A Bitcoin is a type of virtual or digital currency. It exists only online and is not regulated by any governing body. It can be used to pay for a variety of goods and services, which, unfortunately, has included drugs and weapons. While not universally accepted, Bitcoins are growing in popularity. Using Bitcoins can help businesses lower operating costs by eliminating the transaction fees charged by credit card companies. There are no chargebacks with Bitcoins. Once payment is issued, it is not reversible, which can help protect businesses from fraud.
The Bitcoin has a rather mysterious origin. It runs on peer-to-peer software, but the creators of this software have never publicly identified themselves. Early Bitcoin developers were most likely a group of programmers who worked collectively under the single pseudonym of Satoshi Nakamoto. There had been a few attempts at creating a virtual monetary system before Bitcoin, but none of them gained much traction or widespread use. The first open source issue of Bitcoins occurred in 2009, when 50 Bitcoins were used to order two pizzas for delivery from Papa John’s.
Perhaps Bitcoin’s biggest perceived advantage is that they don’t exist physically. They are entirely liquid and readily transferable. They also have appeal as an unregulated form of currency. At this point, no governmental body in the world controls their issuance or exchange. Bitcoins do not have to comply with the standards set forth by the payment card industry, which seeks to regulate the processing of credit card transactions and data. The responsibility of securing Bitcoin transactions falls on the users who must secure their digital wallets. Like a physical wallet, the digital version needs to be kept safe. It is necessary to encrypt your digital wallet and make sure it is backed up somewhere secure.
Bitcoin transactions are irreversible, which make them risky. They should only be used with companies you trust or have a prior relationship. Also, the price is highly volatile and can dramatically swing up and down. Since Bitcoins are not insured by the FDIC, they do present a risk. It is not recommended for anyone to store more than one would feel comfortable losing in this digital format.
Should your business accept Bitcoins?
Some people like the freedom and unregulated aspect of Bitcoins. It’s a rebel currency in a way, and there is a bit of a novelty factor, too. It is new; it is growing, and it is still relatively untested. Will it survive or be replaced by the next big thing? It’s difficult to say, but in a fast-changing tech world, it certainly seems possible.
While not an official currency, any income received in Bitcoins is still subject to taxes. Even though it is unregulated, it is still your responsibility to report earnings to the IRS. For employers, payroll taxes would also be required if you pay employees with Bitcoins.
Accepting Bitcoins can help businesses reach new and untapped markets, and it may provide a little marketing boost in the process. Whether Bitcoins are right for you or your business depends on your comfort level of risk. It might be wise to watch from the sidelines and see how the story unfolds. At the same time, there is an appeal to being involved in this new technology, which could someday replace paper and coin currency, altogether.
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