There has been no shortage of digital ink spilled on the rise of Bitcoin, the P2P-enabled payment system and open source crypto-currency introduced in 2009 by
“Satoshi Nakamoto” (a pseudonym). Bitcoin is a fascinating economic development, representing the possibility of a plausible alternative to state-backed fiat
currency. Indeed, it has proven irresistible to a still-small cohort of privacy advocates, anarcho-libertarians, techno-utopians, and (inevitably) currency speculators. However, it has never lacked for red flags:
Bitcoins can be stolen.
4 years in, it’s still used more heavily by speculators than consumers, leading to extreme volatility.
There is no mechanism for chargebacks, as with a traditional credit card or more conventional online payment system, so consumer protections are minimal.
Because, unlike state-backed currency, no one can be compelled to use Bitcoin, it still has a vanishingly small footprint relative to the economy at large (as of this writing, the value of all outstanding Bitcoin is ~$11bn US, or less than ¼ the cost of the Sochi Olympics).
Predictably, this last point has driven a disproportionate amount of discussion of Bitcoin in the mainstream media, most notably in breathless coverage of the rise and fall of the notorious Silk Road, commonly referred to as “the Amazon.com of illegal drugs.”
However, recent months have seen what could prove to be green shoots for this nascent currency. Last October, a Vancouver coffee shop erected the first Bitcoin ATM, allowing customers to convert their Bitcoin to cash, or make cash deposits to buy more bitcoins. Last month, Redditors highlighted the cheekily-named “Milk Road,” a sidewalk cookie stand in San Francisco’s Noe Valley run by a pair of sisters (age 5 and 8, respectively) that accepts Bitcoin as payment (the girls’ mother is a tech worker). There is also a growing list of non-profits that will accept donations via Bitcoin.
Most interesting to me, however, was the announcement in January that TigerDirect, the major electronics retailer, will now accept Bitcoin on their website. This follows news of a partnership between Overstock.com and payment processor Coinbase that would allow the venerable purveyor of micro-suede ottomans and Paul Frank shower curtains to dip a toe in the crypto-currency game.
TigerDirect is also joining the NBA’s Sacramento Kings, whose Silicon Valley owner Vivek Ranadivé was an early adopter, and Richard Branson’s Virgin Galactic as entities that accept Bitcoin (though the market for private space flights and tickets to see the woefully inept Kings may be a bit soft).
Obviously, TigerDirect is uniquely positioned to envision something of a virtuous circle, where aficionados spend Bitcoin to buy souped-up computer components to mine more Bitcoin. And we’d be remiss to discount the possibility that these moves are a publicity stunt. But if Bitcoin is to reach scale, it will be because of adoption by publicly-traded companies like TigerDirect; in the absence of the coercive power of a nation-state’s backing, the Invisible Hand of the market will need to do the pushing.