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Inside TDV - The Data Vault Blog

Digging into the Bitcoin Mines

Quickly rising to prominence in 2013, Bitcoins have become one of the most widely talked about digital products in the past decade. As by far the most prominent digital currency, it shows promise to change the way global commerce works; but most people are still unsure of how the concept operates and what the implications might be for the future of monetary exchange.

The basic premise of a “Bitcoin” began as a peer-to-peer payment system (à la PayPal) around the time period of 2009-2010. It quickly evolved from a service to a means of exchange (such as the dollar, ruble, or other currencies) used for internet based transactions. After simmering along as a resource only known to people within tight-knit online communities for some time, last year the currency saw an explosion of interest and rapid rise in value across the regular banking communities as well. Increased numbers of regular businesses began accepting it as a valid form of payment, and common people began to keep them as part of their investments and banking practices. Featuring redundant record keeping systems, decentralized controls not limited by geopolitical powers, and a lack of fees (like the ones charged by Visa and Mastercard) for payment processing, Bitcoins can be very attractive to use as a form of payment.

But what about the security implications?

Consisting of a currency based completely on digital technology, Bitcoins can be subject to numerous security threats and require large amounts of computer processing power to handle. As they become more prevalent in society, their use begins to intersect with high-security fields such as medical practices and banking, leading to potential concerns in the future. Last December a San Francisco doctor made headlines as one of the first to accept bitcoins as a payment for patient care, and many healthcare providers are observing how the implementation is going. In spite of digital encryption advancements, current privacy and security concerns are legitimate, as hackers accessed a Bitcoin wallet back in August after finding an Android mobile security gap. Given the popularity in mobile usage among patients and clinical staff in healthcare, apprehension in using Bitcoin consistently for patient payment would be understandable.

As with any sort of payment, consistent and reliable record keeping is one of the central concerns when keeping track of financial transactions. Given the volatile nature of digital currencies, this practice becomes even more prominent as there may not be independent institutions keeping an eye out for fraud within your exchanges. Bitcoins specifically have an open registry of all transactions completed between users to ensure transparency and prevent criminal fraud, but this has been known to glitch and cause mistakes in the reporting. If you or your business is considering a move to accepting digital currencies, keeping a second set of secured records as a backup is a must.

Read More:
Assessing Bitcoin’s Security Risks in Healthcare
Bitcoin Set to Overtake PayPal in 2014
Under The Hood: Bitcoin and How It Works

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