Image courtesy btckeychain

Virtual currency Bitcoin is gaining popularity worldwide and New Zealand will have its inaugural Bitcoin Conference at the end of November. It is estimated that around 80,000 businesses worldwide are currently accepting Bitcoin as a form of payment. Its fair to say things are getting a little serious. Should you care?

First things first: what is Bitcoin? Bitcoin is basically a new kind of money - a cryptocurrency. It uses peer-to-peer technology to allow payments to be made between anyone worldwide. It is open source and touted as a more secure way to make payments. Its value is, however, very volatile so keep this in mind if you do decide to start making Bitcoin transactions. For more information on Bitcoin and how it works, visit bitcoin.org. Keep in mind that, as it is not an official currency, you will need to be aware of how the New Zealand laws and regulations affect the use of Bitcoin.

The trendy currency In spite of its risks, new Bitcoin platforms seem to be launching around the world all the time. Many small businesses worldwide are taking up the virtual currency as a means of payment. Bitcoin is attractive for small businesses because its processing fees (usually less than 1 percent) are a lot lower than fees for credit card transactions.

In fact, some experts claim that small businesses will take up the virtual currency faster than the big corporations and worldwide chains.

While low fees are what first seems to attract businesses, some experts point to other advantages to Bitcoin adoption, including stronger protection against identity-theft and the ability to get paid a lot quicker than using common payment methods like credit cards.

While mainly used for online transactions, Bitcoin can also be used in store if the customer has installed in his/her smartphone a Bitcoin wallet for this particular purpose. In this instance, a Bitcoin transaction works much the same as a cash transaction.

Beware of the downfalls As an unregulated virtual currency, Bitcoin has its cons and, while many think it is the way of the future for businesses, all merchants need to be aware of these before deciding to start accepting the cryptocurrency.

Keep in mind that the currency is very volatile so you might not want to hold onto it for profit and rather just exchange it for real money as soon as you can (or you might get lucky and get some profit when the exchange rates fluctuate).

Still in its infancy, there is a chance that Bitcoin will just end up dying a slow death and become useless. It is also not monitored or approved by the government so check with your accountant to figure out how that would affect your taxes.

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Should small businesses in New Zealand care about Bitcoin?