Typing “Bitcoin” in Google search would give you a million articles on news related to Bitcoin - “Bitcoin ATM opens in Canada, A major Bitcoin Exchange halts trading, Bitcoin traders make millions in just a few days,” and what not! So, what makes Bitcoin so popular? The reason why Bitcoins are so popular is because of their advantages. Some use Bitcoin as a form of currency, some use them as an asset to trade, while some use them as a mode of payment for goods and services online. Listed here, are some major advantages of Bitcoin.
Safety and Control
Safety is one of the most important features of the Bitcoins. Bitcoins serve as a democratic reform in the financial world. The power is vested in the hands of the investors. This brings the investors to a state of full control of the Bitcoin transactions. This makes it highly impossible for the vendors to charge additional unnecessary costs like in other modes of payments. This again cuts a saves a lot of money to the investor. Identity thefts are common in developed countries. According to statisticbrain.com, a renowned statistics website, the average number of identify fraud victims in the U.S annually is close to 12 million, which is about 7% of the total population. The total estimated loss due to such identity thefts in the year 2013 is $21 billion!
The major sources of such frauds were misuse of existing credit cards (64.1%) and misuse of personal information (14.2%). Why does this happen? This happens because the customers are forced to put their personal information out on the web. Although it is guarded by high-level security software, any breach in the security will result in heavy financial loss for the customer. Bitcoins provide an easy solution to this disastrous problem. Bitcoin payments can be made without giving out the customer’s personal information for a transaction. This largely protects them from identity theft and reduces their annual financial loss. Since the Bitcoin system is an open-source online system, everyday a variety of encryption and backup software is released. This keeps Bitcoins safe and gives the control back to the customer.
In May 2010, the world’s first real transaction was made to get two pizzas delivered within seconds. So, how can such transactions happen within seconds? Again, since the whole Bitcoin system is online, it eliminates any manual processing time. This allows all Bitcoin transactions to happen with a click of the mouse. Traditionally, to send a wire transfer to another country would take at least 1-4 hours, depending upon the bank if done within the bank processing hours. And with different countries following different working week structures and bank, religious and social holidays, a transaction can even be delayed for days. Bitcoin transactions surpass all these issues as they follow a peer-to-peer online transaction system. When a Bitcoin transaction is made, the Bitcoins directly transfer from one Bitcoin digital wallet (place where Bitcoins are stored) to another, without any third party transaction. This not only saves a lot of processing time but the customer can virtually see his Bitcoins transfer. And since the whole system is online, transactions happen within seconds.
Low Transaction Fees
Every money transfer in the world has some fees associated with it. Even if the bank provides a free wire transfer in some cases, it has to somewhere bear the costs in the transaction chain. Although online money transfer websites like Xoom, Western Union and MoneyGram charge low transaction fees, the end transaction cost that the customer has to bare is higher than that with Bitcoins. Typical transactional costs include bank fee, custom fee, exchange rate fee etc. And ultimately the customer has to bare a minimum of 0.1% - 1.0% of the money to be transferred as the total transactional cost, depending upon the financial institution. Think about a customer transferring a million or even $100 million, as is done in multinational business deals! The Bitcoin transactions surpass this issue as they are either associated with no or menial fees. They only fees the receiver can incur are when a priority processing is ordered. This results in a faster transaction confirmation by the Bitcoin network.
Every bit of information relating to a Bitcoin transaction is stored in the Bitcoin Transaction Block Chain (similar to a ledger that a bank maintains for all its customers) for anyone to view and verify. Furthermore, the Bitcoin system is secured with cryptography. Thus, no one can alter or control the Bitcoin protocol. This allows a lot of transparency in the Bitcoin system and thus builds trust towards the Bitcoin protocol amongst the investors. This is arguably one of the main reasons for the price rise in recent times.
The first and foremost thing an investor looks for in any financial instrument is the risks involved. Each Bitcoin transaction is secure and irreversible. This acts as a double sided sword. On one side, the transaction being irreversible is beneficial to the merchants as there is no need for PCI compliance and it saves them from fake chargebacks. On the other side, the transaction being irreversible hurts the customer if they order something by mistake as refunds are rarely possible. This also allows merchants to expand in developing countries where the use of credit cards and other online payment services is not yet available. Furthermore, the fact that the Bitcoin system is transparent reduces the risk factor.
The payment freedom, users get by Bitcoin transactions is impeccable. The user doesn’t have to worry about a third party transaction, bank holidays, overseas transaction limits or even round figures. The user can send Bitcoins ranging from a considerable decimal, anywhere in the world seamlessly. Furthermore, the user can access his Bitcoin wallet from anywhere in the world. This ease of access and payment freedom is what makes the Bitcoins viable as a mode of payment online.