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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

Bitcoins may be a fad or a little ahead of their time, but what can we learn from their experience as digital marketers? Mobile is key. Every year for the past couple of years, thought leaders of the marketing world have said that this is going to be “The Year of Mobile.” The ability to directly interact and connect via mobile for Bitcoin trading is something that we can draw from our daily mobile transaction experiences. While actual digital currencies make people nervous, mobile payment capabilities is something that consumers are actively looking for and using. There are a number of phone apps that consumers can use to send each other money, such as: Ally Bank’s Popmoney, Venmo, and Google Wallet. This is further justification that consumers are looking to be able to accomplish everything with the touch of a button on their phones. 
Finally, something else that we can learn from Bitcoin is that there are people out there willing to use real money with a digital currency, which could mean that there are even more people out their willing to interact with a digital currency based off of virtual money, such as points for engagement or gamification product applications. Look how much success games like FarmVille and Candy Crush have seen (my mom constantly bugs me on Facebook for Candy Crush tickets, which drives me crazy)!
While it may seem like a stretch to connect the Bitcoin currency to Candy Crush, both have huge levels of consumer engagement that we can learn from.

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