The virtual currency has its share of critics, but retailers are beginning to embrace its freewheeling philosophy
With so much of our life (communications, music, media, and more) residing in cyberspace, it seems fitting that money would eventually go digital. Bitcoin, rolled out in 2009 by Satoshi Nakamoto (his actual identity is unknown), is a cyber currency that uses “bitcoins” in lieu of dollars to pay for goods and services; users send and receive them from a virtual wallet.
In mid-2010, Nakamoto, a shadowy Internet legend who’s reportedly in possession of millions of dollars worth of bitcoins, passed the torch to Web developer Gavin Andersen.
Since there isn’t a bank that creates physical currency, bitcoins are created through mining, which involves mathematical algorithms that were resolved by hundreds of computers scattered around the world and then published. Roughly every 10 minutes, a Bitcoin miner wins a computational race and earns a certain amount of bitcoins.
Various banking entities have issued warnings about Bitcoin’s lack of consumer protections. And it’s already “crashed” a few times; its most marked nose dive (at press time) occurred in February when one of the largest Bitcoin online markets virtually disappeared, abandoning its office spaces overnight. But proponents of the peer-to-peer payment system say it’s safer and cheaper for retailers than credit cards. The value of Bitcoin fluctuates daily, but at press time a single bitcoin was worth $636.50. The virtual moola has hit its stride in the marketplace: Overstock.com and a handful of Las Vegas casinos are among the major players that now accept Bitcoin.
So is the trendy e-currency right for your store? Stephanie Wargo, vice president of marketing for Bitcoin merchant processor BitPay, helps explain the craze.
How would you describe Bitcoin transactions in laymen’s terms?
I boil it down to electronic cash. You’ve given me a piece of jewelry, I give you the cash, and you can’t take it back.
What is mining all about?
There are enough bitcoins—over 12 million—so the average individual doesn’t need to mine. There’s a total of 21 million bitcoins and there will never be any more. That’s the way the system was set up. It’s not like the Department of the Treasury, where you can print more money. The other 9 million still have to be mined; it gets progressively more difficult. It’s easier to go on an exchange and use the bitcoins right away.
Why should consumers use Bitcoin?
It’s safer. You’re not giving your credit card and CVV [card verification value] numbers. Someone is not dipping into your account and taking money.
What are the benefits for a retailer?
It’s less expensive and safer because they don’t have to house data. Also, there’s no worry about a charge-back. It’s about: “I have my wallet and I gave you the digital cash out of my wallet.” BitPay’s most expensive processing fee is 1 percent; the average Internet transaction fee is over 3 percent.
How easy is it to get set up to accept Bitcoin on a simple website?
Retailers can do it in a day. With us you click a button that says “Accept Bitcoin,” we do a verification, and you install a shopping cart plug-in like Shopify.
How else are retailers benefiting?
A lot of merchants [accepting Bitcoin] are enjoying the uptick in transactions. There are 6 million Bitcoin wallets right now. That’s 6 million people who want to use bitcoins to buy something.