The year started with good news for the controversial yet increasingly fashionable digital cryptocurrrency Bitcoin when overstock.com – one of the world’s largest online merchants – began accepting the virtual currency as a form of payment across the globe. Even with its sordid digital past still in full view, continued to express unwavering support for Bitcoin’s future. Does this mean the upcoming triumph of cryptocurrrency is now set in stone?
A Digital Child is Born
As you may know, Bitcoin was created in 2008 by an anonymous programmer as an alternative to fiat currencies backed by national central banks. Using a system of decentralized servers running special Bitcoin software, payments for goods and services are recorded in a public ledger to prevent duplicate transactions. By also adding cryptographic hashes that identify ownership credentials into the system, Bitcoin usage started to grow globally.
The Revolution Begins
And grow it did! Increasingly, Bitcoin and other similar virtual currencies like Litecoin and Dodgecoin came to be associated with online criminal behavior thanks to their decentralized and pseudo-anonymous nature. Drug dealers began to operate highly anonymous online drug markets, with the Silk Road gaining the most notoriety. Eventually, the Silk Road would be shut down by the FBI (which temporarily lowered the value of Bitcoin); however, the rampant use of Bitcoins to fuel digital crime continued to proliferate.
Although the popular but short-lived Silk Road was no more, cybercriminals continued to expand into a variety of digital currency supported activities including the distribution of malware, botnets, extortions, thefts and money laundering.
Speculation among news outlets fueled the view that Bitcoin’s only source of value was through its ability to purchase illicit goods online. Bitcoin’s sudden popularity, and the links to criminal activity that came with it, seemed to have doomed it before it had a chance.
Seeing their alternate currency fumbling, free market proponents rumbled back resolutely, “Not so fast!” They had always reasoned that the same trappings of Bitcoin – decentralization, ease of transaction and an anonymous guise – would be its greatest advantages.
Bitcoin as a method of online payment grew as supporters quickly riled businesses to offer cryptocurrencies as an alternate form of payment. Merchants relished the fact that Bitcoin transactions were far cheaper than paying 2-3% for centralized credit card processors. Residents in economically volatile countries like Argentina began to use safer Bitcoins to store the value of their personal and business wealth. Speculators saw its potential to revolutionize global finance and began to invest in it.
Enter the Mega Corps
With a legion of potential new customers in sight, Overstock.com partnered with the popular California-based Bitcoin exchange called Coinbase and, in January 9th 2014, became the first major global retailer to accept Bitcoin to purchase its goods. WordPress and OKCupid had already begun offering Bitcoin transactions. Not to be outdone, a Canadian bank even installed a Bitcoin ATM in Vancouver in 2013. Tiger Direct, Expedia, Newegg and Dell soon followed suit with their own Bitcoin-based payments.
Given the rapid rise in popularity of Bitcoin, as well as its sister currencies like Litecoin and Dodgecoin, the relative value of digital currencies remains volatile. As long as virtual currencies can maintain their increasing air of respectability thanks to mature business like Overstock, the future of cryptocurrencies looks promising.