Is digital currency the next big thing? The Winklevoss twins sure think so! After winning their battle with Facebook, they are now moving on to bigger and better things, which in their minds is Bitcoins! In fact, they think it may even have a bigger impact on the world than Facebook and have heavily invested into it.
“Bitcoin potentially could be more impactful because being able to donate 50 cents to someone across the world has more impact than potentially sharing a picture…”
Accommodating your site to accept digital currency may be an interesting feature to your online store, however it’s definitely something that needs to be thought about and researched before implementing it. Despite the Winklevoss’ optimism towards Bitcoins, Goldman-Sachs recently warned potential investors about Bitcoin’s inherent volatility. Here’s the the basics you should know about this new, mysterious craze before you decide to dive in further.
WHAT IS DIGITAL CURRENCY
Digital currency is a form of virtual currency or medium of exchange that is electronically created and stored. They are used without a middleman, meaning no banks! Like regular currency that we’re all familiar with, digital currency can be used to buy both intangible and tangible goods and services. However, unlike regular currency, the CRA has two different tax rules on digital currency based on whether the transaction was income or capital in nature. Transactions with the purpose of purchasing goods or services are taxed according to the ‘barter transaction rules’, while trading for investing gains could be taxed for their gains and losses. There are various types of digital currency but the most popular and commonly known is Bitcoin, which was also the very first cryptocurrency created in 2009. Some other cryptocurrencies include Litecoin, Peercoin, and Robocoin. These cryptocurrencies are a pseudonymous, peer-to-peer and decentralized electronic payment system. What does this mean?
All Bitcoin transactions are recorded in a public log known as the Blockchain, which keeps the system secure from fraud and abuse. However, each tracking only shows the wallet IDs, so no names are ever revealed. People can also have several wallets making tracking one single person as impossible as tracking the use of cash.
ITS A PEER-TO-PEER, DECENTRALIZED ELECTRONIC PAYMENT SYSTEM
Bitcoins are decentralized, which means that there is no central body controlling the network. It is entirely managed and regulated by its users making the system transparent and value extremely volatile since it is based on speculative trading.
HOW DO YOU GET DIGITAL CURRENCY
Bitcoins can be acquired in a few different ways:
Once you get your Bitcoins, they are stored in a digital wallet. You can keep your digital wallet in the cloud or on a computer, think of it as a virtual bank account.
Now you can just keep your Bitcoins as an investment, or you can spend it normally as you would regular currency except no credit cards needed!
SHOULD YOU ACCEPT DIGITAL CURRENCY
As a merchant, there are some pros and cons to using Bitcoins. Here’s a short list of them:
Although Bitcoins don’t have mainstream usage yet, it definitely has the potential to get there. Especially with PayPal integrating digital currencies into their wallets, and the internet and technology becoming more and more integral to our everyday lives, who knows how far digital currency will go. So will you be accepting Bitcoins on your eCommerce site? Share your thoughts on the comments below!