I started researching Bitcoin a couple months ago. As the core developer of a shopping cart provider, I’m very interested in all forms of payment processing. I’ve used Venmo, Dwolla, Square, etc. and it’s always interesting to see how innovations can improve a merchant’s ability to accept payment. Most of them still use the underlying credit card network to get the job done.
Bitcoin caught my attention. I posted about it March 2nd on my personal blog and outlined the story of watching it go from $17 per BTC to $34 per BTC in February. It’s hovering around $215 today, just over 5 weeks later.
As you’re reading this, the price is:
If you’re not familiar with Bitcoin, a good place to start is weusecoins.com. In a nutshell, it’s an “experimental, decentralized digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: managing transactions and issuing money are carried out collectively by the network.” (from the main Bitcoin wiki).
Some say Bitcoin is to commerce what email is to communication or blogging is to journalism. They say it’s as disruptive as MP3s to the music industry. Some even claim it will change society more than the Internet because of how it could remove the need for a central banking system (and, thus, the government’s use of such a system). With these incredible claims, it’s not hard to see why the price has been skyrocketing.
But is it just a bubble?
Yes, according to the Bitcoin Wiki FAQ, “in the same way as the euro and dollar are. They only have value in exchange and have no inherent value. If everyone suddenly stopped accepting your dollars, euros or bitcoins, the ‘bubble’ would burst and their value would drop to zero.”
But what can it do?
How would you like to avoid paying 3% in processing fees? Eliminate chargebacks completely? Or transfer money between accounts without having to wait 3-5 business days? What about getting money to contractors, non-profits, and vendors on the other side of the world? Bitcoin can do this instantly and with a tiny fee (or you can choose to leave the fee out if you don’t need your transaction confirmed immediately). It’s also completely decentralized, so it can’t be controlled or confiscated (you heard about banks in Cyprus recently, right?) and the money can’t be “double spent” due to the way the p2p network validates transactions on the blockchain (which is basically the leger downloaded by every node in the network).
As of our latest release on March 25th (version 1.1), you can accept Bitcoin on your FoxyCart store right now. Just set up an account over at Bitpay.com and put in your API key in the payment section of the FoxyCart admin. That’s it. As an early adopter, you might even get noticed by the media like this bar in NYC that CNN Money just wrote about. The earliest known transaction via Bitcoin was 10,000 coins for a pizza. If that merchant held on to the coins, they’d have over $2M in buying power right now.
Are there risks involved?
Or course! It’s like the wild west of cyrpto-currencies. You might sell a product for $50 in BTC and find the price drop 20% an hour later (I’ve seen that happen a few times in the last 2 months — though the price recovered just as quickly, and then went further up). That said, services like Bitpay allow you to immediately convert to your currency of choice if that’s how you priced your items. If your computer systems aren’t secure, your Bitcoin wallet could get hacked via key logging software or other evil viruses. Bitcoin is like digital cash and when it’s gone, it’s gone. If you do get involved, make sure your antivirus is up to date, your wallet is securely backed up and you’re using password management software for secure, single-use passwords. There are also endless debates in #Bitcoin on IRC and the Bitcoin Forums about what weaknesses exist in the system. Those debates continue improving the protocol and the open-source clients that support it.
Could this be the future of currency?
It’s been said good money drives out bad money. Many believe a decentralized currency that can’t be inflated or devalued is good money. Time will tell if they are right.
As your payment solution provider, we’re working hard to stay up-to-speed on the latest trends and technologies related to your customers’ checkout process. Almost weekly we’re approached about some new payment system or gateway. We feel this one is worth looking into and investing some time to understand. Enough people already believe it’s the future to create a market and increase adoption.
As we’ve been doing since 2007, we’ll continue to improve our technology to serve you and answer your questions as best we can.
One thing is for sure, this Bitcoin thing is super interesting and a lot of people are watching intently. Some are taking action. What happens tomorrow is anyone’s guess.