According to the American Marketing Association, the term marketing is defined as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” While most people may consider marketing as the action or business of promoting and selling products or services, I’d like to explore an emerging process to aid in the exchange of goods and services: the mining, buying, and selling of a decentralized, cryptocurrency of digital coins called bitcoins.
Bitcoins are virtual coins, transferred from person to person via the Internet without going through a banking network. They do not physically exist, but you can use them in every country around the world, assuming a vendor accepts them. So how do you get bitcoins? Short of simply trading traditional currency for them, you can use computer hardware/software that “mines” for these virtual coins by solving complex algorithms. If you’re having a little trouble grasping the concept, just know that the creator or creators, who use the pseudonymn Satoshi Nakamoto, are rumored to be MIT grads. There are approximately 21 million bitcoins that will be discovered through mining. You can buy the mining equipment from companies such as Butterfly Labs or simply buy the rights to use them. As you acquire bitcoins they are stored in your online wallet.
As a merchant, what are the benefits of using bitcoins? First, the transaction costs are extremely low compared to other monetary exchanges such as banking networks or credit card processors. Secondly, bitcoin payments are irreversible, meaning that a customer who pays with bitcoin currency cannot receive a chargeback. (If you have ever provided a customer with a product or service, only to have him contact the bank, dispute the charge, and receive a full and undeserved refund, you know how maddening that can be.) Thirdly, their value is steadily increasing. From September 16 to November 13, 2013, bitcoin value has increased from approximately $140 to $425 and appears poised to continue on an up trend. Finally, they are gaining in popularity for commerce. In fact, eBay is contemplating accepting bitcoins, and I think that speaks volumes about the potential for widespread acceptance.
To address some common questions I’ve heard when discussing bitcoins:
What is backing the currency? Is it on a gold standard?
- Nothing, but neither is the US dollar. It’s been off the gold standard since 1971.
Is it safe?
- Just like other online activities, you need to password protect your wallet and take standard safety precautions like strong passwords. You can also boost your security by using two-form authentication, which uses Google Authenticator. It is a free app for your phone that generates a random number every 30 seconds that you use like a password.
Where is the bitcoin company located?
- Bitcoin is not a company. It’s analogous to explaining where the Internet is. Bitcoin is a concept that’s gaining popularity for an alternative worldwide currency.
Is bitcoin used for illegal commerce?
- Yes, and so are dollars, euros, yen, and all other traditional currencies.
My goal for this blog was to expose you to this emerging concept of bitcoin. Personally, I’m more than intrigued with the possibility of a pure, worldwide currency. If you are too, I encourage you to visit bitcoin.org