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What is Bitcoin – and Should You Care?

bitcoinEveryone seems to be wondering about Bitcoin. I’ve been asked about it several times over email and in person over the past few weeks.

I suspect, that’s because a broker is now accepting Bitcoin — and no surprise, the media is eating it up. In my mind, this is nothing more than a marketing ploy for being the “1st”. Smart to get some attention, but it really doesn’t amount to much in the grand scheme of things. They “accept” it — so what? Are people really paying them in Bitcoin? I severely doubt it.

Or, maybe the Bitcoin questions are because Marc Andreessen wrote an awesome article about Why Bitcoin Matters in the New York Times this past weekend. If you’re extremely curious about Bitcoin, go read it.

Or, maybe it’s because VC’s such as Fred Wilson (Union Square Ventures) is betting big on Bitcoin.

Or, maybe it’s because people like the co-founder of AirBnB are wondering whether they should accept Bitcoin.

Regardless, people are wondering about “Bitcoin”. What, exactly, is it & does it matter?

Watch this short video…

Here is a longer explanation…

Or read Wikipedia.

Does It Matter?

I think we are still early in the evolution (& adoption) of Bitcoin. The benefits, as I see them are…

  1. Bitcoin as a technology protocol for building applications that transfer money. Micro-transfers specifically.
  2. No % of a transfer as a fee, like credit cards.
  3. A record of every single transaction, publicly available.

In summary, you likely don’t need to worry about it right now unless you plan on using it as a marketing ploy.

Did I mention…it likely never will go mainstream in the US.

Feel free to add any thoughts you may have in the comments.

[Graphic via]

About Drew Meyers

Founder of Geek Estate Blog / Geek Estate Labs. Zillow Alum. Travel addict & co-founder of Horizon. Social entrepreneurship & microfinance advocate. Fan of Red Hot Chili Peppers and Kiva.

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  • Glenn Sanford

    So I think most people who don’t think Bitcoin will go mainstream don’t understand Bitcoin from a payment processor perspective. Bitcoin is to some extent a better transmitter of value then traditional payment processors which is why you find a number of them or those associated with them downplaying Bitcoin’s usefulness instead talking about volatility and other issues relatiing to holding Bitcoin… I think Coinbase and Bitpay will be major players going forward not because of their inherent belief in the future value of the coin but their belief in the underlying technology. They are essentially price agnostic even though I would guess they are optimistic on the future value of Bitcoin as well… So the real game is the payment processor game which I think will trump the major credit card processors. Coinbase will IMHO take marketshare from Paypal starting late the second half of 2014 or in 2015… Consumers won’t really care whether they use Paypal or Coinbase since it will result in the same experience for them but merchants will since Coinbase fees will likely undercut Paypal’s significantly even if the net effect is the same for consumers.

    • and you think visa/mastercard is going to roll over and just let Bitcoin take their marketshare in payment processing without a fight? they make a massive amount of money in this space, and will surely spend millions and millions to keep it that way. players that large have many levers they can press, including penalizing merchants who don’t play nice with them..

      • Glenn Sanford

        That’s why there are Anti-Trust Laws and Billion $ Class Action law suits… Paypal made it through without too many bruises so and I think Coinbase has the muscle behind them to make it through as well which will change the landscape a bit… Just imagine a world where you don’t have to give out your credit card info every time you make a payment or have your payment information stored on numerous servers all around the internet. You can set-up your auto pays in your own personal app rather then others having control of auto payments… I think Bitcoin provides the first real way to make that happen putting consumers in control of their own wallets IMHO.

        • Bitcoin is essentially cash. You have to buy it ahead of time. You and I both know a massive, massive chunk of the us economy is debt….consumers spending money they don’t have. How will that play out w/ bitcoin?

          • Glenn Sanford

            I see a combined payment processor. My guess (and its a guess as I haven’t seen it yet) is that Coinbase or Bitpay or someone will combine payment platforms to be able to process Bank Account, Bitcoin, Visa / MC all into one platform. Merchants by contract have to charge the same amount for Debit and Visa/ MC transactions however since Bitcoin is not considered cash there is an argument that could be made that you could sell things for less total dollars if you bought with Bitcoin. So in the consumers Coinbase wallet which is already connected with their personal checking account a consumer could choose to pay with Bitcoin and take advantage of the discount in real time by buying Bitcoin and simultaneously sending that Bitcoin to the merchant… The consumer gets a discount even though he/she held Bitcoin for less then a fraction of a second. The merchant gets a larger net on his / her product or service by getting closer to cash while the consumer saves a % and Coinbase gets a small amount for facilitating the transaction. Everything is calculated real time and with Coinbase in the middle if the merchant ultimately wants the fee in $ then the Bitcoin in the middle would simple facilitate getting around the Visa / MC contracts and would essentially be a riskless transaction for all parties involved. Obviously the specifics and the risk involved would all need to be calculated in but in theory Bitcoin provides easy cover for the merchant and the consumer to pay less to Visa / MC which last year amounted to in excess of $80 Billion in fees not to mention interest. So even though holding Bitcoin is a speculator activity, using Bitcoin could lower the overall transaction costs to all parties. Anyway I’m spitballing here however it seems that there will be a payment processor which makes Bitcoin a preferred payment option with online merchants and consumers even for consumers who never want to hold Bitcoin…

  • Robert Paquette

    I can’t help but believe that the financial industry will not do all that is possible to discredit BitCoin use. After all, there are billions upon billions being made on credit card interest. I doubt they are willing to loose that revenue. We’ll have to see how that goes.

    • I agree. There is a lot of money/power that has a vested interest in bitcoin failing.

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