Should Bitcoin be a Part of Your Financial Planning? Cryptocurrencies in the Age of Cloud Collaboration
by Andrew Mullen on May 23, 2016
Businesses are on the lookout for cheaper, easier, safer, more efficient methods for transferring large sums of money across state and international borders. Retailers, restaurants, and other B2C businesses are also looking for new ways to accept customer payments, especially in an age rampant with credit and debit card fraud. Is bitcoin the answer?
What is Bitcoin and Cryptocurrency?
Bitcoin is an Internet-based currency. Since there is no physical representation (like actual coins or dollar bills), overhead for keeping bitcoins is low. But there are considerable risks involved, too, making it unsuitable for most business transactions.
Bitcoin is a type of cryptocurrency, which is not a legal tender in any nation. It is not issued nor insured by any government or institution, and is not stored, collected, or secured by any bank or financial institution. Cryptocurrencies like bitcoin are generated by solving mathematical equations online. In reality, few people actually understand how bitcoins are generated. What is widely known is that bitcoins are gaining in popularity, both as an investment vehicle and as a method of payment for both online and offline transactions.
Bitcoins are part of an overall trend toward online and cloud-based business models. For instance, with cloud collaboration tools, the data and files are stored in the cloud and accessed individually by the users. Similarly, bitcoins do not have a physical representation. The value of the currency is stored in digital wallets, which also reside in the cloud. Bitcoin is the most popular of many types of cryptocurrencies, called altcoins, which is an abbreviated way of saying, "alternatives to bitcoins". Competing cryptocurrencies include Litecoin, Peercoin, Primecoin, and Namecoin. Except for the fact that bitcoin is the most well-recognized, and hence the most widely accepted form of cryptocurrency, other altcoin systems work more or less the same way.
The Advantages of Using Bitcoin for Business Transactions
Some people have recommended bitcoin as a means for eliminating online credit and debit card fraud, but until there is some way to guarantee or insure cryptocurrencies, the risks outweigh the advantages for most businesses.
Since bitcoins are untraceable, it is often used as payment for transactions among complete strangers (as well as for illegal activities that no one wants to be associated with). There is no need for physical storage or transfer, as with other types of currencies, meaning it incurs none of the overhead of normal money. Some even see it as a potential solution to online credit card fraud.
The Risks of Using Bitcoin for Business Transactions
Like other forms of currency, bitcoin does fluctuate in terms of value. Sometimes a single bitcoin is worth about $15 USD, other times it might be worth more than $400. That means that investments in bitcoin are tremendously risky, as the market is quite volatile. There are other risks associated with bitcoins, too, including:
• Unlike most national currencies, businesses and individuals do not have to accept bitcoin as payment. It is only accepted by voluntary users, and there aren't a whole lot of them.
• Platforms for buying and selling bitcoins are subject to hacking. Also, the digital wallets used to hold bitcoins can be hacked, causing the owner to lose their money.
• If you lose your bitcoins or a wallet gets hacked, there is no recourse from any government or banking institution.
• Bitcoin transactions are irreversible. Once it is done, it is up to the recipient of the money to refund or return any funds sent in error.
• It is conceivable that bitcoins will be fully or partially outlawed by some governments
So, is bitcoin slated to be as successful as other types of cloud collaboration and cloud-based business models? Likely not. In the business world, the advantages of bitcoin are quickly outweighed by the risks. Few businesses would be willing to risk a wallet worth $10 million USD getting hacked in order to make international money transfers a bit quicker and easier. For now, banks and recognized world currencies are the safest and most secure way to conduct business around the globe.
For cloud collaboration tools that aren't a business risk, there's Talon Storage. See our demo video to see how companies get work done faster, cheaper, and more secure in the cloud.