If you’re interested in monetary economics, you’ll have heard of Bitcoin. You may even own some like I do! I’ve been following the currency for the last year in an effort to help my clients prepare for what is possibly a major game-changer for business owners.
Bitcoin is a digital currency that’s regulated by mathematical algorithms instead of a central bank. Its history reads a little like a sci-fi novel, with complicated cryptography and a mysterious founder. It’s intriguing for several reasons; it’s the first currency that removes the need for a bank and its “digital wallet” system is novel in that it allows for anonymous electronic transactions. The recent popularity of the new currency has led at least one company to offer to pay its workers in Bitcoin (link).
But before you begin reworking your payroll, I’d argue that Bitcoin is more of an interesting experiment than a real threat to the existing financial structure. The Bitcoin ledger system can’t be scaled the way the Visa payment network is, and the limit on Bitcoin production makes the system inherently deflationary. At the moment cryptography seems too complicated to support consumer-facing interfaces. The recent surge in Bitcoin purchases has economists questioning whether it’s truly even a currency or a commodity people are purchasing in the hopes its value will increase (like stock). Either way, the legality of Bitcoin is already being questioned by the US government, and no doubt regulation is looming.
So how will Bitcoin change your business? At this point, in my opinion not much at all.