In what constitutes the latest milestone for internet-based currency Bitcoin, Overstock.com became the first major retailer to start accepting them as payment. Of note are two factors: that Bitcoin exists independently of any state regulation, and that this move, according to CEO Patrick Byrne, was driven largely by consumer demand. In an AP interview, Byrne made the audacious claim that his company was tapping into a new market, forging ahead of its competitors. It's uncertain whether or not market share is a sufficient impetus to drive retailers, of both the brick-and-mortar and e-commerce varieties, to follow suit.
The value of Bitcoin is derived from solving computationally-hard problems that yield a payout; a Bitcoin is henceforth defined as a history of transactions dating back to its creation as a reward by a central blockchain. Through this and numerous other protocols, inflation is kept in check. But its status as an international, anonymous currency commands a response from countries with widely varying and incompatible economic systems. While Norway, for instance, regards Bitcoin as an asset for legal purposes, China has banned institutions from accepting it as a form of payment, with the stated aim of protecting individual property rights.
While Overstock.com revels in its over $100,000 in Bitcoin sales from its first day of accepting them, other vendors may be less eager to jump on the bandwagon, although they're likely more afraid of running afoul of state regulators than oblivious to their potential stake in the Bitcoin market. A dichotomy appears to be emerging—between systems that regard virtual currency as merely an asset, and those wary of it as a possible threat to the integrity of their system—and the way these currencies are treated may further distinguish economic systems from one another.
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7 comments:
Bitcoins are some of the most intriguing, recent economic developments. While the acceptance of Bitcoins can distinguish/seperate certain systems, they can also bring them together. It's possible that Bitcoins are a product of a rapidly shrinking (globalized) world.
As bitcoins become more accepted as a form of currency, it is interesting to see how it has a evolved from being used in a criminal capacity (the Silk Road) that fueled the online demand for illegal items to being a viable form of payment for legitimate online corporations. As the currency become more accepted it will be interesting to see how the market will evolve around it.
Warren Buffet said, "be fearful when others are greedy, and be greedy when others are fearful." Bitcoin started in 2009 and many risk averse investors stayed away; but a select few dared to take the plunge and invest (like the Winklevoss Twins). To add some prospective, 1 bitcoin was trading for about $350 in October 2013, and today, the same amount is trading for $850. It is this surge in value, and perhaps a greater understanding of the crypocurrency market that is starting to catch the attention of producers of goods and services.
I'm trading bitcoin, and every time an established institution decides to accept them, its translates into a rise in the value of the price.
In class we have been discussing the importance of innovation to sustain and increase growth in an economy. With technology being the current leading industry it is important that companies keep up with the times and innovate to adapt to the constantly updating technological world. Bitcoins are a new technology that flourished online illegal markets and are proving to be impacting the way financial and shopping related companies are marketing to consumers. The article from ABC News states how “The $1 billion company is tapping into a new market of buyers who use the online currency, and other major retailers will lose market share if they don't follow suit and accept Bitcoins”, demonstrating the impact that Bitcoins have already made in their early life.
I agree that a dichotomy does seem to be emerging between those who support the use of Bitcoins and those don't. It will interesting to see the eventual fate of Bitcoins.
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