This post was originally published on my LinkedIn account here.
With Microsoft recently joining the ever-growing list of companies that accept bitcoin payments for goods and services, the fledgling global currency and payment network is once again in the headlines and on the minds of people everywhere who are curious about this increasingly popular digital phenomenon. While Microsoft and thousands of other merchants that accept bitcoin have opted to convert at least some of the bitcoin they receive into local currency using a merchant payment processor, that is increasingly going to be the exception and not the rule as bitcoin gains usage and acceptance worldwide.
Earlier this year, the CEO of online retailer Overstock revealed that the company keeps 10% of the bitcoins it receives rather than converting them to local currency. Also revealed were plans to offer financial incentives to Overstock partners that choose to accept bitcoin, including better rates and faster settlement for vendors and larger bonuses for employees. As acceptance grows worldwide and the supply chain loop begins to close around the bitcoin economy, there will be less and less reasons to convert bitcoin into local currency. With this in mind, if you still need convincing as to why you should at least consider accepting bitcoin at your business or using bitcoin to pay for things you buy online or in-store, here are ten reasons why bitcoin is better than previous payment technologies:
- Bitcoins are impossible to counterfeit. The supply of bitcoins is limited not by the corruptible laws of man, but by the incorruptible laws of mathematics.
- Bitcoin gives you more freedom. As a peer-to-peer payment network, bitcoin lets you send money to anyone, anywhere, at any time, with the possibility for more privacy than is offered by a bank account, credit card, or traditional remittance service.
- Bitcoin is fast. Payment confirmations using bitcoin take on average just ten minutes compared to the hours, days, or even weeks that payment confirmations can take using traditional money transfer services. Bitcoin payment processors often offer merchants instant confirmation, so there’s no need for customers to wait in the checkout line – it’s just tap and go.
- Bitcoin payments are irreversible. The more confirmations a payment receives on the network, the more certain it becomes that the funds are “good,” thereby eliminating chargeback fraud for recipients. Services such as programmable escrow and insurance can be layered on top of bitcoin to provide senders protection in cases of a dispute.
- Bitcoins can be secured inexpensively. Using a combination of encryption, cold storage, and multisignature addresses, bitcoins can be secured for a small fraction of the cost of storing and transporting paper currency or precious metals in vaults and armored cars.
- Bitcoin units are scalable. Despite the limited supply of bitcoins in existence, their digital nature means they can be divided into an infinite number of smaller denominations. Right now, people are spending “whole bitcoins” for large purchases and “bits” for smaller ones, but those units could get smaller as market liquidity increases to service the global economy.
- Bitcoin is always open for business. Unlike banks, which are notorious for holding inconvenient hours, bitcoin, and the global network of online exchanges that trade the digital currency for local currency, is “open” all day, every day.
- Bitcoin has low fees. There is no fee to receive bitcoins, and senders only have to pay on average .0001 bitcoin, or about $0.035 USD as of this writing, to send a payment. There are no annual fees, no overdraft fees, and no dormant account fees – owning bitcoin is the same as having cash in hand.
- Bitcoin makes money more accessible. With bitcoin, there is no need to wait in long lines to send and receive money. Instead, all that is needed is a mobile phone to send and receive bitcoin anywhere in the world where there is a cellular or Internet connection.
- Bitcoin is apolitical. Because bitcoin is decentralized, it cannot be abused by governments or corporations to stifle political debate or discriminate against legal businesses, nor can it be arbitrarily debased to fund empires, wars, or the extravagant lifestyles of the political elite.
As a payment system, bitcoin is admittedly far from perfect, but it is still demonstrably better than the legacy value transfer and storage methods in use today. The Bitcoin software continues to be updated as improvements are made to the underlying code, and more developers are joining the open source effort every day.
For better or worse, money is an integral part of our lives which gives us the ability to communicate value to others, and in an increasingly globalized world it is becoming increasingly important that our money and payment systems be global as well. What bitcoin offers is an opportunity to have a global currency and payment network without the delicate diplomacy that would be necessary to impose one through the top-down political process, instead achieving worldwide adoption through bottom-up consensus among people about how to best communicate value. Bitcoin is truly democratic, a currency of the people, for the people, and by the people. Bitcoin is better.