[2014-01-07] OVERSTOCK CEO: Here's Why We're Accepting Bitcoin

[Bitcopia]

http://www.businessinsider.com/overstock-accepts-bitcoin-2014-1

Overstock.com has become the first major online shopping retailer to commit to accepting the digital currency bitcoin as payment in exchange for any of our million products. We are doing this for both business and philosophical reasons.

First, the business reasons: There are large numbers of holders of bitcoin who are eager to patronize firms that will accept this form of payment, but so far, their options have been limited. I believe that by being the first major online retailer to accept bitcoin, we will tap into a significant group of loyal consumers, and as a result our share of the overall market will grow.

In addition, the cost of carrying out credit-card transactions is roughly 2 percent. Given that our net margin is also approaching 2 percent, the avoidance of such fees will make bitcoin sales that much more profitable.

And, while it's true that the value of bitcoin has proven more volatile than that of gold, this will not be a risk to Overstock.com; we will either immediately convert bitcoin to dollars or hedge our bitcoin risk through bitcoin-dollar derivatives (should such a market develop).

Now, the philosophical reasons: I believe limited government is a better business model for our nation than is unlimited government (and limited government has the additional benefit of being consistent with our Constitution). Among the many vices of authoritarianism is that it can sustain itself only by offering more things to more people than it can actually deliver, and one way it makes up the difference is by debasing its currency.

People who share my belief in limited government often favor gold-back money, because for millennia, mankind's stock of gold has increased at a rate of 2-3 percent per year, and no government mandarin has the power to will additional gold into existence.

As a digital currency, bitcoin is, of course, suited to online transactions. In addition, however, it possesses those key virtues of gold: Bitcoin is mathematically constrained such that there can be no more than 21 million (infinitely divisible) units, and the supply will grow in a predictable manner.

I am agnostic regarding the future value of bitcoin. I merely feel bitcoin is a viable medium of exchange that Overstock.com should embrace to better serve our customers, and that the U.S. should embrace to create a robust, viable alternative to our current monetary institutions.

— By Patrick M. Byrne

— Patrick M. Byrne is chairman and CEO of online retailer Overstock.com. Follow him on Twitter @overstockceo.

This is slightly outdated and the Overstock story is over reported, but I think it is significant to hear the CEO and chairman of such a major online retailer publicly endorse Bitcoin in such a positive way.

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[guybrushthreepwood]

This is slightly outdated and the Overstock story is over reported, but I think it is significant to hear the CEO and chairman of such a major online retailer publicly endorse Bitcoin in such a positive way.

Yes, I hope accepting Bitcoin is a success for them and many online retailers follow suit. This was a big risk for them so I hope it pays off.

[Bitcopia]

This is slightly outdated and the Overstock story is over reported, but I think it is significant to hear the CEO and chairman of such a major online retailer publicly endorse Bitcoin in such a positive way.

Yes, I hope accepting Bitcoin is a success for them and many online retailers follow suit. This was a big risk for them so I hope it pays off.

Considering their net margin is approaching 2%, and their credit card processing fees are about 2%, this should absolutely pay off for them. They partnered with Coinbase, who's standard fee for merchant processing with USD conversion is 1%. I wouldn't be surprised if overstock got an ever better deal, but even if not, bitcoin payments will give their net margin a boost by at least 25%. That is HUGE.

[RodeoX]

They got over $800 of my bitcoin over the weekend. I think there CEO is capturing a lot of pent up demand.

[Cryddit]

I am watching with great interest because they value it for its utility -- ie, as a medium of exchange rather than as a medium of investment.  They will be returning all the Bitcoin they get directly to the markets according to the CEO, where, in equilibrium, will be bought by people who intend to actually use it as an exchange medium to buy stuff from them and from other merchants.  That creates a fundamentally different supply curve than the speculators selling to each other, which is what we have so far mainly been working with. 

Bitcoin prices are starting to be influenced by its ordinary value according to utility as opposed to its completely speculative value according to investment, so this is where we fly or crash.  Overstock.com is someplace ordinary people go to make ordinary purchases, not the extreme luxury market like Tesla et al that have not enough volume to be a real influence on the market.  Overstock.com is in the same business as Wal-mart; commodity items at low margin.

So, if we've been wrong and this is all a bubble, the bubble is about to pop.  If we've been right and this is all a runway, then we're about to take off. 

Meanwhile, I have a nice new heavy wool peacoat from Overstock.com.   

[TraderTimm]

The best thing about all of this is you have a CEO that is making the business case for Bitcoin. Other CEO's tend to listen to their peers, which is why I think more are about to jump into the pool of adoption. Hold on to your hats...

[kjlimo]

The best thing about all of this is you have a CEO that is making the business case for Bitcoin. Other CEO's tend to listen to their peers, which is why I think more are about to jump into the pool of adoption. Hold on to your hats...

Yep, it's gonna be an exciting few months/year!

[GenTarkin]

yeah, this guy fucking gets it .... and its brilliant =)

[guybrushthreepwood]

I am watching with great interest because they value it for its utility -- ie, as a medium of exchange rather than as a medium of investment.  They will be returning all the Bitcoin they get directly to the markets according to the CEO, where, in equilibrium, will be bought by people who intend to actually use it as an exchange medium to buy stuff from them and from other merchants.  That creates a fundamentally different supply curve than the speculators selling to each other, which is what we have so far mainly been working with. 

Bitcoin prices are starting to be influenced by its ordinary value according to utility as opposed to its completely speculative value according to investment, so this is where we fly or crash.  Overstock.com is someplace ordinary people go to make ordinary purchases, not the extreme luxury market like Tesla et al that have not enough volume to be a real influence on the market.  Overstock.com is in the same business as Wal-mart; commodity items at low margin.

So, if we've been wrong and this is all a bubble, the bubble is about to pop.  If we've been right and this is all a runway, then we're about to take off. 

Meanwhile, I have a nice new heavy wool peacoat from Overstock.com.   

People are only treating it as an investment because of it's nature and current volatility. Hopefully BTC will steady in price sometime in the future so it can be used as 'proper' currency.