What is Bitcoin and how does it affect businesses?

Bitcoin is a digital currency that has been around since 2009 and has no central monetary authority. A Bitcoin can either be purchased or “mined” through difficult computer number-crunching, up to a limit of 21 million total Bitcoins. Given that this currency is limited and cannot be produced at the will of any government, economists worry that it will ultimately be subject to high levels of deflation.

It also caused controversy last month when its value increased dramatically, showing all the signs of a tech bubble. After peaking at $266 per Bitcoin on April 10, the value is now down to around $106. Real-time value is available at Mt. Gox.

So how does this affect businesses? The number of companies accepting the currency is growing, with WordPress, OkCupid, Foodler, Reddit and a bar in New York among them. Some businesses have even offered to pay their employees in Bitcoin.

As the currency grows in popularity, there could be more pressure for businesses to accept Bitcoin payments. However, you could accept a Bitcoin as payment today, and it could be half the value tomorrow. On the other hand, it could be twice the value, but that’s a dangerous way to do business.

Some say the currency is more secure than cash. It is kept online, so it can’t be stolen from your office or robbed from your bank. But a hacker could potentially steal it from your digital wallet, and there would be no way to get it back. This happened to one Bitcoin owner who lost 25,000 Bitcoins in 2011. They were worth $500,000 back then, and they would have grown in value to $6.65 million at the peak of the bubble.

For now, it’s probably best to learn about the risks and be cautious. Bitcoin could be the future of currency, or it could be a trend that has seen its peak. Leave a comment below to let us know what you think.