2014 saw bitcoin’s biggest progress in terms of new merchants backing the currency as companies like Microsoft, Paypal, Ebay, Newegg and Overstock get behind the cryptocurrency. While the value of bitcoin faltered last year, more retailers are showing interest in bitcoin, and it looks like the virtually mined currency is here to stay. Some investors have even gone so far as to trade bitcoin forex.
Why Bitcoin is Different
The rise of bitcoin and other cryptocurrencies over the past couple of years has seen its fair share of controversies. While virtual currency has advantages over traditional money, it also suffers from a few major drawbacks. Bitcoin offers obvious benefits over traditional currencies when used to pay for goods and services. Firstly, payments are fast, especially when compared to checks and wire transfers. Secondly, Bitcoin transactions generally incur lower transaction costs than traditional payments. Bitcoin also offers solid protection to the seller, which partly explains its acceptance even among major retailers. But it’s not all sunshine and rainbows for the flagship cryptocurrency. The most glaring setback is the constant threats to its legitimacy from negative PR, including alleged criminal activity and suspect exchange failures. Bitcoin has been the subject of many major law enforcement operations aimed stopping online criminal enterprises such as the Silk Road. Additionally, without the use of an escrow service, using Bitcoin to pay for goods offers no protection to the buyer. The money may be sent to the buyer, but the transaction may not be reversible if the promised goods are not delivered.
Bitcoin Brings Business
In 2014, Overstock.com became the first major retail outlet to accept Bitcoin as payment for goods and services. Within three days of accepting Bitcoin payments, Overstock.com was able to get about half a million dollars in Bitcoin payments, a clear message to major retailers that 2015 holds a lot of promise for those willing to embrace the famous cryptocurrency. Computer hardware retailer Newegg wanted a piece of the pie, allowing its customers to make purchases using bitcoin. Other high-profile retailers are starting to accept Bitcoin as payment for goods, a decision that has given them notable financial rewards, which is why more retailers are expected to embrace the use of this cryptocurrency in 2015. Even Paypal announced a tentative step towards facilitating bitcoin payments: meaning certain digital retailers can now accept bitcoin causing bitcoin’s value to subsequently increase. EBay soon followed suit, despite its intended split from Paypal, announcing its intention to allow bitcoin in some form in the near future. In December, Microsoft revealed bitcoin payments were now accepted – once again in a limited form – on the Windows Store. This new swathe of recognisable, esteemed brands making moves enabling bitcoin payments generates great positivity and underlines the legitimacy of cryptocurrencies. There are many other low-profile retailers that will take bitcoin as payment for goods as well.
What’s Causing All This Volatility
Bitcoin faces many obstacles on the road to universal acceptance. Ever since rising to prominence at the tail end of 2013, bitcoin has faced almost constant threats to its security and legitimacy. Mt. Gox, a bitcoin exchange based in Japan, collapsed in February 2014 and dealt a crushing blow to bitcoin supporters. Not only because an estimated 750,000 bitcoins were stolen by hackers in the process, but because Mt. Gox’s brand was synonymous with the cryptocurrency. It was the first exchange to allow the trading of bitcoin, and by the time it fell it was by far the largest. It does not appear that the problems with bitcoin security have gone away yet, either. Bitstamp – another venerable well-known exchange – faced similar problems to Mt. Gox just weeks ago (albeit on a smaller, less catastrophic scale). The constant threats have played havoc with bitcoin’s value over the past few months, and bitcoin’s name has become associated with extreme volatility. Worse yet, that volatility has not prevented bitcoin’s main movement from being a downward one. In 2015 alone, bitcoin has dropped from a value of $318 to below $180. Such swings are off-putting to merchants and consumers, and until bitcoin can put questions about legitimacy and security to bed it will struggle to be universally accepted.