Introduction to Bitcoin for the Average UK Business
Start with the word “trust”. In our everyday activities we sometimes engage in hundreds of transactions that rely on trust. When we pay for a beer with cash, the barman sees the five pound note and trusts the Bank of England to ensure it is worth what the face value says it is. If he doesn’t think you are old enough, he asks for identification. You hand him your driving license. He trusts the DVLA to ensure that you are who you say you are. Although these transactions are between two people, they have already used other organisations to facilitate its success. This case shows, there is a charge for obtaining this trust; £80 for an up to date driving license. Businesses have to rely on a whole host of organisations to provide this trust. Although they do business with their customers, they have to pay others to ensure that this trust is obtained. Think of the increasingly high card fees charged by VISA to receive card payments, or the Paypal charges to send and receive money. Ultimately you are moving money from your customers account to your account, but you needs others to confirm this.
The aim of Bitcoin technology is to take away the need for a third party to provide this trust. It uses an open and transparent ledger called a “blockchain” to record all transactions. The blockchain is maintained by a peer-to-peer network of computers across the world. These computers track all of the transactions and provide confirmations to ensure their success. They update the blockchain every few minutes and this information is available to anyone. As well as recording financial transactions, such as who has paid who with Bitcoin, the blockchain can log any information to provide an undisputable record. In its short history people have logged diamonds, a marriage and ownership of footwear. The blockchain could use the same technology that it uses to record transactions to ensure property rights and reduce fraud.
So what does this mean for the average UK business. In the short term, businesses could use the payment infrastructure that Bitcoin provides to send and receive money. There is a whole host of companies offering payment solutions, including my own. This will allow you to join the thousands of companies now accepting Bitcoin and make transactions without having to pay third parties. It also acts as a marketing tool for your business, demonstrating your innovativeness and allow to engage with new audiences through services that map companies that accept Bitcoin. It you have subsidiaries or suppliers abroad, this is where the transactions with Bitcoin really are beneficial; they are close to instant and cost very little. This is compared to the days that it takes banks to wire your money internationally. This reason is why so many companies are now exploring this technology for remittances. Finally, investors are now seeing Bitcoin and the hundreds of other similar currencies as a way of mitigating risk within volatile international markets, similar to how gold is used.
In the long term UK businesses really will experience the transformational effects of Bitcoin and its technology. There are a range of ideas and proposals, from stopping another financial crisis by allowing the blockchain to allocate risk, to running the Land Registry and support all of our interconnected devices to talk to one another. Bitcoin is slowly becoming recognised as the innovative technology that it really is, and is being less associated with sin activities. Ensure that your business benefits from this revolutionary technology.