OK, so what's Bitcoin?
It's no actual coin, it's "cryptocurrency," an electronic form of payment that is produced ("mined") by a lot of people worldwide. It allows peer-to-peer transactions instantly, worldwide, for free or at suprisingly low cost.
Bitcoin was invented after decades of research into cryptography by software developer, Satoshi Nakamoto (believed to become a pseudonym), who designed the algorithm and introduced it in 2009. His true identity remains a mystery.
This currency is not backed by a concrete commodity (such as gold or silver); bitcoins are traded online helping to make them a commodity in themselves.
Bitcoin is definitely an open-source product, accessible by anyone who is a user. All you need is definitely an current email address, Access to the internet, and money to obtain started.
Where does it come from?
Bitcoin is mined on a distributed computer network of users running specialized software; the network solves certain mathematical proofs, and looks for a specific data sequence ("block") that creates a specific pattern once the BTC algorithm is applied to it. A match produces a bitcoin. It's complex and time- and energy-consuming.
Only 21 million bitcoins are ever to be mined (about 11 million are still in circulation). The math problems the network computers solve get progressively more difficult to help keep the mining operations and supply in check.
This network also validates all of the transactions through cryptography.
How does Bitcoin work?
Internet users transfer digital assets (bits) together on a network. There's no online bank; rather, Bitcoin has been described as an Internet-wide distributed ledger. Users buy Bitcoin with cash or by selling a product or service for Bitcoin. Bitcoin wallets store and utilize this digital currency. Users may sell out of this virtual ledger by trading their Bitcoin to someone else who desires in. Anyone can try this, anywhere in the world.
You will find smartphone apps for conducting mobile Bitcoin transactions and Bitcoin exchanges are populating the Internet.
How is Bitcoin valued?
Bitcoin is not held or controlled by an economic institution; it is wholly decentralized. Unlike real-world money it can not be devalued by governments or banks.
Instead, Bitcoin's value lies simply in its acceptance between users as an application of payment and because its supply is finite. Its global currency values fluctuate according to provide and demand and market speculation; as more individuals create wallets and hold and spend bitcoins, and more businesses accept it, Bitcoin's value will rise. Banks are now actually wanting to value Bitcoin and some investment websites predict the price of a bitcoin will soon be several thousand dollars in 2014.
What are its benefits?
You will find benefits to consumers and merchants that are looking to utilize this payment option.
Fast transactions - Bitcoin is transferred instantly on the Internet.
No fees/low fees -- Unlike charge cards, Bitcoin can be used for free or suprisingly low fees. Without the centralized institution as middle man, there are no authorizations (and fees) required. This improves profit margins sales.
Eliminates fraud risk -Only the Bitcoin owner can send payment to the intended recipient, who is the only one who are able to receive it. The network knows the transfer has occurred and transactions are validated; they can not be challenged or taken back. That is big for online merchants who're often susceptible to credit card processors'assessments of whether or not a transaction is fraudulent, or businesses that pay the high price of credit card chargebacks.
Data is secure -- As we've seen with recent hacks on national retailers'payment processing systems, the Internet is not always a protected place for private data. With Bitcoin, users don't quit private information.
a. They have two keys - a public key that serves while the bitcoin address and an exclusive key with personal data.
b. Transactions are "signed" digitally by combining the general public and private keys; a mathematical function is applied and a certificate is generated proving an individual initiated the transaction. Digital signatures are unique to each transaction and can not be re-used.
c. The merchant/recipient never sees your secret information (name, number, physical address) so it's somewhat anonymous but it is traceable (to the bitcoin address on the general public key).
Convenient payment system -- Merchants may use Bitcoin entirely as a payment system; they don't have to carry any Bitcoin currency since Bitcoin could be changed into dollars. Consumers or merchants can trade in and out of Bitcoin and other currencies at any time.
International payments - Bitcoin is used all over the world; e-commerce merchants and service providers can quickly accept international payments, which open up new potential marketplaces for them.
An easy task to track -- The network tracks and permanently logs every transaction in the Bitcoin block chain (the database). In the case of possible wrongdoing, it now is easier for law enforcement officials to trace these transactions.
Micropayments are possible - Bitcoins could be divided down to one one-hundred-millionth, so running small payments of a buck or less becomes a free or near-free transaction. This is actually a real boon for convenience stores, coffee shops, and subscription-based websites (videos, publications).
Still only a little confused? Here certainly are a few examples of transactions:
Bitcoin in the retail environment
At checkout, the payer runs on the smartphone app to scan a QR code with the transaction information needed to transfer the bitcoin to the retailer. Tapping the "Confirm" button completes the transaction. If an individual doesn't own any Bitcoin, the network converts dollars in his account into the digital currency.
The retailer can convert that Bitcoin into dollars when it really wants to, there have been no or suprisingly low processing fees (instead of 2 to 3 percent), no hackers can steal personal consumer information, and there is no threat of fraud bitcoin canada . Very slick.
Bitcoins in hospitality
Hotels can accept Bitcoin for room and dining payments on the premises for guests who wish to pay for by Bitcoin employing their mobile wallets, or PC-to-website to fund a reservation online. A third-party BTC merchant processor can assist in handling the transactions which it clears on the Bitcoin network. These processing clients are installed on tablets at the establishments'front desk or in the restaurants for users with BTC smartphone apps. (These payment processors may also be available for desktops, in retail POS systems, and incorporated into foodservice POS systems.) No charge cards or money need to change hands.
These cashless transactions are fast and the processor can convert bitcoins into currency and make a daily direct deposit into the establishment's bank account. It was announced in January 2014 that two Las Vegas hotel-casinos encourage Bitcoin payments in front desk, inside their restaurants, and in the gift shop.
It sounds good - so what's the catch?
Business owners must look into issues of participation, security and cost.
• A somewhat few ordinary consumers and merchants currently use or understand Bitcoin. However, adoption is increasing globally and tools and technologies are increasingly being developed to produce participation easier.
• It's the Internet, so hackers are threats to the exchanges. The Economist reported that a Bitcoin exchange was hacked in September 2013 and $250,000 in bitcoins was stolen from users'online vaults. Bitcoins could be stolen like other currency, so vigilant network, server and database security is paramount.
• Users must carefully safeguard their bitcoin wallets which contain their private keys. Secure backups or printouts are crucial.
• Bitcoin is not regulated or insured by the US government so there is no insurance for the account if the exchange goes out of business or is robbed by hackers.
• Bitcoins are relatively expensive. Current rates and selling prices are on the online exchanges.
The virtual currency is not even universal but it is gaining market awareness and acceptance. A business may decide to use Bitcoin to truly save on credit card and bank fees, as a customer convenience, or to see if it helps or hinders sales and profitability.
