has captured our attention and spurred us into action.
Bitcoin: What is it and Why Should Marketers Care?
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If you have been paying attention to the news or Twitter for the past month or two, you should have heard of Bitcoins. With all of the hype that Bitcoin and Mt. Gox have been receiving, I wanted to take a deeper dive into what Bitcoin actually is and if it has any impact on us, as digital marketers.
What is Bitcoin?
Bitcoin is one of the first decentralized currencies that actually allow for digital coins to be sent over the Internet. There is a finite number of Bitcoins that can be “mined,” which dictates the supply of Bitcoins. Individuals that can be identified as “miners” are the ones that “discover” new Bitcoins each day by using special software to solve complex math problems.
The Good, the Bad, and the Ugly
The Good: There are a number of basic benefits, such as being able to transfer Bitcoins directly from person to person; low fees, since there aren’t any banks to charge fees; and global capabilities – no exchange rates, accounts cannot be frozen, and there are no prerequisites or limits.
The Bad: Bitcoin faces a number of serious barriers that deter many away, such as: anonymous transactions, no fixed value, online security, and lack of regulation. Having all transactions being anonymous allows for the perfect platform for black-market products and drug transactions. The fact that Bitcoins are treated with no fixed value means that they can be traded like commodities, which leaves a lot of room for volatility. Finally, the online security and lack of regulation are major barriers and issues that Bitcoin and Bitcoin exchanges have been dealing with since inception.
The Ugly: Mt. Gox was the primary Bitcoin exchange, handling 70% of all Bitcoin transactions in 2013. Mt. Gox, which stands for “Magic: The Gathering Online Exchange,” has had a history of troubles ranging from trading incidents to legal issues. The primary reason Bitcoin has been in the news recently is because in February 2014 850,000 Bitcoins, which converts to about $450 million, went missing. After further investigation about 15% of the missing Bitcoins were recovered, but the remaining are believed to have been stolen and Mt. Gox has since shutdown and filed for bankruptcy.
Implications for Marketers