On Thursday, Jan. 9, the virtual currency bitcoin went legitimate. As reported by Wired, on that date, online retailer Overstock.com began accepting the increasingly popular but controversial digital payment system.
It was no secret that Overstock.com was going to accept bitcoin. Since December, Overstock.com’s CEO and chairman, Patrick Byrne, has been saying his site would bitcoin -- but sometime in the next six months. Apparently, Byrne is a tad bit on the impatient side.
Actually, it wasn't impatience or the lack thereof that drove Overstock.com to pull the trigger sooner rather than later. Instead, Byrne -- knowing he had given away his plans -- was afraid someone else would become the first major online retailer to accept bitcoin.
As he said,
I felt I had tipped my hand. I didn’t want someone else to beat us.
So, last Tuesday, Overstock.com and San Francisco startup Coinbase struck a deal, and a team of Overstock engineers worked overtime to prepare the site for a key moment in the bitcoin’s short history (it was introduced as open source software in 2009 by pseudonymous developer Satoshi Nakamoto).
For Byrne, the move isn't so much about the bottom line -- although, of course, the hope is it will help Overstock.com's revenue -- as it is political. Byrne is a libertarian. He told Wired that he hopes bitcoin can help free the world from the control of big government and big banks. "It helps us fight the machine,” he said.
To be honest, bitcoin has been "legitimate" for some time. In mid-December, an Orange County Lamborghini dealership made headlines when it accepts them as payment for a car.
Bitcoin, though, is like a stock. It's price fluctuates, and it is extremely volatile.
There is risk involved, but the risk is Coinbase's, not Overstock.com's. Before each payment is made, Coinbase sets an exchange rate, immediately converts the buyer’s bitcoin into dollars, then transfers the funds to Overstock.com. The retailer never holds any bitcoin currency.
Coinbase believes it can minimize the risk by using software to monitor price fluctuations. “It’s algorithmic trading,” said Coinbase CEO Brian Armstrong. “It hedges that exchange rate risk in the background, every day.”
Coinbase recently received $25 million from Silicon Valley venture capital firm Andreessen Horowitz.