UPDATE: Added a quote from the Bitcoin.org FAQ section for clarification.
Bitcoin has been a controversial topic ever since it first rose to prominence about five years ago. Created by an unknown entity referred to as “Satoshi Nakamoto,” nobody knows for certain how or why the cryptocurrency came to be – it’s also very misunderstood.
The concept of anonymity is what first attracted people from all over the world to adopt Bitcoin as a form of payment. Many users believed their transactions couldn’t be traced and resulted in Bitcoin becoming the go-to payment method for tech-savvy criminals.
Black markets, money laundering, Ponzi schemes, and other illegal activities have all been linked to Bitcoin. And criminal activity involving Bitcoin is not going away anytime soon.
Notable People Accused of Using Bitcoin to Commit Crime:
If Bitcoin is Used for Evil, Why is It Still Good?
Cyber-criminals love using Bitcoin because of its anonymity. But in reality, Bitcoin is the most transparent payment network ever created. All Bitcoin transactions are stored publicly and permanently on the network and anyone can see the balance and transactions of any Bitcoin address. But because the only information that can be identified are Bitcoin addresses and not names, all a criminal has to do is get a new address for every crime they commit. It’s also very easy to mask a computer’s IP address, thus making it nearly impossible to be traced.
But even though Bitcoin has facilitated cyber-crime to a certain extent, many well-established merchants (including Newegg and Newegg Canada) have embraced it for one simple reason: Customers demand it.
Reasons Customers Enjoy Using Bitcoin:
- Mobile Payments are Easy
Bitcoin on mobiles allows you to pay with a simple two step scan-and-pay. No need to sign up, swipe your card, type a PIN, or sign anything. All you need to receive Bitcoin payments is to display the QR code in your Bitcoin wallet app and let your friend scan your mobile, or touch the two phones together (using NFC radio technology).
- Security and Control Over Money
Bitcoin transactions are secured by military grade cryptography. Nobody can charge you money or make a payment on your behalf. So long as you take the required steps to protect your wallet, Bitcoin can give you control over your money and a strong level of protection against many types of fraud.
- Works Everywhere, Anytime
Just like with email, you don’t need to ask your family to use the same software or the same service providers. Just let them stick to their own favorites. No problem there; they are all compatible as they use the same open technology. The Bitcoin network never sleeps, even on holidays.
- Fast International Payments
Bitcoin can be transferred from Africa to Canada in 10 minutes. There is no bank to slow down the process, level fees, or freeze the transfer. You can pay your neighbors the same way as you can pay a member of your family in another country.
- Zero or Low Fees
Bitcoin allows you to send and receive payments at very low cost. Except for special cases like very small payments, there is no enforced fee. It is however recommended to pay a higher voluntary fee for faster confirmation of your transaction and to remunerate the people who operate the Bitcoin network.
- Protects Your Identity
With Bitcoin, there is no credit card number that some malicious actor can collect in order to impersonate you. In fact, it is even possible to send a payment without revealing your identity, almost just like with physical money. You should however take note that some effort can be required to protect your privacy.
With so many great reasons to use Bitcoin instead of cash or credit cards, merchants strongly believe that the good far outweighs the evil. Unfortunately, many people that own Bitcoin aren’t using it to complete transactions, but are instead hoarding the cryptocurrency as an investment.
This is a bad idea.
The Rise and Fall of Bitcoin: Spend it; Don’t Save it
It’s no secret that the value of Bitcoin is extremely volatile and unpredictable. Similar to the stock market, Bitcoin prices can increase or decrease over a short period of time. Because of its young economy, novel nature, and liquid markets; saving your Bitcoin is not recommended.
According to Bitcoin.org’s FAQ:
…keeping your savings with Bitcoin is not recommended at this point. Bitcoin should be seen like a high risk asset, and you should never store money that you cannot afford to lose with Bitcoin. If you receive payments with Bitcoin, many service providers can convert them to your local currency.
Currently, one Bitcoin is the equivalent of $486.99. This may seem like a lot of money but one year ago Bitcoin was priced at an all-time high and worth nearly $1000. One year before that, the price of Bitcoin was hovering around $10. These drastic increases and decreases in value prove that Bitcoin should be seen as a high-risk asset and never as an investment.
If you own Bitcoin, it’s much better to spend it than to save it for two reasons:
- It could become worthless overnight.
- Its future depends on it.
According to a recent article by USA TODAY, “Bitcoin’s future depends on public acceptance.” The article further states that because Bitcoin owners are mostly techies, it needs to become widely accepted by the masses in order for it to survive. And the only way to do that is by spending it any chance you get.
Fresh from attending a recent Bitcoin conference, Laura Baverman of USA TODAY made the following observations:
- The technology that powers Bitcoin paved the way for dozens of new digital currencies to be created around the world. In fact, a man named Christopher Franko in the small town of Washington, N.C., created the Frankocoin. Bitcoin levels the playing field.
- What it really means to be deregulated is that cryptocurrency businesses are unincorporated and often called “projects”. In some cases, they don’t pay taxes. Employees are paid in Bitcoin and pay capital gains taxes when they cash out.
- There is a thing called Bitcoin 2.0, and it actually makes sense. The technology that allows Bitcoin to be securely encrypted, tracked (in a universal public ledger) and transferred between people can also be used for the transfer of other documents. Think real estate documents, business contracts, even passport or citizenship documents if the government gets involved.
- Some high-profile people are excited about Bitcoin. Venture capitalist Tim Draper made headlines in July for buying at auction Bitcoin seized in the Silk Road shutdown. He’ll make the coins available to people in developing nations with volatile currencies.
- It’s important to know that Bitcoin’s value is too volatile to be worth much today. That’s why most retailers who accept it as payment immediately sell. This point is from Duke University finance professor Campbell Harvey, who hopes to offer a course in cryptofinance in 2015.
These observations demonstrate that there is indeed a future for Bitcoin, but we have a lot of work to do before it goes mainstream. Bitcoin (along with all cryptocurrency) is currently deregulated, risky and unpredictable. If owners choose to save it instead of spending it, the Bitcoin community is at risk of losing everything.
Newegg shoppers are among the first wave of Bitcoin users and we’re thrilled to accept the cryptocurrency as a form of payment. Just like you, we also believe Bitcoin can be the future of digital currency. But if you’ve been saving it and hoping it will make you rich one day, you’re better off spending it if you want it to succeed.