Bitcoin has been in the news recently, and not always for the right reasons. The cryptocurrency started at a value of almost nil in 2009, rocketed to a record high of US$20,000 in 2017, but has been steadily falling and is currently worth about US$6,500. Investors who entered the market at the peak suffered staggering losses. Despite all of this, cryptocurrency remains a controversial topic for businesses, with some waiting for it to die out and others willing to bring it into their system. The real question is can this emerging technology help you take your business to greater heights? The specialist business growth accountants at Berley give you the facts.
What is Bitcoin?
In simple terms, bitcoin is a cryptocurrency, a form of electronic cash. Created as an alternative to standard government-held currencies, it uses cryptography to control its creation and management in the same way that a government would control the printing and distributing of money. The difference is that bitcoin is entirely peer-to-peer, with independent operators often storing large amounts of bitcoins on local systems, and trading goes through them rather than through government banks. This allows for more security than most transactions as any hidden costs must be shown to the client. It’s impossible to tie personal information to the transaction, giving the holder complete anonymity and privacy.
Too good to be true?
While it may seem fine, there are many problems associated with the currency. First is the security issue surrounding cryptocurrency in general. This is a relatively new technology, and there have been numerous high-profile cases of hacking that have resulted in enormous losses for various cryptocurrency companies, usually forcing them into bankruptcy. Approximately 45% of all cryptocurrency traders have shut down, with many suffering similar security breaches. One of the most public cases of hacking came from Mt. Gox, which at the time was responsible for approximately 70% of all bitcoin transactions worldwide. In 2014, they filed for bankruptcy after having $473 million worth of bitcoins stolen. That’s around 7% of all bitcoins in existence.
While bitcoin has some viability as a currency, it tends to fluctuate wildly in value, dropping hundreds of dollars in mere hours. Without government regulation, it has often been suspected of being manipulated for monetary gain.
While you can be taxed on cryptocurrency transactions by government financial bodies, they are not accepted everywhere. Either they can gain acceptance over time, or sometimes be rejected altogether. In China, for example, the People’s Bank of China forbids bitcoin or other cryptocurrencies from being legal tender, rendering them virtually useless.
When looking at whether or not to consider accepting cryptocurrencies, you need to have the correct viewpoint. Many cryptocurrency companies will look to advertise their product and give you little information on whether it will help to grow your company, promising success no matter what. However, our business growth services focus only on what gets your company results and give you the information you need to make informed decisions.
What is blockchain?
Blockchain is a form of digital ledger, most commonly associated with cryptocurrencies such as bitcoin. A blockchain consists of blocks that contain a timestamp, a record of the transaction, and a coded version of the previous block. As you make payments, these blocks of data form a chain of payments. Any attempt to tamper with one transaction forces you to modify all the other blocks within the chain, and this becomes progressively harder as more and more blocks are added.
The advantage is that all the data in the blockchain is public and transaction data is easy to find. However, no personal data is stored in the chain, making it far more transparent than traditional banking. In addition, because the data is difficult to tamper with, the transactions themselves are secure, although Bitcoin’s other security failings have made this feature redundant thus far.
Why consider blockchain?
As is the case with any business, you need to look to the future. The current iteration of bitcoin may not be something you would consider using now, but everyone agrees that the technology behind it holds immense promise. Blockchain technology is currently bogged down by many of bitcoin’s sins, and the cryptocurrency’s demise could free it to prosper in many aspects of the business world. Digital currencies could be standard use within a few decades, and it would be blind not to learn from their teething issues.
To stand out from the crowd you must be willing to embrace the future, and while that doesn’t mean you should immediately invest your hard-earned savings in bitcoin, it does mean keeping an eye on one of the more promising technologies of this generation. As with anything new, caution should be exercised, but the potential for growing your business is immense should you choose the right path. This is why it’s so important to seek the advice of an expert like Berley: the risks are just as high as the rewards, and we can help you avoid them. We’re run by entrepreneurs just like you, people who can see the pitfalls and guide you away from them.
Berley can help
As small business accountants, we know a thing or two about the unknown. When our founders first set up Berley Chartered Accountants many people thought they were crazy for walking out on a well-paid salary to set up their own business. They said we would fail for doing something so different, but we proved them wrong precisely because we were willing to accept something new. Now we can help you follow the same path, to be open to the possibilities of a new technology that could help you grow your business.
To find out more get in touch on 020 7788 8261 or fill out our Online Form.
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