If you’ve been paying attention to the news lately, you’ve probably heard people talking a lot about Bitcoin, the online currency that has grown over 4000% in value in the last year.

And that’s because a lot has happened lately.

A leaked email exchange between a Bitcoin entrepreneur and several Google executives revealed Google was searching for ways to integrate the digital cash. In January, Miami Beach hosted this year’s North American Bitcoin Conference. And earlier today, a security firm called Trustwave announced that hundreds of thousands of computers have been infected with a virus called “Pony” by cyber-criminals in order to steal bitcoins and other digital currencies.

In case you don’t know what Bitcoin is, it’s a decentralized digital currency that allows users to purchase goods and services anonymously. You can acquire bitcoins by purchasing them at a Bitcoin exchange,  as payment for goods or services,  exchanging bitcoins with someone near you, or earning bitcoins through competitive mining. Later this month, Seattle, Austin will debut the very first bitcoin ATM in the United States.

The crypto-currency was created in 2009 and many businesses, both large and small, online as well brick and mortar, already accept it, including Overstock.com, WordPress,  Porn.com and even Virgin Galactic. It’s completely different from other digital payment options like Google Wallet (which many users complain is too invasive), or even Paypal, because the buyer can remain anonymous to not only the merchant, but to Bitcoin as well.

Its anonymity not only provides privacy, but also protection against fraud. Bitcoin gives users individual “addresses” (similar to an e-mail address) to make purchases with, which can be discarded after a single use. All Bitcoin transactions are stored publicly, but the identity of the user behind the address remains unknown unless they choose to reveal it. Plus,  users get to avoid bank penalties and credit card interest fees.

Merchants also benefit from Bitcoin since transactions are irreversible, which protects them from fraudulent payments or charge-backs. For example, if a customer eats at a restaurant and pays with a credit card, they can call their bank and say they didn’t enjoy the meal or even deny that they were ever there and the charge will be removed. This loss of revenue is a constant worry for business owners. Not to mention, merchants get to avoid credit card processing fees.

Recently, there were rumors (with substantial evidence) that Google was making plans to incorporate Bitcoin. Musician and entrepreneur Jarar Malik began inquiring about which tech company would be next to jump on the Bitcoin bandwagon, since he was planning to start a Craigslist-like site that would only accept payment in bitcoins. Eventually, Google’s Senior VP of Ads and Commerce, Aridha Ramaswamy, told Malik that they were, in fact, looking for ways to incorporate it, but weren’t sure how. Malik posted screen shots of the conversation on Reddit.

Google has since released a statement saying they “have no current plans regarding Bitcoin, ” however, they are not denying that the exchange took place.

The fact that Google is at least thinking about using Bitcoin is rather interesting since Google’s biggest source of revenue is Adsense. In order to prevent scams or the selling of illegal goods, Google has to keep close tabs on their ad buyers. It is not clear how they would do so if their buyers were anonymous. As for Google Commerce, integrating Google Wallet with Bitcoin might require the buyer to disclose their identity to Google, while still remaining unknown to the merchant, much like Paypal.

Bitcoin’s appeal to privacy also has a flip side. Criminals want privacy too.

The currency has been known to be used on the digital black market to pay for anything from money laundering to illegal drugs and weapons.

Since digital currency is still very controversial, any negative press can cause Bitcoin’s valuation to drop at a moment’s notice. Critics use this instability as ammo to showcase the dangers of Bitcoin, arguing that its extreme fluctuations prevent it from being seen as a real currency.

The Bitcoin brand is still young and it remains to be seen if it’s here to stay or just to open the door for other digital currencies.




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Category: Spotlight