Overstock.com took a gamble on Bitcoin that quickly seems to be paying off.
The company made $124,000 through 780 Bitcoin orders within less than 24 hours of accepting Bitcoin as a form of payment.
Overstock announced a partnership with popular Bitcoin wallet Coinbase yesterday, making it the largest merchant to accept Bitcoin to date. It is also one of the first major, mainstream retailers — meaning its reach extends far beyond the tech world — to accept the controversial crypto-currency.
The partnership is not only a validating moment for Bitcoin but also a political statement from Overstock’s libertarian CEO, Patrick Byrne, who told Wired that “it helps us fight the machine” of big banks and big government.
Bitcoin is a peer-to-peer, decentralized, anonymous form of digital currency. A simple way of thinking about it is as the “Internet equivalent of cash.” For years it was relegated to the edges of tech society, and associated with notorious activities like buying drugs, but 2013 was the year Bitcoin traveled in from the fringes.
Its value soared at an astonishing rate and attracted attention from national media — some good, some bad, and most unsure what to make of Bitcoin at all.
Many big believers in Bitcoin are adamant that for the great Bitcoin experiment to really succeed. For it to become stable, legitimate, and usable, it has to have everyday value. Bitcoin can’t just be something people invest in, hoard, or buy one of “for fun.” It needs to be liquid and spendable — a currency, rather than an asset.
This is why Bitcoin evangelists value adoption by mainstream retailers. It gives “regular” people clear opportunities to spend Bitcoin, which in turn could inspire them to buy (and spend) more Bitcoins.
The question left unanswered, perhaps until now, was whether Bitcoin owners were willing to spend their stash on everyday stuff, like bedding, furniture, bath products, and jewelry.
It seems they do, based on this early response. But we won’t really know unless this kind of sales momentum continues and more retailers adopt Bitcoin and see similar results.
The Bitcoin experiment is in its infancy, and it carries big risks. Bitcoin is volatile and has the potential to crash. This is part of what deters retailers. The fear is that if Bitcoin is at one price and then drops, the merchant loses money.
Coinbase is making a big effort to calm these concerns. It created a suite of merchants tools that make it easy to begin accepting Bitcoin and guarantees a certain exchange rate.
When a Bitcoin payment comes through, Coinbase immediately cashes out that Bitcoin value and transfers in dollars to the retailer. The risk is really with Coinbase, rather than Overstock.
Bitcoin has other benefits — it eliminates credit card processing fees, so it’s much cheaper for retailers than accepting payments from Visa, MasterCard, or PayPal.
Now that Overstock has taken the first step with Bitcoin, it will be interesting to see if other major retailers follow suit.
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