Bitcoin is a digital asset designed to work in peer-to-peer transactions as a currency. Bitcoins have three qualities useful in a currency, according to The Economist in January 2015: they are “hard to earn, limited in supply and easy to verify.”Per some researchers, as of 2015, bitcoin functions more as a payment system than as a currency.

Economists define money as serving the following three purposes: a store of value, a medium of exchange, and a unit of account. According to The Economist in 2014, bitcoin functions best as a medium of exchange. 

However, this is debated, and a 2018 assessment by The Economist stated that cryptocurrencies met none of these three criteria. Yale economist Robert J. Shiller writes that bitcoin has potential as a unit of account for measuring the relative value of goods, as with Chile’s Unidad de Fomento, but that “Bitcoin in its present form doesn’t really solve any sensible economic problem”.

According to research by Cambridge University, between 2.9 million and 5.8 million unique users used a cryptocurrency wallet in 2017, most of them for bitcoin. The number of users has grown significantly since 2013 when there were 300,000–1.3 million users.

Acceptance by merchants

The overwhelming majority of bitcoin transactions take place on a cryptocurrency exchange, rather than being used in transactions with merchants. Delays processing payments through the blockchain of about ten minutes make bitcoin use very difficult in a retail setting.

Prices are not usually quoted in units of bitcoin and many trades involve one, or sometimes two, conversions into conventional currencies. Merchants that do accept bitcoin payments may use payment service providers to perform the conversions.

Financial institutions

Bitcoins can be bought on digital currency exchanges. Per researchers, “there is little sign of bitcoin use” in international remittances despite the high fees charged by banks and Western Union who compete in this market. The South China Morning Post, however, mentions the use of bitcoin by Hong Kong workers to transfer money home.

In 2014, the National Australia Bank closed accounts of businesses with ties to bitcoin, and HSBC refused to serve as a hedge fund with links to bitcoin. Australian banks in general have been reported as closing down bank accounts of operators of businesses involving the currency.

As an investment

The Winklevoss twins have purchased bitcoin. In 2013, The Washington Post reported a claim that they owned 1% of all the bitcoins in existence at the time.

Other methods of investment are bitcoin funds. The first regulated bitcoin fund was established in Jersey in July 2014 and approved by the Jersey Financial Services Commission.

Forbes named bitcoin the best investment of 2013. In 2014, Bloomberg named bitcoin one of its worst investments of the year. In 2015, bitcoin topped Bloomberg’s currency tables.

Venture capital

Peter Thiel’s Founders Fund invested US$3 million in BitPay. In 2012, an incubator for bitcoin-focused start-ups was founded by Adam Draper, with financing help from his father, venture capitalist Tim Draper, one of the largest bitcoin holders after winning an auction of 30,000 bitcoins, at the time called “mystery buyer”. 

We have always emphasized the importance of having a good website for your company because it can act as your best tool for marketing and sales. A poorly designed website can repulse people from your business and can cause you to lose customers before you even have them. Get in touch with HyperEffects to work on creating, enhancing, and making the website of your company more user-friendly.