Bitcoins Are Now Worth More Than Gold… But Are They Worth Your Time?
Since replacing bartering for goods many moons ago, money has seen its share of ups and downs but it has always been the gold standard (see what I did there?). Then came the financial crisis of 2008 where everything changed. On January 3rd, 2009, a new form of currency appeared after about two years of of development. That currency was the bitcoin.
According to BlockChain, bitcoins can be defined as:
“A system designed to create a truly free, open, fair, equal, decentralized & borderless network to facilitate trade between the only two parties that matter in a transaction. A transaction system without buildings, owners or employees.”
Up until the invention of the bitcoin, people hardly ever questioned the monetary system, but as of late, more and more consumers, businesses, and governments have taken notice. Created as a “cryptocurrency”, bitcoins are decentralized and contain encryption algorithms that are shared with everyone on the network and used to verify and document each transaction. This concept allows for person-to-person transactions – no middleman, no financial institutions, and no government involvement. Imagine a ledger book that every person on the bitcoin network has access to which is updated in real-time as transactions happen. This makes it impossible for any one person to fudge the numbers. As of March 3, 2017, bitcoins officially became worth more than gold.
Worth Its [Digital] Weight In Gold
The fact that bitcoins have soared in value in just under a decade has a lot of implications for the future of commerce and for your business. Companies like Microsoft, Shopify, and WordPress (just to name a few) have begun accepting bitcoins. In the UK, there even exists a bar that accepts bitcoins as payment for pints. Companies have started collecting bitcoins by the truckload, governments have tried to step in and regulate, and in the case of the U.S., haven’t been able keep up. Even banks like J.P. Morgan, Chase, and Citigroup have started to find ways to get in on the action to become the middleman in a monetary system that was designed to cut out the middleman. This doesn’t even begin to scratch the surface on the stock market. If money becomes obsolete, what happens to the place where people trade stock in companies for money? Suffice it to say, if this ever were to happen, there would be a huge shift in the world economy and how it runs, but more importantly how businesses function and monetize.
So what does this mean for small businesses? Should companies open the flood gates and get into the game now? Or should you hold out until a clearer picture of what the future will hold presents itself? These are important questions to ask yourself because we are in a unique time, one for which there is no precedent (except for when money replaced bartering). Some of the big advantages to accepting bitcoin are that there are no fees, and the middle man doesn’t exist. In addition, the payments are instantaneous, so no more waiting for checks to clear. Also, bitcoin acts more like cash than credit so all transactions are final once they are verified by the Blockchain system. This might sound like the perfect solution but there are also pitfalls: like the fact that the bitcoin is still unregulated, somewhat unstable, and no one really knows how things will play out. The currency has shown great potential but has had its share of ups and downs. At the end of the day, the decision you have to make is based on what the value add is for your business. Make no mistake, bitcoin will only become fully normalized once more big names get on board, so you have to decide if it makes sense for you to get ahead of the curve, or adjust later.
For a more in-depth explanation of how bitcoins work, you can view a detailed timeline of the history of bitcoin here. For a full breakdown (in layman’s terms), watch this video put together by The Guardian here.
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