Bitcoin gains currency in the digital world
Bitcoin, the anti-authoritarian crypto-currency, is still far from reaching mainstream acceptance, but is slowly attracting merchants and payment providers that may help validate it as a medium of exchange, especially when it comes to mobile payments.
So would a bank with a thirst for innovation ever move the virtual currency dial towards the mainstream by accepting it from customers?
Today, the closest any Australian bank gets to the three-year-old decentralised currency is wiring a deposit holder's real currency to and from the account of a Bitcoin exchange, such as Tokyo-based Mt Gox.
Bitcoin is already challenging to convert and spend, and its unstable price during its "breakthrough moment" earlier this month made it an even more impractical currency for the handful of places that do accept it.
Bitcoin's rise to more than $260 and cyber attacks on Mt Gox designed to cause panic selling did little to generate confidence in Bitcoin as a true currency.
However, the drama that accompanied the bubble - Bitcoin's second since 2011 - did offer many non-geeks a first glimpse at the experimental currency. It boldly has two aims: to enable direct online payments unmediated by financial institutions, and provide a means to protect the digital currency's integrity without a trusted third party, such as a central bank.
Satoshi Nakamoto, Bitcoin's attributed creator, described the electronic cash system in 2008 as "fully peer-to-peer, with no trusted third party".
Despite Bitcoin's bubbles, bursts and dire predictions for its future, the currency is showing signs of maturing by way of associated services such as BitPay, which offers merchants a fee-based "Click to Pay" processing service with some protection against its volatility. There are a clutch of Australian merchants that also accept Bitcoins, such as Patchd and honestbeef.
Berlin-headquartered start-up 9flats, an online service for short-term accommodation seekers, began accepting Bitcoin at the height of the latest bubble and uses BitPay to lock in the exchange rate at the time of transaction.
Despite these signs of growing acceptance, Bitcoin still lacks the trust consumers have in other payment services and, in turn, transaction volumes that might attract financial industry support. Trust may be its biggest issue, says Chris Hamilton, chief executive of the Australian Payments and Clearing Association, the bank and credit union-owned company that clears payments between Australian financial institutions.
"All payment systems are fundamentally about trust," Mr Hamilton tells IT Pro. "The system needs to be widely accepted by market participants, and backed by a belief the currency can't be devalued by someone printing cash or falsifying it," he says.
Bitcoin's finite and controlled supply, and its cryptographic protections may partly satisfy doubters, but, Mr Hamilton says, "at the end of the day ... the conceptually difficult thing about Bitcoin is 'who is that?'"
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