Overstock now accepts Bitcoin

Bitcoin’s network effect got a big boost today, since the nation’s second largest pure-play e-tailer, Overstock.com, began accepting it as payment for all purchases.

Patrick Byrne

Patrick Byrne

“We just went live minutes ago,” Overstock CEO Patrick Byrne told Hypergrid Business.

According to Byrne, Overstock will accept only Bitcoin, and not other cryptocurrencies. As a result, it will help establish Bitcoin as a serious payments platform.

In particular, he says, it helps address the fragmentation issue.

“I doubt that another cryptocurrency will catch Bitcoin now, because there was just a huge network effect unleashed from us doing this,” he said.

Although Overstock is getting some media attention as a result of its decision to accept Bitcoin payments, the publicity wasn’t the main reason for the move.

“Fifty people worked around the clock for about ten days to get this live,” he said. He did not give a specific dollar amount for the cost involved in accepting Bitcoin, but said that it far outweighs that of the benefit of a few days’ worth of media attention.

The primary reason for accepting Bitcoin, he said, was because the company had customers who wanted to pay with the currency. “We want to serve those people,” he said.

The second reason was philosophical.

“I believe in limited government,” he said. “I love this cryptocurrency, Bitcoin, because it’s a way to sidestep the centralized institutions of power and authority.”

To guard against the risk of currency fluctuations, Overstock went with payment processing services from Coinbase,

Byrne said that Overstock chose Coinbase in part because it recently got a major infusion of funds from Internet pioneer Marc  Andreessen– in the form of a $25 million investment from his venture capital firm, Andreessen Horowitz, in partnership with other VCs.

Right now, Overstock will not be keeping Bitcoin balances on its own books.

“A time may develop when we use derivatives to hedge our risks, rather than have them convert instantaneously,” he said. “But right now, we’re just saying, convert it to dollars the minute the transaction occurs.”

(Image courtesy Overstock.com)

(Image courtesy Overstock.com)

Coinbase isn’t the only player in this space. Its chief competitor is BitPay, which currently powers Bitcoin payments for Gyft.com.

Jump start the commercial ecology

By having Overstock start accepting Bitcoin, Byrne said he expects to see more people get interested in the currency. And, with more people holding Bitcoins, more merchants might be inspired to take it as well, he added.

“It’s called the network effect, and this coming live today, it will put Bitcoin far ahead,” he said.

Overstock is the nation’s second largest pure-play online retailer after Amazon, with $1.3 billion in annual revenues.

Overstock is now accepting Bitcoin payments for all purchases, he said. During the first half hour, for example, someone spent $2,700 worth of Bitcoin on a new patio set.

Bitcoin has seen an enormous increase in value over the past year — and some holders of the currency may be feeling like they’ve won the lottery and now be looking to reward themselves for their foresight.

“People who have enormous runups in Bitcoin [can] come and buy a bunch of products from us with it, convert it into goods,” he said.

Byrne said that he expects to see Bitcoin get much, much more important and widespread in the next few years.

“I think this is going to be a massive story,” he said.

maria@hypergridbusiness.com'

Maria Korolov

Maria Korolov is editor and publisher of Hypergrid Business. She has been a journalist for more than twenty years and has worked for the Chicago Tribune, Reuters, and Computerworld and has reported from over a dozen countries, including Russia and China.

  • great, Overstock now joins the ranks of some of the illicit services in the onion network! the bitcoin business may help them with their $6.4 million dollar court penalties

    you never know when you need your clearance item to have a non-traceable payment! =p

    go Stormy go!

    • wolftimber

      Yeah like all of these get rich quick privately produced currency schemes this one has taken on a life of it’s own thanks to virtual worlds latching onto it.

      Like the article I posted says:

      “After 9/11, the authorities have become far tougher in
      trying to crack down on the financing of illegal activities through
      anti-money laundering rules that require banks to know the source of
      funds being transacted.”

      That will be the undoing of it if nothing else does it sooner.

  • wolftimber

    Good for them, wait till something unfortunate happens and they’ll wish they hadn’t!

    Mon, Jan 13 2014

    Investors beware of Bitcoin

    Bitcoin has a deflationary bias with all the adverse repercussions that the policy of QE is trying to avoid

    Sooner rather than later, holders will find that there are a diminishing
    number of greater fools left to buy bitcoins from them, and its price
    will collapse.

    Like all fads, bitcoin is wrapped up in modern-sounding,
    grammar-less jargon that makes some prefer to enthuse rather than suffer
    the ignominy of admitting that they don’t understand it. Bitcoin, we
    are told, is a peer-to-peer payment system introduced as open source
    software. Cash is also a peer-to-peer payment system, but thankfully no
    one chooses to describe it as such.
    Bitcoin is a cryptographer’s wet dream rather than a useful monetary system.
    Bitcoins have been stolen and there are allegations of covert creation
    of bitcoins and cornering of supply by a few larger computer networks.
    But the reasons why bitcoins will be worthless within a couple years are
    different.
    Because of its anonymity, bitcoins are attractive in the laundering of
    illicit activities. Last year in the US, FBI shut down “Silk Road”, an
    online black market, and seized $28 million worth of bitcoins. This will
    be its undoing. After 9/11, the authorities have become far tougher in
    trying to crack down on the financing of illegal activities through
    anti-money laundering rules that require banks to know the source of
    funds being transacted.

    Complete article here:

    http://www.livemint.com/Opinion/fEXo8r2OcAIZHWOMbZmmfO/Investors-beware-of-Bitcoin.html

  • I don’t think Bitcoin is going to stabilize until the currency is completely mined out, in what, a little over 100 years? I believe in digital currencies. But the hype over Bitcoin right now is as inflated as it’s pricing.

  • Overstock reported that it made $130,000 the first day of sales from Bitcoin-paying customers: http://www.theverge.com/2014/1/10/5297254/overstock-ceo-says-company-made-130000-in-first-day-of-bitcoin-sales

    And, in other Bitcoin-related news, there’s now a company offering Bitcoin deposits insured with Lloyds of London: http://arstechnica.com/business/2014/01/backed-by-lloyds-of-london-new-uk-startup-offers-insured-bitcoin-vault/