal, and Western Union, are the lowered transaction costs, averaging in at 1%, as compared with the aforementioned at 2-4%. “With Bitcoin we can take temporary deposits and refund the amount without incurring charges,” says Alex Shapiro, founder of AmuseMi.com. The implications of the low cost transaction are wide ranging from micro-payments to peer-to-peer to international to the “unbanked’s” transactions.

Micro-transactions: Companies like PayPal implement a $.30 flat fee plus a percentage of the transaction as their fee. With a strictly variable pricing model, Bitcoin could open the door for the micro-transaction ecosystem to finally be economically viable.

Peer to Peer Transactions:  The barrier to entry to create your own small business has come down and more small businesses are opening up benefiting companies like Square and other SMB enablers. With Bitcoin, peer-to-peer transactions become even simpler.

International Transactions:  International transactions have always been extremely challenging.  Fees on both ends with foreign exchange risk in the middle usually whittles away any profits. Similarly, sending money via wire or Western Union is also expensive. Dominic Paolilloof Brown Harris Stevens mentions how certain international real estate transactions, like condominiums, would be simplified with Bitcoin and could be advantageous, especially in markets like New York where “all cash” is always a possibility no matter what the number is.

“Unbanked” Transactions: Without a need for infrastructure, Bitcoin can be an alternative for the unbanked community, either domestic or abroad.  Fees for check cashing can be upwards of 2%, double the rate of a standard Bitcoin transaction.

As more Bitcoin services rise, friction in the marketplace will decrease in both settlement times, currently about ten minutes, as well as in transacting.

2. Theoretically less risky than any currency.  Since Bitcoin is not tied to any country, the currency is theoretically more stable and suffers from less political risk. Of course, the biggest political risk is that Bitcoin becomes unrecognized as it was in China for a few days last year.  However, this risk counteracts the restrictions that governments can levy via the banking system as Cypress did in 2013, and a reason why Bitcoin is a big deal in China and other countries with potentially unstable political and economic situations. Furthermore, in developed countries, like the US, the Fed can implement policies where they can print more money causing inflation. Since the Bitcoin protocol calls for a finite number of circulating coins, there will be more deflationary effects with this digital currency.

3. Security.  Silicon Valley engineer Stuart Eichert mentions how “Bitcoin is like cash. Who ever has them owns them, so processing and transacting can be really safe for your customers. Unlike the recent attack on Target, customers using Bitcoin leave no data behind that can be used to steal their identity or print fake credit cards.” Public and private key encryption** was created especially for the Internet age as opposed to credit cards which have no private values or tokens other than the physical card, which is unnecessary for online transactions.  The only way that a company can detect fraud is if they see a deviation of behavior or if the shipping address is different. Bitcoin wallet addresses are public but anonymous, thus the public ledger of Bitcoin creates a money trail and prevents double spending. Since Bitcoins act like cash, there are no chargebacks. Thus caveat emptor, and they can be lost. Although losing them requires a bit more work. Furthermore, since there’s no central government or third parties involved, they can’t freeze your assets, like when WikiLeaks.com was shut down by PayPal.

4. Publicity.  The newness and risk associated with accepting Bitcoins will give you an initial PR pop. Internet companies like Overstock, OKCupid, Reddit and Zynga accept Bitcoin as a form of payment, and more interesting are the offline brick and mortar stores accepting Bitcoin like Meze Grill and Hudson Eatery in Manhattan.  Social Media maven Harry Hawk mentions how Burger Bear, a food truck in London, one of the first of 26 businesses in the UK to accept Bitcoin, handled 1/3 of all their transactions on their first day of acceptance via Bitcoin. The fervor of the Bitcoin community will also provide support to you as well as directories like spendbitcoins.com. After all, the 21 million Bitcoins need to be spent somewhere!  A company recently reverse-merged into a shell partially for publicity; it began trading on February 6th and has since gained nearly 40%.

5. The Bitcoin Protocol Itself.  Paul Kemp Robertson has an interesting idea on the future of branded currencies and how airline miles, coffee shop loyalty points and sandwich stamps can all piggyback on the Bitcoin protocol. The protocol allows for “colored” coins in which a field attached to the coins can be designated for anything from shares of stock, futures contracts, or used to represent physical property. The costly loyalty programs that only large chains have or the easily forged stamps and cards that lead to loss can be replaced with crypto currency. With branded crypto currency, the brands receive a similar loyalty with all of the benefits of Bitcoin. Imagine actual Star Bucks for Starbucks…

Our world has shifted from the industrial revolution to the current information age. As value has become stored inside intellectual property, it only makes sense that our medium of exchange is as well. Today we still deal in physical goods. However, one day in the near future, you’ll be able to purchase and download designs over the Internet, pay with Bitcoin, and print them out on your 3D printer.

** Why Public Key Encryption works — As an aside, the only way that hackers know how to crack public key encryption is via ‘brute force,’ repetition of operations over and over again.  The operation is the most intense: long division of very big numbers.  (Remember how much you hated that versus the other math you did?  The computer does too.)

*** As I was writing this, my dad’s computer was infected with the cryptolocker virus, which encrypts all of the files on your computer with a public key and for a ransom, will provide you the private key.  Ironically, the ransom was two Bitcoins, a way to maintain anonymity and security for the hacker as well as be accepted anywhere worldwide, instantaneously. (Note: he did NOT pay the ransom.)

Reprinted by permission.

Image credit: CC by antanacoins

 

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About the author: Roger Wu

Roger Wu is co-founder of Cooperatize, an advertising platform for sponsored content. Previously, he founded Klickable.tv, an interactive video platform and was part of the founding team at Bloomberg Law.

  • http://www.mistaweb.com/ Horst G Ludwig

    Any digital currency does make sense only if it removes the principal dirt attached to currency systems. Why doing half steps? The problem of Bitcoin is the same problem we encounter with the following: “Who sets the amount of emission, who does control it and how much does it cost”. So far Bitcoin is a wet dream of programmer not caring about economics, human reality and human problems, just another toy with speculative outcome. And that is my critics to all colleagues of the IT world, not being consequent enough with what we really could do for this world. You are pretty much in love with Bitcoin and still I do invite you to be more reflexive and not ignoring the rest of 95% of humanity. Thanks a lot.

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