Bitcoin Blog Part Two: The Risks of Accepting Bitcoin for Companies and Their Customers
In our last blog we discussed some of the benefits for companies of adding Bitcoin to the range of online payment methods they accept for their products and services. From fee reduction and ease-of-use to security and speed, the virtual currency does have its plus points – and for companies in the right sectors it can create a buzz and give them an air of being an ultra-modern, cutting-edge company on the forefront of new technologies and trends.
However, before jumping in with both feet it is important to weigh up both sides of the Bitcoin to make sure you are fully informed, fully protected and fully prepared in case the Bitcoin bandwagon turns into a rollercoaster with a particularly nasty death drop half-way through.
Dealing in Bitcoins is a high-risk venture for small businesses. The fact that Bitcoin is not regulated by any bank or country does indeed mean minimal processing fees. However, it also means that Bitcoin is volatile and its value is very difficult to predict. Businesses could be exposed to quite significant losses if the Bitcoins they have accepted as payment are suddenly worth less. And, unfortunately for those that have taken the plunge, Bitcoin does seem to be struggling. At the start of 2014 the currency was trading at $1,000 per coin. Today’s value as I write is a fifth of that.
As Secure as it Seems?
Bitcoin wallets are only as secure as anything can be on the internet. There have been hacks, heists and cyber-attacks that have led to millions of dollars’ worth of Bitcoins ‘going missing’. While the technology and tools of Bitcoin may be sound, the technology around it and on which it must operate – namely the internet – is vulnerable to cyber criminals. Ultimately, Bitcoins are just code and we all know that hackers like a challenge. The safest option is to store Bitcoins offline.
Bitcoin could be described as pseudo-anonymous. The public ledger (or blockchain) of transactions records and provides amounts and Bitcoin addresses of each transaction, but the personal and business information of the person behind the Bitcoin address is not given. The ease of transaction that Bitcoin offers makes it quite attractive to those involved in not-so-legitimate activities. Therefore it is vital that all businesses understand exactly who they are trading with at all times to ensure they do not get mixed up with what could be illegal undertakings.
These blogs merely scratch the surface of what Bitcoin is and the benefits and risks it carries for companies. It is important that you are fully informed. Seek out and speak to experts – including your payment service provider – before you decide to take the plunge.