By Andrew Masak
Has the water cooler talk at your workplace turned to the hottest topic in technology – Bitcoin? Are your employees clamoring to be paid in digital currency or include crypto currencies in their defined retirement plans? In a recent poll by Tech in Motion, 51 percent of IT professionals responded that they would be interested in accepting Bitcoins as payment for work, and major retailers, including Tesla Motors, Lord & Taylor, Overstock, and Tiger Direct are beginning to accept Bitcoin payments. When someone from IT comes knocking on your door asking you about Bitcoin, should you consider paying him in it?
What is Bitcoin? Bitcoin is a decentralized digital currency that allows parties to exchange virtual coins without a middle man. Moreover, Bitcoin is not controlled or backed by any bank or central government authority, like the Federal Reserve. As Bitcoin transactions do not require a centralized intermediary, payments can be processed at a very low, almost “frictionless” cost.
Where do Bitcoins come from? Bitcoins are pieces of computer code that represent monetary units. Each Bitcoin is “mined” by a computer solving complex algorithms. There are currently approximately 11 million Bitcoins in existence and only about 21 million Bitcoin will ever be generated or “mined.”
How do people buy or use Bitcoins? Bitcoins are bought online using traditional currencies (U.S. dollars, Euros, etc.) through Bitcoin exchanges (see, e.g., Coinbase, Bitstamp.net, or the infamously defunct Mt. Gox) and private sellers. Bitcoin users must first install a Bitcoin wallet on their computer or smartphone, or, alternatively, use a wallet in the cloud. Users can then share their wallet’s address with others to make or receive payments.