I used to consider myself pretty tech-literate. Admittedly that feeling began to fade when my son started caning me at Xbox but I still clung to the notion that while I retained the ability to code I could wear geek glasses with pride.
Bitcoin existed in my peripheral vision but on-going problems with PayPal (not to mention the dreadful new interface) have led me to believe it is time to explore new options. The recent adoption of bitcoins by major online merchants such as Expedia and Overstock peaked my interest.
Reported sales, in a recent Reuters article, paid for in bitcoin ran to less than 1% but it has lent the medium a greater general acceptance. Indeed, a representative of Expedia sees bitcoin as being a major player in online sales and they want to be on the ground floor.
So, what is bitcoin?
It is an online software-based payment system. Bitcoins are stored in a wallet with a unique identification number and there are companies who can hold the currency for the user. I have Hive now installed on my desktop but a lack of Internet (thank you Plusnet) is preventing me from having a play.
When you wish to buy from a website you click on the bitcoin option, a pop-up window will appear and you can type or copy-paste your wallet ID number.
What are the advantages of this? For the seller it means instant payment and low costs for the transaction â€“ which, if it becomes even more popular, could in turn lead to vendors being able to be more competitive on price.
The drawbacks? There are a few at present: for a start there is none of the protection afforded by payment systems such as Paypal â€“ if the vendor doesnâ€™t ensure delivery or there is something wrong with the product there is no one to cry to. Also, as the payment to the vendor is converted into US dollars, the transaction is susceptible to a high volatility in bitcoin-dollar conversion rates. This volatility is produced bitcoin payment processors such as Bitpay and Coinbase, they sell on bitcoins to the market to offset there potential loss from holding too many if something went wrong.
It is this uncertainty that feeds into the slow uptake of bitcoins by the general public, coupled with payment systems that work and peopleâ€™s love of credit cards. At the outset there were also concerns over the payment processors themselves but Bitpay and Coinbase both have a lot of venture capital stacked behind them.
Currently there are 63,000 merchants who accept bitcoin with a prediction of that rising to 100,000 by the end of 2014. Sales using bitcoin, from wallets held by BlockChain.info, run to around 75,000 transactions per day and have a value approaching $85,000,000. Those who use bitcoin tend to be tech-savvy, high net-worth individuals.
It is predicted that come the end of 2014 eight million of us will be holding bitcoin accounts. Without having to worry over transaction charges and lower exchange rates, with the wider incorporation of bitcoin cashpoints to come and protection from banks going bust or investing your money in dust maybe it is time to give bitcoin a closer look?