Health & Fitness
Betting on Bitcoins: A New Way To Pay, or Just Here Today?
If you don't have one eye on bitcoins already, you will soon. For weeks, the digital currency has been skyrocketing in dollar value and in cultural cache. Owners are watching the trendlines, wondering whether to buy or sell. Economists, tech nerds and opinionated citizens are debating whether the bubble will burst. Some people are still wondering what the heck they are (if you're one of those, never fear — an intro is below!). For companies, though, the conversation isn't speculative — figuring out whether or not to accept bitcoins as payment is an important business decision. Our office is currently embroiled in a debate over this very issue, and we decided to lay out the arguments for and against.
Bitcoin Basics
Bitcoins are the world's most widely used experimental digital currency — currently, there are about 11 million in circulation, with a combined U.S. dollar value of over a billion dollars (though this changes often — the bitcoin value trend lines look like the EKG of someone watching the bitcoin value trend lines). They've been around since January 2009, when developer Satoshi Nakamoto became frustrated with the need for "trusted third parties" to get involved every time people want to buy or sell anything online, and published a paperexplaining his idea for a better system.The bitcoin economy is unique in that it's completely decentralized — it's not controlled by the government or any other entity, and it isn't processed through banks or clearing houses. Instead, computer networks "mine" bitcoins like gold, using a software model that anyone can download. The model is designed to keep the creation of bitcoins at a steady rate — right now, a new "block" of 25 is found every 10 minutes or so, and creation is set to peter out in 2140. The computer networks also collectively keep track of all transactions, which keeps the system honest. It's a new idea — a real-world economic experiment — and bitcoin popularity has spiked along with its value.Bitcoin Business
As people all over the world fill up their pockets with digital gold, more and more businesses are providing places to spend it. Large online service providers have jumped on the bitcoin bandwagon, including Wordpress (a blogging platform), Reddit (a social news and entertainment site), and Expensify (which does expense reporting for small businesses). Now, some smaller businesses that provide offline goods and services are hitching a ride as well — you can use bitcoins to buy anything from sports equipment to specialty incense to Swiss watches, or you can donate them to a Catholic church in California. It's enough to make us ask — what's on that wagon? Should we hop on too? Over the course of several days and many discussions, we've laid out the aspects of bitcoins that could tempt us into that decision — and what's still a little scary.The Pros
Consumers Cutting Out MiddlemenBitcoin is an entirely digital currency. For this reason, tech sites like GigaOm, Tech Crunch and others seem fairly excited about this new form of exchange. We’re an online company, and we designed our security systems from scratch, so the digital and technical aspects of bitcoin appeal to us, too. We’re big fans of anything that helps consumers find more flexibility, especially when the solution involves the internet: those are two keys to our success. Bitcoin was also designed to cut out middlemen: banks and the governments that control them. Instead, it’s a distributed network, and the transactions are verified by a dispersed group of “miners.” We too sell online, cutting out middlemen like salesmen and alarm installers. Our customers love having freedom from contracts and feeling like they have the flexibility to leave us whenever they want. They also love the transparency afforded by a no-contract system that does exactly what it says on the tin, without messy fine print. Bitcoin aims for transparency, too — its software is open-source, which means anyone can see how it works at any time. On a more practical level, bitcoin transaction fees are very low — BitPay, the most popular payment processor, takes less of a cut than credit cards or Paypal — which means it actually costs less for us to accept them.AnonymitySince bitcoins are sent between unique, secure websites, there's no need for people to exchange private information in order to swap money — you can even make a separate bitcoin wallet for every transaction. As security experts, we understand the value of this kind of privacy. The Bitcoin website explains that, since no one is watching your wallet but you, it's important to take precautions to secure it, just as you would with your physical wallet. They recommend encryption, backup, and redundancy — the same steps anyone should take to protect their physical belongings.Opportunity to gain new customersAs a business, we obviously are interested in how accepting bitcoins could enable us to reach new customers. We are a home security company, but we’re also the designers of our wireless security systems. Tech lovers have been a huge part of our customer base, and perhaps bitcoins at checkout would encourage more of those visitors to try us out. The question we ask ourselves is “Will the TechCrunch reader be more likely to buy when they see the bitcoin option at checkout?” We wonder if accepting bitcoins is a way to send out a beacon to a particular segment and say to them “Your Business is Valued Here!!”Early AdoptionIf Bitcoins or something like it represent the wave of the future — as the fine folks here, here and here think — then getting comfortable with accepting this currency sooner rather than later has it’s advantages. We’d likely be the first home security company to do it (and we like the idea of that!), but also we’d be able to work out the kinks of accepting this type of payment earlier and not find ourselves behind the curve. (Although if we did wait, we could see how others like Wordpress work out the kinks and then follow their lead.)