Bitcoin: new future for e-commerce?

Bitcoin: from idea to successful business

The idea of creating an international virtual currency was first described in 1998 when the messages from Wei Dai and Nick Szabo were published. The currency development began in 2007, the file with description of the principle of project’ operation «Bitcoin: Peer-To-Peer Electronic Cash System» was published in 2008. All in all, the network was launched in 2009, the project was developing quickly by its first founder, and by the end of 2010 it was presented to the online community for further tune-up by joint forces of software developers from around the world. Bitcoin is not just a replacement of actual money with their digital equivalent to speed up payments, but rather creation of countertype of actual money, or gold to be more precise.

Nowadays Bitcoin digital money is on the way to be officially acknowledged as a unit of monetary payments.

The difference between Bitcoin and other e-currency

• Bitcoin does not relate to the debt obligations of the issuer.

Bitcoins are not material. It’s enough to meet certain conditions for carrying out the operation of paying with Bitcoins: to use a Bitcoin address and Bitcoin system. The exchange rate is defined by the balance of supply and demand.

• The process of controlling is simply impossible.

Peer-to-peer communication takes place within the system that works as an organized community. Every participant interacts directly with others. There are no intermediate banks or any other form of a central server. Thanks to such principle one can receive transactions any time, regardless of the computer being turned on.

• The aggregate number of Bitcoins cannot be manipulated.

Transactions processing and emission of new money are done by mining, a process which uses users’ hardware resources that conduct mathematical calculations. Participation in such process earns users a reward in the form of newly created Bitcoins. Mining process becomes more and more complicated and resource-demanding over time, because data massive to be processed becomes larger.

• The maximum number of Bitcoins is limited.

Emission of new Bitcoins will continue until their total amount reaches 21 million Bitcoins, after which the emission will be stopped completely. Participants foresee this happening in 2030.

• The system is programmed at reducing their number by 2 times, about once every 4 years.

During its history since 2009 Cryptocurrency has seen several rapid growths and similarly unexpected losses of value. Currently 1 Bitcoin costs approximately $350. It is determined through trading on specialized exchanges.

Pros

• The absence of control on the part of any issuer, and no restrictions on the turnover of the currency.

• Bitcoin is one of the safest systems in the world.

System security is ensured by several key factors: irreversibility of transactions, impossibility to repeatedly spend money (making payments to two users simultaneously), cryptographic signature, procedure for transaction confirmation, private digital key for access to the wallet. Besides, system decentralization makes it impossible to compromise.

• Bitcoin wallet cannot be blocked as your bank account, and the currency is almost impossible to withdraw from the market due to the lack of the emission center.

• Transaction fees in the system are very small or equal zero. Miners receive their remuneration in the form of new Bitcoins, and there is no central intermediary in the system.

• The speed of the payment transaction is rather high: maximum – 1 minute. The system does not provide a chargeback, so you may be asked to provide your Bitcoin wallet for paying for the goods, and if the goods are not received, the funds will not come back.

• Both new user as well as new participant of e-commerce can easily start using Bitcoin system to make transactions. To do so, user simply needs to setup a wallet at his or her computer or mobile device. Installed wallet will generate a Bitcoin address. In the future one can create new addresses and transfer money as well as to pay for goods and services.

Cons

• The Payer’s data is not disclosed. Terrorists, drug mafia, and others take advantage of this – they can buy drugs, weapons, sell human organs and etc.

• With the help of Bitcoins money laundering and evading taxes may occur.

• No safety against thefts. It is impossible to prove the fact of theft and to return the stolen currency.

Successful businesses with Bitcoin currency

A few years ago almost no one knew about Bitcoins. Today, interest in this virtual currency is huge. In recent years, more attention is paid not on its instability, but opportunities. Now a number of interesting projects already operates on the basis of Cryptocurrency. Here are few of them.

• ATM machines: Robocoin

There are several reasons why people relate to Bitcoins apprehensively. The essence of one of them is the fact that Cryptocurrency has no physical expression, and the practical benefits of such money for laymen are equal to zero.

The founders of Robocoin solved this problem in an original way – with ATMs.

The new devices allow you to make instantaneous exchange of the currency with the current exchange rate and receive cash. Exchange is possible in both directions, i.e. one can not only buy dollars / euro for Bitcoins, but also – Cryptocurrency. Today such ATMs have been installed in 13 countries around the world and they may offer to exchange up to 12 currencies.

• The commercial YouTube: WatchMyBit

YouTube is the most popular video-hosting in the world. Thousands of people are using advertising to make money on it. But the founders of WatchMyBit project believe that you can do without advertising.

The startup idea is simple – you pay money and watch videos. The main problem is that very few people are willing to spend ten or more dollars to watch videos online. Small micropayments from one dollar or less is a good solution, but it is impossible to offer such payments under the traditional system – through the payment with credit cards and PayPal, because additional costs are too high.

That is why founders rely on Bitcoin payments for the implementation of this idea. This format allows you to pay for content with one click and without transaction costs.

• Play And Earn: Leetcoin

Hundreds of young people around the world spend hours playing computer games. Many of them dream to generate revenues with this. But not everybody can become a competitive cyber sportsman who really makes money.

Leetcoin developers have come up with the idea how to integrate e-sports and Cryptocurrency, giving people an opportunity to earn money with a game. After registering on the website of this project via Steam-account you need to select the server with suiting player bets and receive the agreed amount of Bitcoins to your wallet.

• Instant Lottery: Daily Bitcoins

The next project is notable not so much for its essence but for its geography location.

Instant Lottery DailyBitcoins is founded by the Russian company.

The principle of the lottery is simple: there is an opportunity to participate in the raffle of the prize fund for a fee, but even in case of failure, the “consolation prize” is transferred to user.

• Exchanging Bitcoins: Coinbase

There is a great variety of services for exchanging Cryptocurrency. But this project was able to attract investors as a “classic” business usually does.

Coinbase company from San Francisco became the most popular service for exchange Bitcoin in the United States. The project has received the largest amount of investments ($ 31 million) among the start-ups in this sector in 2013. Today, the company provides services to 16,000 stores, including OkCupid and Reddit.

Conclusion

Bitcoin is a new concept, but it’s in the process of being understood and adopted by a growing number of consumers, merchants, and investors around the world. As this process continues, the reasons to start using Bitcoins are becoming more compelling.

Recently, as we see at Altabel Group, projects related to Bitcoin (like purchasing goods from an e-commerce site or auction) are among the hottest and most discussable topics with the clients, and judging by the current currencies situation in the world Bitcoins may become a viable solution that opens new opportunities.

Are you thinking of implementing Bitcoin into your project? Do you foresee bright future for Bitcoin and will they gain extensive usage soon, and why yes or no? Feel free to share your thoughts about this subject and leave your comments here or send me a message.

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