Where to start

The benefits of accepting bitcoin as a form of payment is a discussion had at almost all bitcoin events. Moving away from credit card transaction fees, minimal transfer fees, and the algorithm validating the creation of bitcoin appeal to merchants or individuals that want to accept bitcoin as payment. The number of transactions that are being completed are considerably increasing each year. The complications of accepting and exchanging bitcoin however, are exasperated if a small business owner doesn't understand how to adopt bitcoin into their current payment structure. It is recommended that as you are accepting bitcoin that you advertise with a small sign declaring that you offer a bitcoin payment option.

There are a few ways to accept bitcoin. One is through a bitcoin payment system that offers support for web based payment systems. Bitcoin payment systems offer conversion options that can automatically exchange currencies from BTC to the currency of your choice. If you are paying suppliers, employees, or other merchants the business owner can set their a conversion rate based on current market price. The set price point can be calculated by looking at popular bitcoin exchanges and finding an up to date exchange rate.

A few payment processing systems have a large pool of systems with bitcoin integration. Bitcoin payment processors have grown in the last year and POS systems are beginning to adopt bitcoin with just a few setting changes. Bitpay is an active payment processor that is rapidly acquiring new partners that have adopted bitcoin integration. Using DC POS with your Bitpay account, you can enable a Vend POS system to accept Bitcoin in 7 steps. The SoftTouch POS system, mainly for restaurants, accepts Bitcoin as well. Other methods include mobile platforms that allow your customers to scan a QR code to complete a transaction. Gift cards can also be purchased with bitcoin and can be used as a substitute for the above payment processing methods if conversion is too cumbersome or the risk is too high for you to accept direct bitcoin payments.

Here is a visual infographic, from CoinTelegraph, of information I provided above:

Considerations

There are other areas of finance that do not have such clarity on how bitcoin payments are processed. Taxes, and accounting procedures have yet to create a uniform standard for bitcoin transactions. I am not qualified to give advice on these matters so I will not be giving direct guidance, but there are resources available for further research. The risks with accepting bitcoin are not unfounded either. The risk of fraud is high, and new regulations attempting to derail the increase of fraud, is making accepting bitcoin a more complicated process. The more blocks that are confirmed, the more validation those transactions have. So if you are trading in large denominations, waiting for more blocks to be verified, decreases the amount of risk you have for double spending. Be mindful for fraudulent QR codes and addresses that your customers may interact with attempting to pay you, but funds are sent elsewhere. There is no central banking system for bitcoin and if funds are sent from a customer to a malicious third party, you will not be able to recover the mispent bitcoin.

Services Explained

Altcoins - A token reward set by a blockchain developer for distribution between users for various services. The value of each token is in relation to the value of the data that can be accessed with that token.

Signatures - a cryptographic signature is a mathematical mechanism that allows a user to prove ownership. On a blockchain network the token, and the wallet it is associated with, are linked by an algorithm. The software that interacts with the blockchain will sign the transaction with the private key of the parties interacting in the transaction. Private keys are a hash signature to show absolute ownership of the contents of the associated wallet.

Miners - Hardware in a blockchain network that is rewarded for processing services which can include transaction requests, synchronizing, and proof-of-work (mathematical) calculations. Miners can connect to their blockchains via various software and hardware.

Proof-of-Existence Services - Convert data files into a cryptographic hash algorithm (SHA256 specifically) which represent the file (as a whole) when the hash was created. The hash that is created of the document is unique to the contents of the document, and any adjustments to the document will result in a different SHA256 hash and would invalidate the transaction, rejecting the change. Website

Smart Contracts - Multiple inputs are placed into a single transaction. Those individual inputs can be independently signed by multiple parties and once conditions are agreed upon. The single output of all the inputs generates a unique hash. These contracts, located on a blockchain, can be used for multiple functions. Example: Assurance Contracts & Wills

Block Explorer - a service that provides an interface to interact with blockchain information. This service is a third party interaction to the client itself.

Private Keys - Every bitcoin wallet contains at least 1 private key. A private key grants the ability to spend the bitcoins attached to a transaction. Once a private key is used it can no longer be used again to spend those bitcoins.

Genesis Block - The first block, or ledger, created on a blockchain.

Oracles - Scripts or Code written to determine if a mechanism has passed or failed certain parameters. Oracles are implemented as a test condition and for verifying outputs.

Escrow Services - Perform duties as a representative of a particular account. Escrow services dealing in cryptocurrencies often offer private and public key representation.

M-of-N - N is the total amount of private keys assigned to validate a specific address. M is the minimum number of N keys needed to validate a transaction from that address. A 2-of-3 transaction requires 2 of the 3 private keys to validate the transaction.