Over the past 12 months, the virtual currency Bitcoin has experienced major price swings and a mysterious break-in at a major online exchange, Mt. Gox. But it has also gained wider acceptance, with a growing number of major brands signing on to accept Bitcoin as a form of digital payment, according to a new eMarketer report, “Alternative Payments: Bitcoin and Beyond.”
For the unfamiliar, Bitcoin (with a capital B) is an open-source, decentralized virtual currency, comprising a digital payment system and unit of value also called “bitcoin” (with a lowercase b). Instead of relying on a central institution to issue currency and manage transactions, Bitcoin uses peer-to-peer technology to perform these functions.
A May 2014 study by the Massachusetts Division of Banks and Conference of State Bank Supervisors (CSBS) found 51% of US adults had heard of Bitcoin or another virtual currency, mostly from sources like the internet and television. However, just 3% had purchased or used virtual currency, with 18% reporting they would likely do so in the future.
In a June 2014 survey of US adults conducted by 451 Research, around 60% had heard of Bitcoin, though more than half of those who had heard of it didn’t know what it was. Just 2% reported already using Bitcoin, with another 3% waiting to use it.
A December 2013 survey of US internet users conducted by PricewaterhouseCoopers highlighted many of the concerns consumers have about using Bitcoin, including the unpredictability of its price, the experimental nature of the virtual currency and the fact transactions cannot be reversed.
Not having chargebacks may be an attractive feature for online merchants that are often victims of chargeback fraud, but not as intriguing for consumers who might legitimately need to reverse a transaction.
Security is another consumer concern related to using Bitcoin. The Massachusetts Division of Banks and CSBS survey found that security was the most important factor among consumers in deciding whether or not to purchase or use Bitcoin, followed by insurance and regulation related to the virtual currency.