Cryptocurrencies such as Bitcoin and Dogecoin are becoming more mainstream, with established businesses beginning to accept them. Following the meteoric rise in Bitcoin’s value, as well as the famous funding of the Jamaican bobsled team with Dogecoin, companies seem to be recognizing the viability of cryptocurrency.
Cryptocurrency is a digital currency based on the principle of commodifying computing power. Computers solve extremely complex math problems, which results in the cracking of a code. Once this code is cracked, the Bitcoin exists, ready to be stored in a wallet program, sold for fiat currency, or traded for goods and services.
In January 2013, the online retailer Overstock began accepting Bitcoins as a form of payment and brought in $130,000 in Bitcoin sales on the first day of its acceptance. Computer hardware retail giant Tigerdirect has recently followed suit, and according to an interview in the Miami Herald, Director of Corporate Marketing Steven Leeds said that “being first out the gate [to accept Bitcoins] in our particular industry will give us a competitive advantage in showing this community what we have to offer.”
Large online businesses aren’t the only ones getting on board with digital currencies. The amount of physical locations that accept Bitcoin is on the rise. According to Coinmap.org there are currently over 3,100 physically located merchants in the world accepting Bitcoin, a sharp increase from the roughly 500 locations listed in November 2013.
A notable addition to this list is The Diamond Collar, a New York based pet grooming boutique featured on a reality TV show on the Oprah Winfrey Network. With the influence of the cryptocurrency consulting firm Coyote WallStreet, The Diamond Collar has recently begun accepting Bitcoin, as well as its animal themed competitors, Dogecoin and Catcoin. According to an email from Patrick McDonnell of Coyote WallStreet, “our mission is to bring Dogecoin & Catcoin to the entire pet industry…this just makes sense.”
The most notable benefit for small businesses accepting cryptocurrency is the ease and low cost of transaction. When a business accepts credit card payments or Paypal, it has to pay a 2 to 4 percent fee for each transaction. With Bitcoin merchant services such as Coinbase or Bitpay, the average transaction fee is around 1 percent. If the business chooses to not use an intermediary service and transact directly, then there is no fee at all.
An expansion of consumer bases due to the adoption of these currencies has also been noted by Overstock. In an interview with CoinDesk, Overstock CEO Patrick Byrne said that the Bitcoin customers on the site are 80 to 85 percent male, while Overstock’s overall customer base is 60 percent female.
“The figures suggest bitcoin has opened up a new audience for the company” said Byrne.
The publicity gained with accepting cryptocurrency cannot be ignored either. Dogecoin, the cryptocurrency most recently connected with the funding of the Jamaican bobsled team, is now involved in a movement with East Coast food vendors. In cooperation with Coyote WallStreet, Bonnie’s Hotdoge’s, a mobile hot dog vendor based in Mt. Pocono, Penn., recently began accepting Dogecoins. According to its website, Coyote WallStreet “will be soliciting ‘EVERY’ HotDog vendor in the New York area to accept Dogecoin for Dogs.”
With cryptocurrency acceptance gaining momentum in large businesses and local movements alike, concerns of security have arisen. Recently, the latest iteration of the black market website Silk Road, Silk Road 2, was allegedly hacked, with the attackers making off with about $2.6 million in Bitcoins.
The Silk Road 2’s administrator, Defcon, wrote on the site’s forums that “our initial investigations indicate that a vendor exploited a recently discovered vulnerability in the bitcoin protocol known as ‘transaction malleability’ to repeatedly withdraw coins from our system until it was completely empty.” There is doubt about Defcon’s claims within the Bitcoin community however. Reddit user LedLevee commented that “the supposed hack isn’t possible. Defcon…point[s] to a vulnerability that doesn’t allow you to steal Bitcoins from a wallet. The supposed vulnerability was exposed in 2011 and it doesn’t allow you to steal, only to hinder transactions being confirmed.”
Though businesses seem to be warming up to the idea of accepting cryptocurrency, the recent controversy surrounding Bitcoin’s security makes it unclear if cryptocurrency will ultimately become a viable alternative to credit cards and cash.