The digital currency, which launched about five years ago, will join PayPal and credit cards as a payment for the web-only mass merchant.
Overstock.com Inc. will begin accepting bitcoins near the end of the first half of 2014, becoming the first major U.S. e-commerce operator to say it will allow consumers to use the nearly 5-year-old digital currency for purchases.
Overstock.com is No. 31 in the Internet Retailer Top 500 Guide, with 2012 sales of $1.099 billion, up 4.3% from the previous year. The web-only mass merchant already accepts payments via eBay Inc.’s PaypPal and Bill Me Later, Google Wallet and Amazon Checkout, according to the Top 500 Guide, along with traditional payment cards.
Perhaps 1% of Overstock transactions will involve bitcoin, predicts Overstock CEO and chairman Patrick Byrne. That would translate into some $15 million worth of transactions annually, he adds.
Retailers work with processors to accept bitcoins. One such processor, Coinbase, says it charges only when a merchant converts bitcoins into local currency. That charge stands at 1%, though the processor today was offering a promotion that waived the fee on the first $1 million worth of processing. Another processor, BitPay, says it charges monthly fees that range up to $3,000 per month for its “enterprise” level service—that includes accepting bitcoins on an unlimited number of sites, plus “priority” account service support for the merchant. BitPay also charges at least 0.01% of the transaction amount for such a company.
By comparison, PayPal charges monthly fees that range from nothing to $30, with the standard transaction fee set at 2.9% of the transaction amount, plus 30 cents per transaction.
The value of bitcoins, which are not backed by any central financial authority or government, is volatile. As of August, the value of bitcoins in circulation topped $1.5 billion, according to Bitcoin.org, a web site that provides information about bitcoins. Several online bitcoin currency trackers today put the value of one bitcoin at between $650 and $730. The value had reached at least $1,200 less than a month ago, with the drop widely blamed on the Chinese government’s ban on payment systems in that country from accepting bitcoin transactions, or a speculative bust.
Overstock’s move comes down to a mixture of business and politics, Byrne says. No fan of “fiat currency” or central banking—which he equates to “central planning”—the grassroots digital currency appeals to his political philosophy, he says. And with bitcoin gaining press and ground—online dating site operator OKCupid and blogging platform WordPress are among the companies that accept the digital currency—he aims to appeal to shoppers who have grown comfortable with the fledgling form of money. How many consumers have used bitcoins is difficult to determine, but Bitcoin Charts, another provider of information about the digital currency, early this afternoon said there had been 58,118 bitcoin transactions over the last 24 hours, with about 31,344 bitcoins sent on average per hour.
The creators of the bitcoin currency have not publicly declared themselves, but they’ve published papers explaining how it works, and claiming that their algorithms will allow no more than $21 billion in bitcoins to be created. Individuals that marshal the necessary computing power to create, or “mine,” bitcoins, receive a portion of what they create as payment. They then can sell the bitcoins online.