With Overstock on Board, Bitcoin Begins To Resemble a Legitimate Currency

Beyond the hype and wild speculation, Bitcoin is beginning to look like conventional money—that is, people are spending it for the exchange of common goods and services.

Observers have long been critical about the cryptocurrency because it hasn’t resembled a legitimate currency—whether it was the deflationary model that destabilized its price and promoted hoarding and gambling or its subversive qualities that created the potential for illicit activities, like money laundering or buying drugs on the deep web.

The technology’s unique characteristics have led some to define it in a class of its own. Not quite a commodity and not quite a currency, cryptocurrencies represent something totally new.

But more and more, Bitcoin is starting to become what it was always meant to be. That is, it's becoming a convenient form of digital money, thanks to the continued expansion of the ecosystem's infrastructure as new startups are built, making it easier to use than ever, and major retailers begin accepting the virtual currency. This has been made possible as officials fine-tune the regulatory framework regarding virtual currencies in the U.S. (and around the world).

Coinjabber.com—basically Yelp for crypto-friendly businesses—now lists over 1,000 sites that accept Bitcoin or other cryptocurrencies.

Earlier this week, Ovestock.com—the online retailer best known for discount home furnishings (but sells everything from tablet computers to women’s jewelry)—launched its Bitcoin platform.

The initial results have been nothing short of impressive, with over $10,000 worth of BTC sales in the first hour. CEO Patrick Byrne took to Twitter to boast about the day’s earnings, which included purchases of bed “sheets, mobile phone cases, flash drives” and more. “I expected more video cards,” a "stunned" Byrne joked, a reference to the use of GPUs for Bitcoin mining (though the hardware has now shifted toward specially designed systems known as ASICs).

#Bitcoin's first full day on @overstock.com was a huge success: 840 orders, $130,000 in sales. Almost all new customers. #stunned

— Patrick M. Byrne (@OverstockCEO) January 10, 2014

The total take represents 4.3 percent of Overstock’s average daily revenues.

The site had originally announced that it would accept Bitcoin later in the year but ended up completing the project six months ahead of schedule. Even for a company that did over $1 billion in sales last year, setting up a cryptocurrency platform is apparently not that big of a deal.

The retailer was able to expedite development by teaming up with Coinbase, which is quickly becoming the hottest Bitcoin startup in town. The San Francisco-based firm recently announced $25 million in additional VC funding from Andreessen Horowitz last month. Coinbase offers users an easy way to buy and sell bitcoins, but also provides platforms to handle transactions including a software development kit that allows Android developers to easily accept Bitcoin payments through their apps. Currently, over 19,000 merchants use its virtual wallet services.

Andreessen Horowitz partner Chris Dixon believes the development of cryptocurrencies can help Silicon Valley disrupt the entrenched financial sector, which he told Motherboard over the summer stifled innovation with its incumbent power. He explained how technologies like Bitcoin act as a vector into a historically difficult industry to enter during the Lean Startup conference last month.

Accepting cryptocurrencies can be an easy PR strategy for adventurous companies, one Bitcoin insider who wished to remain anonymous told Motherboard, a move employed by the likes of Richard Branson and Virgin Galactic. “Accepting Bitcoin is like free money,” he said.

The arrival of cryptocurrency to the mainstream has also helped spawn a legion of specialty firms created for the sole purpose of trading goods and services for digital cash, like the Bitcoin Store, which is operated by Roger Ver, also known as “Bitcoin Jesus.”

“In the same time period that Overstock sold $130,000 via Bitcoin, Bitcoinstore.com sold about $80,000,” said Ver, who also runs Memory Dealers. “Bitcoin adoption is growing faster than ever before in terms of actual users.”

And many of these users are treating Bitcoin just as they would regular money. Soon, they’ll be storing it using traditional means, too.

Over in London, a company called Elliptic launched the world’s first insured Bitcoin storage service. “Elliptic Vault offers protection against the loss or theft of Bitcoin holdings, with insurance underwritten by Lloyd's of London,” the company told me over email.

“Securing your bitcoins involves implementing advanced encryption and even then you are still at risk of losing them,” said co-founder Tom Robinson. “Elliptic Vault secures your Bitcoins for you and is insured against theft or loss, so our customers can have peace of mind that their bitcoins are safe.”

Such positive developments have helped pushed the price of bitcoins over $1,000 on Mt. Gox, the third time the level has been reached.

That doesn’t mean the ecosystem doesn’t still have a ways to go, however. On Thursday, Bitcoin’s fatal flaw, the dreaded “51 percent attack,” was nearly exposed when a single mining pool commanded almost half of all computing power on the network, but the community quickly self-corrected as individual miners fled the pool fearing a potential takeover.

@sfnuop

More on Bitcoin:

Bitcoin's Fatal Flaw Was Nearly Exposed

So Bitcoin Has Reached North Korea

Turning Five: A Timeline of Bitcoin's Greatest Milestones

Bitcoin Becomes a Real Job and Wall Street Is Hiring

Bitcoin Just Scored Its First Major US Retailer