The internet truly is a digital frontier, filled with opportunities that just cannot be found offline. This naturally extends to trade, as eCommerce businesses can outfit their online storefronts with all kinds of features for the convenience of their customers. One major example that should be a priority for all internet-based merchants is offering a variety of payment gateways. The more ways they can accept payment, the more customers they can reach and retain.
These options are not simply limited to different types of credit cards, money orders, or even conventional currency. They also include Bitcoins, a unique example of how the internet has changed the ways that people conduct business. Embracing the Bitcoin scene and all its enthusiasts can open a new and potentially lucrative revenue stream. Here is some information on what Bitcoins are and how they are used.
What are Bitcoins?
Bitcoins are a form of electronic currency that exists solely on the Internet. They are not dependent on any government or corporate entity and instead operate on a system maintained by thousands of computers. Bitcoins are then transferred through internet-connected computers, smartphones or tablets without the need of an intermediate financial institution.
Bitcoin transactions are processed and secured on the Bitcoin network by the implementation of what is known as the blockchain. In short, the blockchain is a public ledger of all transactions ever sent using Bitcoins. This record is kept to ensure transparency and prevent fraud by letting everyone know who owns each and every Bitcoin, or fraction thereof, in circulation.
Bitcoin supply is regulated by a preset generation algorithm that controls the creation of Bitcoins and at what rate. Any Bitcoin that's created fraudulently, which is noticed by not following the precise rules of the preset algorithm, will be flagged as invalid by the network and deemed worthless.
What are the Advantages of Using Bitcoins?
To many, especially those who are less than familiar with internet culture, the Bitcoin system may seem strange or even unnecessary. Store owners may wonder why they should accept digital currency when traditional currency (in digital form, of course) would suffice. However, the qualities that make Bitcoin unique can do so much for your eCommerce business. Here are a few of the most significant advantages of using Bitcoins.
Practically Free Payment Processing
You can find plenty of platforms online that will process the transactions made on your store. However, many of them make a profit by charging service fees. The customer pays the charged amount, but the merchant gets slightly less than what they requested. On the other hand, Bitcoin payment processing costs next to nothing. No middlemen means no usage fees, a major advantage for cost-cutting pragmatists.
Transferable to Anyone, Anytime, Anywhere
The internet, created by the connections of international networks, effectively flattens the world. Bitcoin is similarly detached from space, due to their detachment from banks and other financial institutions. The automatic nature of the system and its processes allows users to make payments whenever they please to whoever they please in any part of the world.
For the most part, Bitcoin transactions can be made and processed almost immediately. Everything about them is electronic and connected to the currency’s online management system. This allows online merchants to see each new Bitcoin transaction within seconds.
No Seizure, No Freezing
The rise of Bitcoin stems in part from the 2008 financial crisis and the ensuing economic recession. Many internet users appreciate that a Bitcoin Wallet can never be seized or frozen. Additionally, there is no way for anyone to reverse, block or hold transactions.
What is a Bitcoin Wallet?
On that note, a Bitcoin Wallet, an electronic storage unit of sorts that allows users to send, receive and house Bitcoins. Without a Wallet, Bitcoins are useless.
Each time they're transferred, a unique string of numbers and letters is generated to create what is known as a Bitcoin address (Example: 1NcqwujdxEdTKMpD2CoEGMzTYcd5xUvBCs5). Those sending Bitcoins simply need to enter the supplied address, input a monetary amount, and hit send. It’s as simple as sending an email.
Most Bitcoin Wallets generate a new address every time one accepts a Bitcoin transfer. Even though these addresses are public, they remain anonymous. This makes it next to impossible to link past, current or future transactions.
How Do Bitcoin Transactions Work?
Each Bitcoin transaction has three strings associated with it: the private key, the public key and the aforementioned Bitcoin address. The private key is required to validate all transactions. The public key is used to verify the transaction signature associated with the private key. Lastly, the Bitcoin address determines where transfers will be sent.
If you want to send Bitcoins, your Wallet will create a Bitcoin transaction file that will be published to the Bitcoin network via the blockchain. A transaction will then contain five basic parts: the previous transaction (where the Bitcoins came from), the public key, the destination address, the amount to be sent, and a digital signature.
To verify legitimacy of transactions, the Bitcoin network checks the digital signature by authenticating both the private and public keys to make sure a transaction has not been tampered with. If both keys match the receiving address, the transaction will be approved by the network.
What is Bitcoin Mining?
Bitcoin mining entails the process of adding transaction records to Bitcoin’s running public ledger, the blockchain, of past transactions. This is done to ensure the legitimacy of all Bitcoin trades by confirming that each one is valid and secure. While more and more companies are getting involved in Bitcoin mining, much of it is completed by computers with specialized chips know as application-specific integrated circuits, which are far more powerful than your typical central processing units.
Individuals and companies alike are starting to mine Bitcoins in an attempt to strike while the iron is hot. The amount may fluctuate from one day to the next, but as of this writing, a single Bitcoin is worth a whopping $8,259.18. If that value rises even higher, Bitcoin miners could stand to make substantial profits.
With that said, we should warn that Bitcoin mining on your own is not recommended. For starters, it can be rather difficult. Even if you know how to do it, you will still need a substantial amount of time, energy and resources before you begin to generate profits. While some consider Bitcoin Mining to be a lucrative and worthwhile endeavor, others are not so sure. If you want to own Bitcoins, you may be better off buying them outright.
If you want to mine Bitcoins on your own, however, there are options available. First, you can join what is known as a Bitcoin pool. This will allow you to work with a group of miners on available “blocks” —individual units of blockchain. If you join a pool, keep in mind that larger pools make finding Bitcoin blocks easier but often lead to smaller payments. Pools with fewer miners may result in larger payments, but it may also make finding blocks more difficult. You have to weigh the pros and cons of each type and decide whether you prefer the division of labor or the division of profits.
As more Bitcoins are found, they become increasingly difficult to find. Also, the Bitcoin reward for finding blocks, known as the block reward, is halved for every 210,000 blocks discovered — a process that typically happens every four years. This is done not only to control Bitcoin currency rates, but also to decrease the number of new Bitcoin miners that are allowed to work within a given block. As of this writing, the bounty for completing a Bitcoin block is 12.5 Bitcoins, a number that will continue to drop over time.
Accepting Bitcoins on Your eCommerce Store
Any business owner with an online store should at least consider accepting Bitcoins. According to Bitcoin Market Journal, more than 30 million Bitcoin wallets exist, and more than 7 million users are active online. This may not exactly represent a large fraction of internet users. However, the enterprising entrepreneur could also view this data as an indication that an audience of millions is out there. These people are always looking for retailers that cater to their needs, and their digital wallets are open for those who accept their unique currency.
If you run your own eCommerce business, you should look into your options for making your website friendly to Bitcoin users. There are platforms out there that enable merchants to accept Bitcoins from paying customers. They can even convert the cryptocurrency tokens into American dollars, or the currency of their preference. These platforms may charge a small processing fee for each transaction. However, they should not be underestimated or dismissed offhand. Just by opening your website to more transactions from more customers than ever before, they more than pay for themselves.
Now that you know more about Bitcoins, and why so many people are attracted to them, you may feel more prepared to accept them for your business. Check today if your eCommerce platform can integrate with one of these Bitcoin digital wallets, then incorporate this option with your other payment gateways. The community of Bitcoin users is quite tight-knit. They just might flock to you if word gets out that you will welcome them.