Bitcoin is on the rise, but not in the way you might think.
The cryptocurrency, which uses strong encryption methods as a way to ensure the viability of online transactions as opposed to using a third-party bank, is starting to stabilize. Since January of this year, the price per Bitcoin has hovered right around $200 (according to CoinBase). That stabilization is a good sign, because it means more people are using the alternative payment method.
In fact, according to BitPay, the number of Bitcoin transactions (aka, BTC) doubled last year. And, North America accounts for 57 percent of all Bitcoin payments: You can now buy everything from beef jerky to flowers using BTC.
Yet, the really impressive news is that larger, more-established companies like Expedia have jumped on the alternative payments bandwagon. Since last year, the popular travel site has used CoinBase to handle its Bitcoin transactions. Large online retailers like Overstock.com now accept Bitcoin, and countless small (but legitimate and well-funded) etailers like BloomNation, a flower delivery service, have jumped on the BTC bandwagon.
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Experts tell CIO.com that several factors are driving adoption, including new technology breakthroughs involving the blockchain – which is a secure public ledger for Bitcoin transaction – and even a new “stock exchange” for Bitcoin called Gemini. The payment method is finally expanding beyond the world of online poker and gift cards into mainstream commerce.
“Bitcoin is becoming more and more mainstream,” says Marwan Forzley, the CEO of Align Commerce, a global payments company that makes it possible to pay employees stationed overseas. “We see this in the NYSE’s introduction of the bitcoin index and IBM’s rumored development of a new blockchain based cash payment system, as well as large retailers such as Overstock.com adopting bitcoin as a form of payment.”
“As more regulation and trust in bitcoin businesses is established with clear oversight, the more use cases we will see emerge,” adds Jesse Chenard, the CEO of MonetaGo, a BTC exchange. “The fringe uses helped establish the economics and function of the protocol. It also helped to prove out the security of it. As some of the baddest actors on the Internet have not been able to compromise the basics of it you can consider it very well security audited.”
Reducing the risk
Expedia is a good example of a company that is paving the way for legitimizing Bitcoin and making it more viable for larger companies. About a year ago, the travel portal started looking into alternative payment methods beyond credit cards and PayPal. They noticed how many of their customers were inquiring about Bitcoin and noticed how it was popular with smaller etailers.
Connie Lin Chung, the senior product manager at Expedia, told CIO.com that adding the payment format went incredibly smooth. They use CoinBase to handle the conversion from BTC to U.S. dollars. At checkout, Expedia users are temporarily redirected to the Coinbase site to add their account information if they want to pay with BTC.
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“One of the things that matters a lot for executives was what type of risks we were taking by taking bitcoin. But we really aren’t because we convert it straight to USD right after the transaction,” says Lin Chung from Expedia, Inc. “There was a segment of people who were really interested in paying with Bitcoin, so we wanted to offer that to our customers.”
How the blockchain helps
Blockchain technology is also helping making BTC more legitimate for larger companies. Judd Bagley, a spokesman for Overstock.com who works closely with the internal Bitcoin development team, says blockchain tech is a key reason why they accept the payment method.
“The blockchain is very good at removing the need for intermediaries whose purpose is to bridge the transactional trust gap that exists between individuals who wish to do business without already having a trust-based relationship,” he says. “These intermediaries don’t work for free. They come at a cost of time and money. However, with the blockchain, you don’t have to trust the counterparty on the deal. You only have to trust math and the principles of cryptography.”
The real benefit of using the blockchain for any large company is that it solves some of the regulatory issues and helps companies scale out as the transaction levels grow.
“Our technology can fit easily into existing business systems. We see this blockchain as a service model growing rapidly because a few simple API calls can give your accounting or document system a blockchain back end,” says Peter Kirby, the president of Factom, a company that creates a secure time-stamp of data used for transactions.
Not picture perfect yet
Of course, we’re still a long way from walking into a Best Buy store and paying with Bitcoin from your smartphone, and that’s mostly due to customer perception and adoption trends. Many consumers have a hard time even understanding Bitcoin or the blockchain. Indeed, when CIO.com contacted two major retail giants, Amazon and CVS, both companies said they had not announced any plans to accept the alternative payment method. To date, no mainstream brick-and-mortar retailer has started accepting the currency, although you can use an app like Gyft to purchase a gift card using Bitcoin for major retailers.
“We are starting to see many POS systems accepting bitcoin – from gas stations to gaming machines,” says Forzley from Align Commerce. “It is absolutely feasible to see it offered as a payment option in brick and mortar retailers in the not so distant future.”
"Bitcoin has become more legitimate or at least it is perceived as more legitimate, because of the major retailers jumping on board and accepting it,” says Marc Diana, the CEO of MoneyTips, a financial management company. “With retailers like CVS and Amazon now accepting it through third party processors, the coins are perceived as being a trusted source to buy goods with and, if they were not, retailers would not accept them, even though they are not actually accepted by major retailers outside of OverStock.com. Perception is half the battle."
As blockchain tech improves, more people hear about Bitcoin as a payment method, the currency continues to stabilize, and more companies start accepting it, the enterprise may follow suit.
This story, "Will Bitcoin become a legitimate currency for large companies?" was originally published by CIO.