News related to bitcoin has been trending on most social media platforms. Interest in Bitcoin has skyrocketed over the past few weeks after headlines on how its price has soared over the past few weeks. At today’s date (19th December 2017), according to CoinDesk.com a single bitcoin is worth £13,668 ($18,305). But what is it and how does it work? What is Bitcoin?
Bitcoin is a digital currency which was created in 2009 that uses decentralised technology for secure payments and storing money that doesn’t require banks or people’s names.This virtual currency was created by an unknown computer whizz using the alias Satoshi Nakamoto. In the beginning, as the Bitcoin community grew, the currency's value steadily climbed. The first great Bitcoin bubble was in 2011 and media coverage of Bitcoin attracted more users, which caused the price to rise. That rise in price attracted more media coverage and the cycle continued. In simple terms this how the bitcoin boom started.
Transactions are made without middle men, so there are no transaction fees and no need to give your real name. You can purchase bitcoin though an online exchange Bitcoin ATM.
Where to use Bitcoin?
More businesses are starting to accept them and in some parts of the world you can buy pizza with Bitcoin. London has more bitcoin accepting retailers and bitcoin ATMs than any other city in the UK. Whether you want to buy a tasty burger or get a tattoo, there is a vast range of bitcoin accepting retailers in London. For more information on Bitcoin locations click Here.
How does it affect Businesses?
Now more than ever, businesses that want to be competitive must utilise electronic payments in selling their goods and services. The use of cheques and cash has been in steady decline for many years while digital banking methods has continued to grow. This can be seen by the recent announcement from the Royal Bank of Scotland (RBS) as it plans to shut down numerous high street branches, resulting in around 680 job losses. The world is moving towards a digital banking system, but this is not to say that Bitcoin offers a reliable method for businesses to conduct their finances. Before considering whether to join the Bitcoin revolution, you need to be aware of the shortcomings associated with the digital currency. For instance, a Welsh IT worker lost his hard drive containing thousands of bitcoins which he estimates to have been worth £74 million. Although in this case the drive was chucked out to a landfill site, Bitcoins are also vulnerable to online hackers or fraudsters. You need to make a conscious effort to find the best way to store them. In addition, banks are very cautious with respect to Bitcoin. As a business it is important to maintain a good banking relationship and the use of bitcoin may put your business under scrutiny. Bitcoin is not an official currency. The Bank of England deputy governor Sir Jon Cunliffe advised the public in a recent BBC article, to “do their homework” before investing. No central bank stands behind it, no government stands behind it. But this has had the result of making it more attractive to some users because of its anonymity and lack of government control.
What does the future look like?
Bitcoin made its anticipated launch onto the Futures Market on 11 December 2017 (the Chicago Board Option Exchange) but some bankers and analysts are still urging caution. This is a big move for the digital currency as this allows investors to bet on whether Bitcoin prices will rise or fall without actually owning them.
Futures are usually based on the price of a real commodity, e.g. oil, thus this move has been seen by some as a positive step towards legitimising the currency. Although there are still warnings on the potential high level of volatility and risk in trading, it seems to be a step in a positive direction. This may lead to more investments as investor and public confidence in Bitcoin increases.
As the value and participation in Bitcoin grows do you think it is a risk worth taking? We would love to hear your thoughts on this article. If you would like to leave your feedback, engage in the discussion or tell us something new, please email Solinda at pblintern3@purebusinesslaw.co.uk.
Solinda Nyamutumbu is a legal intern at Pure Business Law. She is an LLB Graduate from The University of West England as of July 2017 and began her LPC/MSc course at The University of Law (Bloomsbury) in September 2017 as a part-time student. She has greatly enjoyed the varied and in-depth commercial experience which she is gaining during her internship at Pure Business Law.
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