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Rakuten have recently enable Bitcoin payments for their US customers, but what exactly is this crypto-currency and how does it work?

What is Bitcoin?

Invented back in 2008, Bitcoin is a type of crypto-currency that is created and held entirely electronically. It uses encryption techniques to generate units of the currency – Bitcoins – and to verify the transfer of funds.

Bitcoin is the first decentralised peer-to-peer payment network, because it operates independently of countries’ central authorities and banks. From a user’s perspective, Bitcoin is similar to a mobile app or a computer programme, in the sense that users are presented with a personal Bitcoin wallet that allows them to send and receive units of the currency electronically.

What are the advantages?

Bitcoin is growing in popularity among corporations and small businesses, offering a number of benefits other types of currency can’t provide. Payment freedom and efficiency of transactions are among the top advantages of this innovative online payment system; since Bitcoin makes it possible for users to send and receive any amount of money, anywhere in the world, at any time, with no or very small fees applying.

Bitcoin can be extremely appealing to big corporations because international payments are made simple and cheap, while small businesses may like using Bitcoin because there are no credit or debit card fees! Bitcoin transactions also hide fewer risks for merchants, by offering anonymity and protection against identity theft, because they do not contain customers’ personal information. Individuals have shown an increasing interest in using Bitcoin, as well, because it is neutral, transparent and predictable.

Who controls the Bitcoin network?

Instead of being tied to any one country or regulatory body, this digital payment network is controlled by Bitcoin’s adopters all around the world; the system is fully open and any user can access the source, and suggest any improvements or changes.

However, Bitcoin can only work correctly if there is a complete consensus among all users. Although this all may sound very unsafe, the network remains secure at all times, because it is protected by a protocol and complicated peer-reviewed cryptographic algorithms.

Where can I use my Bitcoins?

Bitcoin is now considered the most well-known and widely used digital currency, and a growing number of companies already accept Bitcoins as a legitimate source of payment from buyers purchasing their online products or services.

Some of the largest and most popular online companies, agencies and retailers that accept Bitcoins are: Amazon, eBay, PayPal, Zappos, Expedia.com, Etsy, Apple’s App Store, Wikipedia, Dell and many others.

What are the risks?

Although Bitcoin is becoming more and more popular, there are still some people and businesses that are unaware of how it works and the advantages of using a crypto-currency. Potential users are concerned about its credibility and the fact that Bitcoin value can be affected by price fluctuations.

So, in order to protect themselves from Bitcoin’s volatile nature and any chances of devaluation, many businesses that have adopted this crypto-currency use third party companies, which allow them to accept a payment in Bitcoins, but then exchange them to paper currency, such as sterling, dollars, euro, etc.

Is Bitcoin the future?

Although Bitcoin is not close to the mainstream yet, the fact that measures to support digital currencies have been included in this year’s British government budget, raises Bitcoins’s credibility and users’ overall trust and confidence in adopting crypto-currencies.