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Bitcoin shows staying power

Thursday, August 28 08:49:27

Bitcoin is catching on at U.S. online merchants including Overstock.com and Expedia, as customers use a digital currency that just a few years ago was virtually unknown but is now showing some staying power.

Though sales paid for in bitcoin so far at vendors interviewed for this article have been a fraction of one percent, they expect that as acceptance grows, the online currency will one day be as ubiquitous as the internet.

"Bitcoin isn't going anywhere; it's here to stay," said Michael Gulmann, vice president of global products at Expedia Inc. in Seattle, the largest online travel agent. "We want to be there from the beginning." Expedia started accepting bitcoin payments for hotel bookings on July 11.

Until recently a niche alternative currency touted by a fervent group of followers, bitcoin has evolved into a software-based payment online system. Bitcoins are stored in a wallet with a unique identification number and companies like Coinbase and Blockchain can hold the currency for the user.

When buying an item from a merchant's website, a customer simply clicks on the bitcoin option and a pop-in window appears where he can type in his wallet ID number.

Still, broad-based adoption of bitcoin is at least five years away because most consumers still prefer to use credit cards, analysts said.

There are also worries about bitcoin's volatility: its price in U.S. dollars changes every day. On Wednesday, bitcoin was up 0.4 percent at $514.09.

That risk is borne by the consumer and the bitcoin payment processor, such as Coinbase or Bitpay, not the retailer. The vendor doesn't hold the bitcoin and is paid in U.S. dollars. As soon as a customer pays in bitcoin, the digital currency goes to the payment processor and the processor immediately pays the merchant, for a fee of less than 1 percent.

For some, it has become a beneficial situation for retailers, as they take advantage of lower transaction fees and sales from new customers. In at least one instance, bitcoin sales are expected to pad a company's bottom line, adding 4 cents a share to 2014 earnings at Salt Lake City-based online merchant Overstock.com, said chief executive officer Patrick Byrne.

Overstock was the first U.S. company with annual sales of at least $1 billion to accept bitcoins. Soon after, other companies including computer maker Dell Inc, Dish, and Newegg Inc , an online retailer of computer hardware and software, began to accept payments in bitcoin.

To date, there are about 63,000 merchants globally accepting bitcoin, estimates from data provider CoinDesk show. It forecasts that figure to rise to 100,000 by year-end. (Reuters)

For more visit: www.businessworld.ie