Over the last few years the rise of cryptocurrency has taken the world by storm. There are multiple variations with names like Litecoin, Dogecoin, Namcoin, and Mastercoin, but the most famous and publicly recognized is Bitcoin.
Bitcoin empowers people all over the world to transfer money with just a click and without paying transaction fees or having to engage with a 3rd party trustee. Though the true “magic” behind Bitcoin and others like it is the Blockchain. Blockchain ensures that every transaction is unique and valid.
So how does it translate to everyday e-commerce? Let’s take a dive into cryptocurrencies using Bitcoin as our example because it has the largest community by far and the best commercial adoption to date.
As a merchant you can accept Bitcoin from everybody in the world within seconds without paying fees or signing up for a debit account. All you need is to create a Bitcoin wallet to process the payment. There are several opportunities out in the market to integrate Bitcoin payment options into existing infrastructure, one of them is BitPay. The service takes care of processing the payment as well as converting Bitcoin into other currencies and wiring it into your bank account. Some companies have also started to pay their employees in Bitcoin or use it for other expenses. There is no need to exchange your coins as you can use it for paying bills as well.
As a customer you can spend your Bitcoins at any marketplace which accepts Bitcoins. To find merchants in your neighborhood there are services like Coinmap that list them. You can not only purchase items from Merchants with Bitcoin but also transfer Bitcoin to anybody else. Imagine you would like to split the bill at the restaurant. Another way to spend your coins is by using services which accept Bitcoin only. Changetip is one of them allowing people to transfer small amounts of money called micropayments.
You can find more information on wallets and merchants at coindesk.com.
Ready, Set, Go…let’s purchase!
Now that you know what Bitcoin means for merchants and customers, let’s have a closer look at how we can make a transaction using Bitcoin.
Ready: First of all you need to have a Bitcoin wallet and Bitcoins. A Bitcoin wallet can be compared to a bank account. The difference is you can create it for free without paying any fee and have as many as you’d like in just a few clicks. To create a wallet you can choose among websites, apps, hardware and desktop applications. Coinbase or Blockchain are some services that provide web and app wallets, for other services click here. Each wallet has its own unique address which looks like this: 1dice8EMZmqKvrGE4Qc9bUFf9PX3xaYDp. In order to receive money, you need to share this address with people you are dealing with for them to transfer Bitcoins into your wallet. In the same way to send money, you can transfer BTC (Bitcoin) from your account to theirs by using their wallet address. Only the owner of an address can sign a transaction to another wallet. The “magical” Blockchain then validates the transaction, confirms it and makes sure it is unique. This ensures that no BTC can be spent twice neither can it be held in two different wallets at the same time.
Set: The next step is to buy Bitcoins with your preferable currency. Some services like coinbase provide an all in one solution which allows you to buy/sell Bitcoins and access your wallet from web and app. Since you are already a proud owner of a Bitcoin wallet, you can buy BTC anywhere you like and transfer them easily in your wallet of choice. Maybe there is an Bitcoin ATM in your neighborhood?
Go: Once you have found a business which accepts Bitcoin, go ahead and use your coins to make a purchase. The payment process is similar to using a credit card. Both parties need to exchange their account information to transfer the fiat between accounts. When using Bitcoin, this can be done in several ways. Either you copy and paste your wallet address to hand it on or present it with a QR-Code. The QR-Code enables other people to easily scan your code with their smartphone camera and deposit BTC into your wallet. You can only grant and submit transactions to the Blockchain and thereby to other wallets when being the owner of the wallet. Nobody can withdraw from your wallet without having your permission. Permission can only be granted with passwords or 2 way authentication. This has a lot of advantages as once a transaction has started the coins are transferred instantly. There is no way to revoke a transaction. It ensures every coin being spent actually exists and is not being double spend. Compared to ordinary banks cryptocurrencies are free, fast and reliable. They give you the power to access and transfer your money whenever and wherever you want.
We at DOOR3 are closely following the cryptocurrency space and are looking forward to the new and interesting ways it can be used. Companies like Dell, Microsoft and Overstock are currently using Bitcoin with other companies potentially following suit in the coming year.
Kai Schulz is an Intern of the Engineering Team at DOOR3. What are your thoughts about the impact of cryptocurrency/Bitcoin in 2015? Let us know by commenting below.
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