Dollars, Euros, Sterling – the world of currency got a lot more confusing with the introduction of digital currency. Tim the tech bloke finds out more
Think of digital currency and you probably immediately think of Bitcoin. Established in 2000, it is a currency that has no country of ownership, is overseen by no recognised central bank, is difficult to trace and its value varies wildly. Even though Bitcoin’s shine might now appear tarnished, the Wall Street Journal said it will be one of the most powerful innovations in finance in 500 years.
So, here’s some background if and when a supplier mentions or includes Bit-coin as payment.
The transactions are simple but use complex background methodology. It can appear as straightforward as a regular transaction from one account (an online Bitcoin ‘wallet’) to another. However, a ‘blockchain ledger’ (a system-wide record of the transaction) prompts other Bitcoin ‘miners’ (the creator alogorithm) to verify the transaction anonymously, who then legitimise the transfer. Got it? There’s actually a lot more to it than that.
But attractively, there are no transaction fees to pay. That might be one reason why many regular shopfront and service businesses openly welcome Bit-coin as legal tender. Cafes worldwide in tourist hotspots often tout accepting this digital currency.
Here in Australia, no less than Lachlan McKnight, the CEO of law firm LegalVision, told Executive PA Media, “Legalvision was Australia’s first law firm to accept payment in Bitcoin. The decision and subsequent publicity was great for our business as it put us front of mind for tech businesses. We have however found that not many businesses have chosen this payment method. The fluctuation in the exchange rate has also been an issue as we’ve had to change Bit-coin pricing regularly. Overall, we see Bit-coin as a positive development.”
As such, if your business chooses to accept or offer Bitcoin, be prepared to expect changes in pricing over time for the same services. No-one ‘sets’ the cash rate for Bitcoin. Celambarasan Ramasamy is a general partner with Focus Investments in Los Angeles, a Bitcoin-focused investment fund. He sees greater protection for his business using one unique aspect of digital currency.
“I frequently work on putting together business-related patent applications. Documenting my progress as I work on these ideas is always a challenge,” he said. “I used to get my documents manually notarised by a notary public in-order to establish proof of my progress. Now I directly use Bitcoin’s blockchain to timestamp my digital documents to establish proof of ownership without having to look for a notary public each time. I use a service called the ‘proof of existence’ to do the time stamping on the Bitcoin blockchain, by paying a small fee in Bitcoin.”
Evaluate the risk
In Ireland, online art dealer and owner of myartgallery.ie Kritika Ashok accepts Bit-coin alongside PayPal and regular credit cards.
“We are always expanding the ways in which we can lower the hassle a customer has to undergo. For most businesses the set up cost is low, it is possible to convert it to cash immediately and therefore, minimise the risk to the business,” Kritika told Executive PA Media, adding “However, every business should evaluate the decision to accept these coins based on their customer base and business model.”
But it must be noted that the de-centralised nature of digital currencies also makes it popular with the black market as well, and here is where it gets murky. No ID is required to open an ‘account’, Bit-coin value can be transferred without any authority oversight and it takes no more than an internet connection to undertake.