Since the first 50 Bitcoins were created on January 3, 2009, the digital currency has evolved rapidly. Under the pseudonym Satoshi Nakamoto, one or more developers have created a cryptocurrency to be independent of conventional currencies and banks. The distribution of Bitcoins takes place via a network that is formed jointly by all users. Internet access is sufficient for the participants, so that Bitcoins can be used as a means of payment in all countries of the world. The virtual monetary unit initially spread among Internet users, but from 2013 onwards it increasingly gained access to acceptance points from various industries, such as hotels, restaurants, delivery services, online retailers or web services. Donations to charitable organizations are also possible in Bitcoins.
The spread of Bitcoins
The virtual currency is created by computers and stored by users in a digital wallet. In contrast to conventional money, the operators do not print banknotes or mint coins. The number of Bitcoins generated so far can be calculated mathematically. The inventors have limited the maximum number of cryptocurrency to 21 million units. The multiplication takes place through so-called mining, in which new Bitcoins are mined. These are complex computational tasks that are used to confirm third-party payments and ensure the operation of the Bitcoin network. When a user solves the task, they receive a coin as a reward. About twelve new units are created approximately every ten minutes. Therefore, experts assume that there are currently between 16 million and 17 million coins in circulation. The maximum number of 21 million Bitcoins is expected to be reached between 2040 and 2100. As the computational tasks become more complex, the time it takes to mine a new unit increases, so the total number increases more and more slowly. Today, private individuals are no longer able to generate Bitcoins themselves on their home PCs. This is done by huge Bitcoin Farms, i.e. large halls in which thousands of computers are busy around the clock producing new coins.
Can the digital currency play a role in business?
In Germany, about 100 companies accept the digital currency. In Austria, consumers can purchase Bitcoins in all post offices. ATMs where consumers can deposit money to top up the balance in their Bitcoin wallet can also be found in some countries. Lealane, a manufacturer from Hawaii, produces physical Bitcoin coins that can be topped up with a balance. In North America, the digital monetary unit is widely used and consumers can pay for goods or services with the cryptocurrency. These are mainly online merchants who accept Bitcoins to pay bills. In Japan, Bitcoins were even declared legal tender on April 1, 2017. This information suggests that the digital currency could play a role in business. However, the arguments of experts who see the use of digital means of payment as a great danger for companies and economies speak against this.
What are the challenges for companies?
Even though the acceptance of Bitcoins is increasing worldwide, companies are taking a big risk when they accept the digital means of payment. Above all, the price fluctuations of the virtual currency represent a high risk factor. In 2017, the Bitcoin price experienced an extreme price increase from just over $1,000.00 in January to more than $6,000.00 in October. Since the currency is not controlled and backed by a central bank, an equally rapid fall in the price can follow, which can put a company in serious financial difficulties. The balance in the Bitcoin wallet only remains stable for a company if it finds enough business partners who accept payments in Bitcoins.
At the same time, however, this also represents a great opportunity for future-oriented companies. The digitization of accounting is an important point for a company that values high data quality, fast reporting and better target achievement. This also includes paperless and digital payment transactions. When payments are no longer made through bank accounts, but are processed through the Bitcoin payment system, companies save time and money. Worldwide payments are made quickly and directly without charging fees.
What experiences have you had with Bitcoins? Are digital currencies the future in your view? We look forward to your comments.
Image source: Fotolia.com, Photographer: DedMityay
