As we take on more and more blockchain projects, customers are asking, “Can we pay in bitcoin?” With prices on the rise (and our longstanding nerdy obsession with cryptocurrency), we had to say yes. This week, we signed our first contract that’ll be paid in bitcoin. It feels like an appropriate way to close out a year dominated by the cryptocurrency’s increasing popularity (and value).
We’re excited about the milestone for our company, but we’re actually pretty late to the party. Overstock was the first big consumer-facing company to accept payment in bitcoin. In January of 2014 they partnered with Coinbase so customers could pay for thousands of items with bitcoin. Since then, many other companies have also started accepting bitcoin, including Subway, Expedia, Microsoft, and Shopify.
How did we get here?
The concept of bitcoin was launched just a few weeks after Lehman Brothers went bankrupt and United States’ financial system nearly collapsed. The crisis showed that the existing system had some major flaws, and people were hungry for an alternative.
“Money is basically just an accounting system. It’s a way of reporting who owns what. Who has what, who owes what to whom. That’s all money really is. You needed someone who could stand as the central issuer,” says Paul Vigna, a reporter at the Wall Street Journal. “Money is just an accounting system. That’s what bitcoin is — it’s a way of recording transactions, recording value, and it does it digitally so you and I can send it to each other directly.”
Bitcoin’s monetary supply is recorded on a distributed ledger — on thousands of different computers — not a central server. Every single transaction is recorded, and once it is there, it can’t be altered. Individual identities are encrypted, so you don’t know who is spending the money, but every single bitcoin out there has a history, you know exactly where it’s been.
The most important part of the bitcoin infrastructure is the miners — computers tasked with maintaining the ledger on the blockchain and making sure it’s trustworthy. To incentivize people to do this, miners are rewarded with bitcoin for validating and verifying transactions.
Why isn’t everyone accepting bitcoin?
Considering bitcoin's growing legitimacy, you might be wondering why more companies haven't started accepting the cryptocurrency. The biggest reason is bitcoin’s volatility. Bitcoin prices dropped more than $200 in a single day between June 25 and June 26. While investors like the fact that bitcoin doesn’t have government backing, that same absence of backing — along with the thinness of its trading volume — creates substantial volatility.
On top of that, there’s still quite a bit of uncertainty about if or when the US government will enforce more regulations around bitcoin. Many in the financial industry predict that it’s only a matter of time until regulations become stricter, a move that would likely affect the currency’s value.
Much like investing in bitcoin, accepting payment in bitcoin isn’t for the faint of heart. Then again, tech investor and stock picker James Altucher recently predicted that bitcoin will top $1,000,000 per coin. I suppose time will tell.