Written by Anson Zeall
These days, the word “Bitcoin” is everywhere in the news. Headlines on every TV station, newspaper and website are declaring it as everything from a game-changing investment opportunity to an outright scam. Everyone seems to have an opinion about Bitcoin, and yet almost no one seems to have a simple explanation for what it is, or why an average person or merchant should care.
Unfortunately, those “experts” are mostly missing the point. For merchants and customers alike, Bitcoin is the light at the end of the tunnel.
The reason being fees. In almost any transaction involving a bank or credit card company, there are fees. For retailers in particular, those fees can add up quickly, eating 3.5% out of every transaction. That is a huge burden, and it only exists because of the outdated, fraud-prone technology behind the banking and credit system.
Bitcoin is different. It has all of the benefits of a bank account or credit card, but with a dramatically lower cost. Simply by accepting Bitcoin, merchants are able to increase their profits because they are not paying those huge transaction fees.
For owners of small businesses, such as bars, cafes or restaurants, every dollar in profit is important. A few percentage points can mean the difference between success and failure. By using Bitcoin, business owners can completely cut out the middleman, like banks and credit card companies, and keep the profit.
Another concern is the exchange rate, in 2013; bitcoins were valued at less than USD 20 each, only to skyrocket to USD 1,200 by the end of the year. A few months later, the price is bouncing around between USD 600 and USD 450. This is not a problem because bitcoin’s -seemingly erratic- price over the last year is a side effect of its rapidly growing market share. Bitcoin has boomed in the last year, and the shockwave has rattled lots of cages. However, only few are questioning the amount of investment going into Bitcoin, which has already topped USD 100 million in 2014 alone.
The Bitcoin ecosystem is still developing, and it is very easy for people to overreact and temporarily drive down the price. Whether, it is Mt.Gox collapsing, U.S. tax rules or China’s central bank issuing stern warnings, the price is then to fluctuate less as Bitcoin becomes more widely accepted. The important thing to keep in mind is that Bitcoin is clearly becoming an accepted part of the international finance ecosystem. Even with this year’s crash, the price is still up dramatically from the USD 20, in early 2013.
It is expected bitcoin price will also increase along the way as mining gets more difficult and more individuals and organizations understand its benefits. Therefore, from the consumer side, having bitcoins is an investment, and the merchant’s side, being able to convert bitcoins to the local currency as they receive payments will relief them from credit card headaches. Good news for merchants is that some service providers, such as CoinPip are now setting up these systems for them. Thus, Bitcoin is now developing into a complete cost-effective and convenient payment solution.
–Edited by Mohamed P.Hassan