A lot of people are quick to dismiss Bitcoin because of tales of misfortune that have been circulating the media. There was the security breach at Mt. Gox, the volatility of the cryptocurrency at its early stages, and the instability surfacing around the Bitcoin black markets. However, these stories are not up to date—some of them have been circulating since the days of Bitcoin’s inception in 2009—and more often than not, these news items are clickbait articles that bank on sensationalized fear. Until now, very little light is cast on the nature of Bitcoin itself.
So what is the latest score on Bitcoin? Here we outline real and un-hyped advantages and disadvantages of using the digital currency from the side of both consumers and merchants.
But first, what is Bitcoin again?
Bitcoin is now known to be the world’s first decentralized digital currency, and here are its features that distinguish it from other modes of payment.
- Bitcoin uses encrypting technology that is considered to be military grade. Bitcoin transactions can be counted on to be more secure than regular bank transactions.
- Bitcoin is decentralized, meaning it is not affiliated with any government, central authority or bank. It is hinged to its peer-to-peer network or community of Bitcoin buyers and sellers.
- A private network of computers carries out Bitcoin payments and every single transaction is logged in real time in a public record known as a blockchain.
- The only way new bitcoins can enter the market is when it is needed to pay “Bitcoin miners,” or those individuals with super advanced computers that participate in approving the extremely complex and mathematical nature of Bitcoin cryptography.
Military level security. Detachment from a single regulating body. High accountability. These are the fundamental characteristics of Bitcoin.
Pros and Cons: For Consumers
All members of the buying public, including you and me, should know that these are the advantages and disadvantages of using Bitcoin.
- Identity protection and security. You are not required to disclose personal information such as your full name or credit card number to be able to buy things with bitcoins. Instead, you will utilize anonymous and encrypted transaction IDs that change with every transaction.
- Little to no fees = more savings. You can send and receive money at little to no cost because Bitcoin does not charge you 3-4% per transaction the way credit cards do. Moreover, when you make international payments, you don’t have to pay expensive foreign transaction fees because Bitcoin is not dependent on ForEx.
- However, Bitcoin tends to fluctuate dramatically. You can either profit a lot or lose a lot of money depending on how well you speculate the market.
- Transactions are irreversible. Make sure you are sending to the right person at all times because there is no way to cancel a Bitcoin payment as soon as it is sent out. The only way you can get your money back is if the same person will send the same amount back to you.
Pros and Cons: For Merchants
If you are a business owner, here’s what you stand to gain or lose when you use Bitcoin.
- You’re going to save a lot of money. Running a business means you have to process a lot of transactions and receive multiple payments on a daily basis. Credit card companies and other third parties such as PayPal charge as much as 3-4% per transaction. Imagine how much money you are giving away to the payment of fees. The Bitcoin game is different because you are charged either a flat monthly fee or a significantly lower amount than per transaction charges.
- Eliminate your worries. With Bitcoin, you don’t have to worry about customer chargebacks, PCI compliance, and cyber criminals trying to decode your account. Remember that they have military grade security.
- Cheaper software and hardware. You don’t need a pricey POS system to set up Bitcoin for your business. A simple tablet or smartphone with the right app will do.
- You need to set clear return policies. Because Bitcoin transactions are irreversible, you have to adjust by making sure all your customers know that you cannot accept returns. But if you do need to issue a refund, base your price on the original dollar price and not the Bitcoin rate.
A lot of developments are expected to take place in the dynamic world of Bitcoin so keep yourself abreast with the latest. Do not rely on over-hyped headlines and fear-inducing articles that shroud the real potential of this amazing digital technology. Consumers can benefit from the added security features that will minimize identity theft and fraud. Merchants can also benefit from this added layer of cryptography to ward off hackers, and saving a lot on processing fees is not a bad deal either. So consider using Bitcoin and see just how much it could work for you or your business.