Bitcoin – Should Local Businesses Accept It?

An interesting development has popped up over the last couple of months, we are starting to see a new internet currency come into play.  Bitcoin is a new online currency that is gaining some steam.  This currency is not based on gold or silver but on solving complex mathematical equations. This video does a good job of explaining how it works and how it was developed.

Basics

Bitcoin is a digital currency that was originated by an unknown group or person.  This makes it a little “scary” but nonetheless it is getting a good amount of PR and funding.  Bitcoin got its start in 2009 by Satoshi Nakamoto but Satoshi is not known to the public.  We’re not even sure if it is a person or a group, although the thought is that it is a person and that they are doing this as a political thumbing of the nose to government regulated currency.

Math

The way that it works is that Bitcoins are hidden in mathematical equations and the only way to unearth them is by solving the code.  The code is solved by Bitcoin miners.  These Bitcoin miners are computers that are diving into the code trying to find the Bitcoins.  Once you find a block of Bitcoins they are yours to keep.  There are 21 million Bitcoins available to be found, which is how worth is determined.  Not all of the Bitcoins have been released and only a few are release each year.  The pricing of Bitcoins is fluid, like any currency, and it currently sits around $112 per Bitcoin.  Websites like Mt.Gox are where you can go to exchange the currency.  It’s value is based on what we think it is worth so it is much like gold.  You value gold because there is a limited amount of it and the same is true with Bitcoins. 

Acceptance

Now the question comes to play, who is accepting it and should local Philadelphia businesses jump on board?  Right now most transactions are mainly between individuals.  There are website companies that are accepting it but most of them are internet based gambling sites and web based businesses.  You can find them on Google by searching for “accepting Bitcoins”.  Right now there aren’t any major companies that are on the list but there are some major companies investing in it.  Bitcoin got $5 million investment from Union Square Ventures so with money starting to get invested into the system, it gives the movement some validity.

Paypal is a good example of how this can explode.  Paypal had a pretty quick adoption rate with local businesses.  Paypal is grounded in hard currency but the thinking is similar.  Since Bitcoin is its own currency the adoption is going to be a lot slower due to the uncertainty of the platform.  PayPal is considering accepting Bitcoins, which would be a major breakthrough.  If Bitcoins can break into the mainstream by way of PayPal or other banking facilities, this will go a long way to legitimizing the whole process.

Hackers

One issue that it will have to over come is hackers.  The Bitcoin system has been hacked a couple times and the hackers are targeting the online wallets of users. With everything online, there is the risk of getting hacked so it is something that everyone has to weigh before getting involved.  That being said, people thought Facebook would sell your personal information to the government and they would have full access to your life but look how successful it has been.  Even stocks markets can be affected by hackers, look at what happened when the AP twitter account was hacked and the stock market tanked.  These situations don’t keep the majority of people away from Facebook and the Stock Market.

Why Do It?

For local Philly businesses it comes down to whether or not they want to venture into this arena.  If they do, there are some benefits.

• No cost of entry
• No charge backs or fees
• Early adopters are bound to gain from it in the beginning

As with everything there are some drawbacks

• No regulation – could be a plus or minus really
• Hackers
• Market volatility

How To Market It

For those companies that do jump into this, they will need to get the word out.  If I was a business, that catered to the young cutting edge demographic, I would seriously think about moving forward with it.  There are lots of internet forums out there to get exposure for this. You can get listed in a lot of areas, like https://www.spendbitcoins.com/places/. Social marketing is going to be key in how to get the message out.  Twitter, Facebook, Google + and other are going to make or break your strategy.  You can also set up an Google Adwords account to focus in on searches for Bitcoins.  Also incorporating the Bitcoin into your website and text ads is going to help promote this new part of your business.

Final Thoughts

As Bitcoins pick up speed, you will be out in front of the wave.  If you are the early adopter type, you’ll want to get on board quick because as more people get involved the more watered down it will become.  I believe that internet currency is going to go through a couple generations of change but we’ll see something like Bitcoin that will catch on in the mainstream.  The internet has changed so much in our lives and this is one area that it can easily revolutionize. Educate yourself and be aware of the changes with Bitcoins, as this is probably the first wave of a title wave that has yet to come.

If you have any questions, feel free to email me at elaylon@gmail.com or visit my website, www.EricLaylon.com.