I have a client who told me nine years ago that he was working on a formula to unlock Bitcoin. I said “Bit what?” He said, “It’s a digital currency that you earn or mine by figuring out a mathematical algorithmic equation and can use it to make online purchases.” I think I was intrigued, but didn’t follow up.
Bitcoin was invented in 2009. I wish I would have looked into Bitcoin a little more back then. Now, this virtual payment system has become so popular that you can use it for just about everything from staying in hotels to buying a cup of coffee.
You may have heard that Bitcoin values skyrocketed last year to nearly $19,000 a Bitcoin. In 2018, the value dropped by half. That’s still not a bad thing. But before you buy it, there are some things you might want to know about Bitcoin:
- DECENTRALIZED AUTHORITY – Nobody owns or regulates Bitcoin. Unlike American Dollars or Japanese Yen, no central authority backs Bitcoin. So that means there’s no bank or government agency controlling it. Instead of using names or tax ID’s to buy and sell, Bitcoin is bought and sold or mined through encryption keys via the internet.
- HOW DOES IT WORK – If you want to buy Bitcoin, first you should set up a Paypal account to make a deposit into a virtual wallet. You then exchange your currency for the Bitcoin. Once you receive a Bitcoin, the transaction is recorded in what’s called a “block.” Each transaction block is kept in a digital ledger of sorts. A group of these “blocks” is known as a “blockchain,” a forever record of all the Bitcoin transactions ever made. There are only 21 million Bitcoins that can ever be mined and about 12 million of those have been mined so far.
- EVERYONE CAN USE IT – It used to be that Bitcoin was a product of the dark web, but now, anyone can use it. You can use Bitcoin to buy things from more than 100,000 merchants around the world. Burger King in the Netherlands accepts the currency. You can also buy Dallas Mavericks tickets with Bitcoin as well. Companies like Expedia are allowing customers to use Bitcoin to book travel. Online companies, like Overstock.com, take Bitcoin. You can even pay for your parking at the Denver Airport or stay at the Clevelander on South Beach using Bitcoin.
- CONSULT WITH YOUR ACCOUNTANT – Even though Bitcoin has become more mainstream, it might not be ideal to introduce into your small business. So before you invest in this new cryptocurrency, consult with your accountant, bookkeeper or financial adviser. They should all be up to date on whether Bitcoin will be beneficial to you and your business. The value of a Bitcoin will always depend on what the public is willing to pay for it, so consult an expert before you invest.
Bitcoin is all the rage, but just like you wouldn’t buy up a bunch of stock without talking to your financial adviser, you may want to consult with someone who knows the ins and outs of this virtual currency.
I find Bitcoin fascinating. In retrospect, I wish my curiosity would have kicked in sooner. Oh well, here’s to new forms of making money!