There’s no denying it – Bitcoin has gone mainstream. Bitcoin users struck it rich when the cryptocurreny reached a high of $1,000 last year. It’s gone from a fringe currency to a widely accepted digital currency. Bitcoin isn’t just an online currency – in cities like Toronto, Montreal, and Vancouver, there are Bitcoin ATMs where you can perform transactions in person and exchanges like Bitcoin loophole where you can trade Bitcoin. While Bitcoin is more widely adopted, a lot of people (myself included) aren’t ready to hop on the digital currency bandwagon just yet.
What is Bitcoin?
You’ve probably heard Bitcoin mentioned in the mainstream media, but do you truly understand what it is? Bitcoin is a digital currency that is electronically created and stored. Unlike hard currencies like the Canadian Dollar, there’s isn’t a central authority like the Bank of Canada looking after it. Instead there’s a network of computers that process Bitcoin transactions.
When a transaction takes place over Bitcoin, the details are stored in a digital ledger known as a “block chain.” The parties remain anonymous in Bitcoin transactions. Bitcoin addresses aren’t connected to names, addresses, or other personal information. Just like hard currency, Bitcoin can be used to purchase goods and services. The main advantage of Bitcoin is that it’s ideal for Internet transactions and it has lower transaction fees than credit cards. Bitcoin does have its drawbacks – the risk of fraud is higher and there is a lack of consumer protection.
Would You Consider Getting Paid in Bitcoin?
An Ontario company has gone out on a limb and started paying its employees in Bitcoin. Wagepoint introduced the option of Bitcoin last November, but did not expect any takers. Much to its surprise, a few employees have chosen to receive their weekly pay cheque in Bitcoin. The company has even gained new customers because it offers Bitcoin as a payment method.
Bitcoin Faces an Uphill Battle
Many predicted mobile payments would to take off – unfortunately, that hasn’t happened. Even with big names backing Google Wallet and Amazon Wallet, mobile payment still isn’t widely accepted in brick-and-mortar shops. If Google, the company that can’t seem to do anything wrong (well, besides Google Video and Google Wave), can’t seem to take mobile payment mainstream, does Bitcoin stand a chance?
Finding a brick-and-mortar retailer that accepts Bitcoin can be like finding a needle in a haystack. To say the adoption of Bitcoin by real world retailers has been slow would be an understatement. Until multinational companies like McDonald’s and Walmart start accepting Bitcoin, the cryptocurrency still has a long way to go.
CRA Lays Down the Law on Bitcoin
With the rise in popularity of Bitcoin, it’s no surprise Canada Revenue Agency (CRA) has weighed in with its two cents. The taxman has said paying employees in Bitcoin is the same as compensating them in goods – in other words, it’s a barter transaction. It’s like if I repaired your computer and you installed a new garage doors in return – it’s an exchange of goods. Since Bitcoin is considered goods, Canada’s taxman says it must be valued and reported in Canada dollars.
Why I’m Not Gung-Ho for Bitcoin
I’m still not convinced Bitcoin is a safe currency to use. Until Bitcoin is backed by a multi-billion dollar corporation like eBay, I’m not comfortable using it, at least not for big transactions. Bitcoin’s decentralized system is a lot like the Wild, Wild West. If failed Bitcoin exchanges like Mt Gox have taught us anything, it’s that Bitcoin is just digital currency – your money can vanish in an instant.
Call me biased, but I’ve been ripped off my digital currencies before. StormPay was an electronic currency similar to PayPal. It seemed to be rock solid until 2006, when it suddenly shut down. It got into hot water for accepting payments for Ponzi schemes. I lost thousands of dollars when my account was abruptly shut down. Bitcoin has been called a haven for criminals, so could we see the same thing happen there? Only time will tell if regulators will crackdown on the cryptocurrency.
Are you a fan of Bitcoin? Do you think Bitcoin is just a fad or will it be widely accepted one day?
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, available now on Amazon and at Chapters, Indigo and major bookstores, and as an Audiobook on Amazon, Audible and iTunes.