Bitcoin for your Small Business

Bitcoin

 

By Ian Ross

Small business and part time business owners are used to being flexible in how they are compensated for their wares.  The rise of Bitcoin has attracted a lot of press and if not already offering it as a way for customers to pay, you may be considering it — especially if it can be done easily, securely and with minimal cost or risk to yourself.

For those unfamiliar with exactly what Bitcoin is, it’s been described as a virtual or digital currency or sometimes as a “crypto-currency”.  It has no physical form, nor even in a single online repository, but exists across a vast number of computers.  It is private, with only transactions recorded and it is secured by strong digital encryption.

You can receive Bitcoins in one of two ways – either as payment or through what is called “mining”.

Mining Bitcoins is a process by people offer up some of their own computational resources to help process groups of payments, which as mentioned above, are handled across wide networks of separate computers.  The group of payments becomes known as a “block” and once a unique identifier linking it to past payments is determined by one computer (roughly once every ten minutes) the successful terminal is awarded with Bitcoins (thereby controlling the rate of new Bitcoin production) and the new set of transactions is published to the “block chain”, which is an accessible ledger recording each transaction.  In this way no one central computer or central authority controls the transactions and the transfer of individual Bitcoins cannot be duplicated.

As a small business owner, you may simply be interested in receiving payments directly, however.  A number of merchant services are now in the business to help you with transactions.  Payment processor Square is working on one system.  Even Paypal is looking to allow Bitcoin purchases on certain items.  Payments can be transferred online, such as by generating unique electronic addresses to include on invoices or individualized web pages for customers.  Smart phone apps and some POS systems will also allow the generation of QR codes which a customer then scans into their smart phone and taps to confirm payment.

The secret to possessing Bitcoins is your personal encryption key which is then matched to a public key.  This is the most important element for retaining ownership of your Bitcoin wealth and forms a part of what is often called your Bitcoin wallet.  It is comprised of a long string of lower and uppercase characters.  It can be printed out to create a physical form, though it would be tedious to re-enter by hand.  Nonetheless, you need to protect it and if stored electronically, be sure not to make such a mistake as to toss out your hard drive, which was the fate that befell James Howells of Wales.  Having acquired Bitcoins in 2009, he was reminded of them when their value escalated to be worth over $7.5 Million dollars.  Alas, he’d lost his personal key and with it, he lost the Bitcoins.

While transactions are essentially private and personally untraceable, as a business owner, you may wish to record the transactions much as you would anything else without a record, like cash.  Using individualized addresses on invoices to receive payment can help create a paper trail for accounting purposes.  If quoting a price in Bitcoins, you may also wish to specify a time period that the rate remains valid as the price of Bitcoins, in relation to other currencies, fluxuates based on supply and the open market.

For a long list of service providers who can help you accept Bitcoins, see the section “Merchant Services”, here:

As of the writing of this post, one Bitcoin is trading at $377.21 USD.  To keep up with current Bitcoin news and prices, visit a site such as Coindesk.


Ian Ross is an entrepreneur, and the owner of Spring Digital Media in Halifax, NS, Canada.
Published by Spring Digital Media, All Rights Reserved.