Bitcoin For Dummies. Prypto

the bitcoin network. Without individual users, there is no bitcoin. The more people embrace bitcoin, the better it works. Bitcoin needs an ever-expanding community who actively use bitcoin as a payment method, either by buying goods and services with bitcoins or offering goods and services in exchange for bitcoins.

      

Due to the digital currency’s free market spirit, anyone in the world can set up their own business and accept bitcoin payments in a matter of minutes. Plus, existing business owners can offer bitcoin as an alternative payment method, with the potential to expand their customer base on a global scale. It’s easy to do your bit(coin) and get involved.

Getting Technical

      As you’d expect with a peer-to-peer payment system, the technology powering bitcoin digital currency is a force to be reckoned with. A lot of focus is being put on making bitcoin’s blockchain technology a powerful tool in the financial sector. That’s only to be expected, because most of the focus regarding bitcoin revolves around the currency aspect.

      

Bitcoin’s technology offers unprecedented technological options and abilities only dreamt of a few years ago. And a great deal of potential remains hidden below the surface for the time being, as some of the world’s brightest minds try to grasp the potential implications of integrating bitcoin technology into our daily lives. There is more discussion about this in Chapter 3.

      

Bitcoin technology has been underestimated in the past, and to be honest, it has a bit of a checkered history. Several platforms have been created in order to make bitcoin more accessible and usable, but that has not always lead to a happy ending – especially when it comes to security. New tools like bitcoin represent a learning curve for everyone. Bitcoin is only slowly starting to mature in that regard.

      The potential of bitcoin technology has attracted many interested parties from all aspects of life. The frontrunners are people in the financial sector, who are intrigued by the open ledger aspect of bitcoin technology. Open ledger means anyone in the world can see every financial transaction on the network take place in real time. Even though that idea might seem a bit scary, open ledger in a system allowing us to track multiple things would be beneficial. None of these implementations have to be related to finance per se, but there are plenty of options worth exploring in that sector.

      

When it comes to accepting bitcoin payments, there’s a lot of room left to explore. Although integrating a bitcoin payment option onto your website just takes a few minutes, in-store payments are a slightly different manner. However, multiple payment processors will gladly help you convert your bitcoin transactions to local currency. To make that deal even better, you receive payments to your bank account the very next business day, rather than waiting up to a week for credit card payments to clear through the banking network. And the fees for accepting bitcoin as a payment solution are likely to be low as well.

Bitcoin as Currency

      Whenever we talk to people about bitcoin, one of the first things they mention is the current bitcoin price. At the time of writing, the price hovers around $300 per bitcoin.

      Bitcoin had nearly no value until 2011 and only then started climbing the charts slowly. However, in 2013 bitcoin saw a peak price of well above $1,100, which some attributed to market manipulation by a trading bot on the largest bitcoin exchange at that time.

      The bitcoin price is determined by its users under the free market principle of supply and demand. And although the bitcoin supply is limited to 21 million “coins” in total – to be reached by 2140 – no huge demand exists for this digital currency just yet. As bitcoin matures further over the next few years, that story might change.

      Why 21 million? Nobody knows. Some believe it’s because it’s a mathematical equation that brings us to the amount of coins available until the year 2140 with rewards being halved every four years.

      

Keep in mind that bitcoin is a payment method that can be used online and in the real world as well. However, that does not make bitcoin a currency, because it lacks certain aspects of the “ground rules” that determine whether a payment method is a currency or not. But according to most experts around the world, bitcoin is to be considered a digital currency in its truest form. As we try to wrap our hands around this new currency technology, who is to say whether or not that term is correct? What we can say is that bitcoin is a valid payment method for many goods and services, and that is what makes its digital aspect so much fun to explore.

      By being a decentralized payment method (meaning no government or official entity controls it), bitcoin lets anyone in the world accept a digital currency payment from anyone else in the world. Bitcoin is the same digital currency across borders, no matter what the country’s physical currency, and can be converted into nearly any local currency on request. With no transaction fees to speak of, and being able to receive your payments the next business day, what’s not to like? On top of that, mobile payments are on the rise, so bitcoin is an excellent alternative mobile payment method to take your customer base to the next level, at very little cost.

       Bitcoin as a currency tool

      For bitcoin to be widely thought of as a currency, it needs to be used more and more. As you might imagine, it’s hard enough to convince merchants to accept bitcoin as a brand new currency, but it is even harder to convince consumers to get involved with digital currency.

      The advantages for the merchants are crystal clear: Bitcoin cuts down on fees and other costs. But if no one visiting your store is using bitcoin as a payment method, there is no benefit in accepting it either. So it’s up to the consumer to set the wheels in motion.

      

To make bitcoin a more convenient currency tool, you can turn to familiar-looking plastic:

      ✔ Prepaid bitcoin cards

      ✔ Bitcoin debit cards

      These plastic cards can be topped up with bitcoin – or linked to an existing bitcoin wallet (for more on wallets, see Chapter 5) – allowing you to spend digital currency wherever major credit cards are accepted. The merchant still pays the same fees as with regular card transactions and still receives funds in local currency.

      Bitcoin is still some way from being a mainstream payment method; retailers need to be convinced to accept bitcoin. We think the time has come to start convincing the everyday consumer to leave the cash and cards at home and pay with bitcoin using their mobile device. That will not happen overnight, so until then, bitcoin users must be patient (while reveling in the thought that they’re ahead of the game).

       Bitcoin and retailers

      As a forward-thinking retailer, you should be ready and prepared to accept bitcoin payments for your online or brick-and-mortar shop. Accepting bitcoin payments doesn’t require you to deploy additional hardware, as it peacefully coexists next to your existing payment infrastructure. You do need an Internet connection however, but most retailers already have that.

      

Here are some of the main advantages of accepting bitcoin:

      ✔ Accepting bitcoin payments is subject to very low transaction fees – a welcome change from the 3 to 5 percent per transaction you lose when accepting any type of card transaction.

      ✔ Bitcoin payments can be converted to a local currency of your choice, and funds are deposited to your bank account the very next business day. If you’re using a good payment processor, they will charge you only a small margin to convert the bitcoin to your local currency. Compare that to card transactions, where you have to wait up to a week or so before you receive the money – minus the 3 to 5 percent transaction fee plus an additional fee for any currency conversions – and bitcoin is the clear