Bitcoin is a Bit Mysterious
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Every couple of years in eCommerce a new form of alternative payment comes along that causes VP’s and Directors of eCommerce to scratch their heads and wonder if they should be adding the new form of payment to respective websites. Traditional payment types have always been credit cards (and the big three as the most popular – Visa, MasterCard, and American Express).
Personally, I have been involved in debates about adding Discover and Diners Club as alternative credit cards. I have gone round and round about the acceptance of TeleCheck for the diminutive sliver of people that do not have or do not trust giving credit cards online. Add to that the acceptance and processing of Amazon checkout, Google checkout, and PayPal and before you know it there are more choices about how to pay than the number of colors to choose for that shiny new widget in your shopping cart.
Then along comes to another payment type – Bitcoin. Wrapped in secrecy and tied to technical engineers, the difference is, Bitcoin is not just a payment type. Bitcoin is a revolution that is the current front-runner of the “cryptocurrency” rise in commerce. First, it was prevalent on the Deep Web (and that is really as ominous as it sounds – but for a later discussion in another post). Now, Bitcoin has found its way into mainstream discussions and is actually accepted on very few websites anyone can shop. Based on that, it merits at least a high-level review. Over the coming year, many sites will have to consider whether Bitcoin has a place in the operations of those sites.
What is Bitcoin
- Bitcoin is a currency, not just a payment type. Just like gold, the exchange rate for Bitcoin is set by the marketplace. It will go up and down based on what people are willing to pay for it.
- Bitcoin is “mined”. Much like taking gold out of the ground over a period of time, “miners” use various hardware and software combinations to solve equations that create new Bitcoin in small blocks (currently 25 Bitcoin).
- Bitcoin has a limited supply. Only 21 million Bitcoin will ever be available and that will take over 100 years to happen based on how they are mined and released to be used.
- Bitcoin has a marketplace. Many “exchanges” exist – Mt. Gox is the most widely known. It is here that Bitcoin are bought and sold on the exchange; thus, setting the prevailing value of the currency.
- Bitcoin is transparent. Every transaction ever done with Bitcoin is on a public ledger that can be accessed by users at any time.
- Bitcoin is real. Just like cash or gold or any other precious item, Bitcoin can be lost or stolen. Once gone from the owner, that value is lost by that owner. Because it is digital, it is typically stored on a hard drive and access should be secured like cash is secured.
I knew it was time to think more about Bitcoin when I saw my local news station do a profile on it during a late-night segment. So, it is not quite “prime time”, but it is moving closer to popular discussion and opinion each week. Therefore, it is time for companies to be talking about it in order to be ready as customers begin to make inquiries. Overstock.com now accepts Bitcoin on its website. I have not heard much about it being used, but clearly they saw a need to provide the service to customers. No doubt more sites will follow. In the end, knowing your customers and their needs will lead you to the right decision about jumping into the Bitcoin wave.
A great article is out there called On The Matter of Why Bitcoin Matters that compares and contrasts an article written by Marc Andreesen about the traits of Bitcoin. I highly recommend this be read to add some of the technical and philosophical thinking to this high level overview.