Reuters – Bitcoin shows staying power as very big online merchants chase digital sparkle

Bitcoin is catching on at U.S. online merchants including Overstock.com and Expedia, as customers use a digital currency that just a few years ago was virtually unknown but is now showing some staying power. Though sales paid for in bitcoin so far at vendors (interviewed by Reuters for this article) have been a fraction of one percent, they expect that as acceptance grows, the online currency will one day be as ubiquitous as the internet.

„Bitcoin isn’t going anywhere; it’s here to stay,” said Michael Gulmann, vice president of global products at Expedia Inc. in Seattle, the largest online travel agent. „We want to be there from the beginning.” Expedia started accepting bitcoin payments for hotel bookings on July 11.

Until recently a niche alternative currency touted by a fervent group of followers, bitcoin has evolved into a software-based payment online system. Bitcoins are stored in a wallet with a unique identification number and companies like Coinbase and Blockchain can hold the currency for the user. When buying an item from a merchant’s website, a customer simply clicks on the bitcoin option and a pop-in window appears where he can type in his wallet ID number.

Still, broad-based adoption of bitcoin is at least five years away because most consumers still prefer to use credit cards, analysts said.

Overstock was the first U.S. company with annual sales of at least $1 billion to accept bitcoins. Soon after, other companies including computer maker Dell Inc, Dish, and Newegg Inc, an online retailer of computer hardware and software, began to accept payments in bitcoin. To date, there are about 63,000 merchants globally accepting bitcoin, estimates from data provider CoinDesk show. It forecasts that figure to rise to 100,000 by year-end.

For retailers, the biggest benefit in accepting bitcoins is lower transaction costs. Coinbase and Bitpay, for instance, charge less than 1 percent per transaction. A credit card payment, in contrast, typically carries a 3 percent fee.

Dell, which started accepting bitcoins in July, Dish, and Expedia all say their bitcoin revenue so far have exceeded their expectations. The three companies declined to give specific figures, but said bitcoin sales are modest relative to their overall revenues.
„From the first day…we saw traffic at the site, it has been growing since,” said Paul Walsh, chief information officer at Dell Commerce Services in Texas. He cited a recent single purchase in bitcoins of a server worth more than $50,000.

Data from BlockChain.info, a bitcoin wallet which stores the digital currency for customers, showed that over the last three months, there were between 50,000 and 75,000 bitcoin transactions a day on average, worth between $45 million and $85 million. That compares with U.S. retail sales of about $15 billion a day during July, according to U.S. Census Bureau estimates.
As of the end of June, bitcoin wallets, representing the number of users who have bitcoin accounts, have grown to 5.32 million, from 765,039 users a year ago, CoinDesk data show. It predicted that wallets would increase to 8 million by year-end.