Recently a colleague introduced me to the concept of bit coins. The idea is that they offer a method for transactions which are too small for a debit or credit card payment but where the payment needs to be digital rather than in cash.
In my e-commerce classes I often encourage students to debate the many different methods for exchanging money online. As the web develops, more and more sites are looking for ways to invoke small transactions from customers for added value services, donations and software licensing and there is definitely a market for an alternative to cash or credit cards, this is where bit coins come in as you can see from the video:
A number of companies already have their own form of micro-payment with a virtal currency account such as Facebook Credits and XBox Live which uses Microsoft Points. Recently we have also seen lots of innovations in micro-payments using mobile phones.
The issue with all of these being that they involve a trace of the transaction including information about the payee and the recipient. Bit coins are anonymous in the same way as cash, they are kept in a digital wallet and exchanged without the need for the parties in the transaction to share personal details or account information.
The question is therefore, do we mind if all our transactions are recorded and traceable? If cash were to die out and all transactions became electronic would we be sacrificing our anonymity? Would companies use this information? Think about it, there would be data available to show exactly what you have consumed, how many chocolate bars do you buy per week? How much do you give to charity? How long do you spend in your local pub? Your financial transactions can tell a very detailed story about your life.
Some people will argue that anonymous payment in the form of cash is currently the only way for criminals to do business. If all financial transactions were traceable it would make it much more difficult for people to trade illegally. I would suggest however that crime always find a way around any obstacles and the criminals would simply trade goods or services instead. Lets face it, there are plenty of supposedly legitimate companies and organisations who use fully traceable financial transactions everday and still manage to carry out illegal activities so why should we think that removing cash would stop all crime?
If cash is really on its way out then perhaps bitcoins might be our only option for those anonymous transactions that we would like to keep private. Here are a few companies who are already accepting bitcoins:
Bit coins can be traded for real cash and have an exchange rate. They are already being traded on the stock market and as I am writing this article they are currently trading at over $18 per bit coin. It will be very interesting to see what path our financial transactions take in the future and whether there will ever be a day when we no longer carry any cash at all. Will bit coins be the future or will we be forever bound to never purchase anything in private again?