We knew it was coming and now, it’s here. Small business owners are turning to Bitcoin and guess what? Not only are they not worried about the hiccups from last week – the massive increase in value as well as the hacker attacks – and not only that, but they’re saying they’d much prefer using Bitcoins over their credit cards. What does this mean for the banks and credit card companies? It could be trouble. Or, then again, it could be nothing more than a slight hiccup.
The Bitcoins Economy
First, you have to understand a few truths about this virtual currency. There are no banks anywhere in the world that recognize Bitcoins as true currency. In fact, there are still plenty of folks who are quite convinced that this is just a brief pause given to a “goofy” or “unrealistic” idea. Many insist it’s a Ponzi scheme and not surprising, many governments are saying the same thing.
Ah, there are those, however, who would argue that until the cows come home. In fact, USA Today calls it a “scoring hot commodity” and even reminds us that Bitcoins are being pushed heavily by the Winklevoss twins. If that name sounds familiar you might recall these are the two brothers who went toe to toe with Mark Zuckerberg in The Social Network and afterward, in a failed lawsuit filed against Zuckerberg. It’s rumored that they own 1% of the more than $1 billion bitcoin market though no one from their camp will confirm those figures.
Big Detractors, too
While there are those who are saying bitcoins are the best thing to happen to humanity since peanut butter, there are those who continue to insist it’s little more than a ponzi scheme. But they may have to concede before much longer, especially since there are no shortage of venture capitalists and other financial minds who are calling it the ideal currency of our time. In fact, OpenCoin CEO Chris Larsen says it’s the long awaited finance system that finally makes the leap into the digital age and says the excitement many are expressing are legitimate.
And lest we forget the current economic deadweight consumers are carrying on their shoulders in this country.
If I understand it correctly the USA is still running deficits of $1.2 trillion per year, or $100 billion per month,
says Bill Tai, general partner at Charles River Ventures.
What does that say about the sustainability of our currency? Maybe Bitcoin or other real currencies are not a bad idea as an alternative to hold.
But its the small business owners who are really bringing the idea front and center, especially considering the adamant belief that many now have in that bitcoins are much better as a currency for their smaller companies. Fox Business reported over the weekend the growing sentiments of many of these entrepreneurs.
Small Business Owners
In a day and age when so many are turning to bartering, the bitcoins are golden. It’s about having complete control of one’s money and the absence of, ironically, another news-breaking problem that plagues the financial system today: credit card swipe fees. Not only that, but using bitcoins has proven to be a faster transaction that credit cards and even Paypal. The payments are processed within just a few seconds. One small business owner, Zach Harvey, from New Hampshire, is developing, along with his brother, the model for the first ever Bitcoin ATM.
It’s a compact desktop device, and you’ll insert US dollars or Euros or Canadian dollars. The device will tell you the price of a Bitcoin, and then you just scan your phone, and you’ll immediately have Bitcoins,
Another small business owner in Vegas says she was approached by a customer who uses bitcoins and asked if she would be interested in allowing customers to pay for their meals with them. She agreed as a courtesy to the loyal customer and since then, about four weeks, she already has close to a dozen regular customers who pay using Bitcoin.
They pay over the phone and send me Bitcoins, and then if we need the money we’ll transfer it into cash immediately,
says the woman.
Finally, an Alpaca farmer in Massachusetts says bitcoins account for a total of one third of his profits every year. He says the transactions go much smoother than credit cards and don’t come with all of the fees. It’s better for his bottom line and says his customers are beginning to use bitcoins far more often as well.
Remember, the stock is growing in extraordinary ways. It was selling for $230 early last week and dropped quickly, but because of a number of denial of service attacks. By the end of the week, it had regained its profit footing.
Here to Stay
Whether one loves or hates Bitcoin, there are the security concerns, especially after last weeks aggressive hacking efforts. But then again, as Andreas Baumhof, chief technology officer at computer-security firm ThreatMetrix said,
Security is a nagging concern, with a series of DDOS attacks over the past few days that hampered the service. All major websites, online banks, retailers are exposed to the same threat and are targeted by hackers all the time, so its nothing unusual.
“This is not a fad, it is digital gold” explained Jon Matonis, a board member of the nonprofit Bitcoin Foundation, created last year to foster and protect the system.
It’s based on sound security technology, and it has a lot of the same economic properties as gold.
Even a Nobel Prize winning economist, Paul Krugman, believes this is the “real deal”. He says the slow bitcoin supply could result in massive demands, even with the 8 million bitcoins being circulated around the world this very minute.
But what are your thoughts? Is Bitcoin really the cure-all or will it become yet another convoluted effort of someone trying to take shortcuts? And do you think credit card networks and banks will suffer as a result of the digital currency’s success?