There has been some discussion about the practicality of accepting Bitcoin, but many fewer voices have been explaining the reasons Bitcoin may be a useful tool for your grid. There are at least five reasons that Bitcoin may be right for your grid.
1. Fraud mitigation
BitPay, the number one Bitcoin processing platform. reports that it has processed 10,000 transactions with zero incidents of fraud. By comparison, the rate of credit card fraud is much, much greater, one in 167 transactions domestically and one in 50 in international transactions. These 10,000 secure transactions add up to $3 million that BitPay processed in 2012. BitPay recently received a $510,000 angel investment, which will help the company increase their capacity to process payments. It’s clear that Bitcoin is shaping up as a secure way to accept payments from, and transfer money to, grid users.
2. Bitcoin provides greater safety for the user
One of the features that is touted as a plus for Bitcoin users is the anonymity that the digital currency provides. Part of the reason for this anonymity is that Bitcoins are pushed from one user to another, versus the pull method used in online credit card transactions. When information is pulled from your credit card it includes your personal information as well as your financial information. This information is then vulnerable to fraud and theft.
3. Bitcoin’s increasing legitimacy
In November of last year the blog hosting site WordPress.com began accepting Bitcoins as payment for themes and other blog add-ons. This move adds legitimacy to the virtual currency, because of the web giant’s good name and market penetration. WordPress also announced that its VIP users could use Bitcoins to pay invoices, another move which increases legitimacy.
In addition, a foundation has been established to promote the digital currency and clearing up misunderstandings about it. Legitimacy is a currency of its own when trying to get grid users involved and to part with their money. To this end the work of the Bitcoin Foundation will be important to watch because the more online and offline merchants that trust Bitcoin enough to accept Bitcoin as payment the more comfortable users will be to adopt it.
4. Bitcoin can be exchanged for conventional, government backed currencies
Even though the number of merchants accepting Bitcoin is on the rise it is still important that you are able to interact with vendors who do not yet accept Bitcoin. Fortunately, exchanges exist that allow you to trade the Bitcoins you’ve collected with government-backed currencies, such as US dollars, Euros or Yen. This can be a clear advantage as the exchange rates are experiencing an upward trend, and are trading at $19.66 USD to 1 Bitcoin at the time of this writing. The high water mark was $35 USD to 1 Bitcoin in the summer of 2011.
5. Bitcoin can be used for online gambling
In 2007, Second Life shut down the virtual gambling parlors bringing in very real money. The legal issues associated with online gambling were too much to deal with.
But Bitcoin-based online gambling sites are flourishing, with Bitcoin’s anonymity providing some legal cover to the operations. One online gambling sites accepting Bitcoins reported almost $600,000 in profits in one week. The popularity of gambling coupled with the decentralized nature of Bitcoin makes it a yet-to-be-regulated, legal gray area. This represents a market with earning potential for your grid, and a way to attract new users to a virtual world.
These points are in no way a complete case for the adoption of Bitcoin for your grid, but they can be a starting point to begin to rethink the usefulness and effectiveness Bitcoin could bring to your grid.