This week, Bitcoin is taking another step toward becoming legitimate, as various online merchants have agreed to accept the digital currency on Black Friday.
An organization called Fight for the Future is spearheading the campaign, and in its press release says some 250 online stores are taking part. Most aren’t that well-known, but there are a few that people will recognize, such as OK Cupid and CheapAir.com. There’s also a site called Bitcoin Black Friday that has direct links to some of the sellers.
So what’s this about? Bitcoins are a virtual currency that are “mined” by computers doing complicated calculations, and there will be a limit of 21 million on the total number of bitcoins in existence (about 12 million have been mined so far). It’s sort of an online version of a metal-based currency, like gold coins, except there’s no central bank for bitcoins the way there is for U.S. dollars or Japanese yen.
Each bitcoin is a string of data that records a transaction history, yet does so anonymously. It isn’t tied to a single Internet address or name the way a credit card transaction is, no are there any associated fees and so it functions like cash.
The lack of traceability makes bitcoins an attractive method for conducting private transactions, both legal and illegal. The Silk Road Market was one such online site to conduct transactions and it’s why Bitcoin has had a whiff of the criminal about it. The Silk Road, though, was shut down in October, and since then the virtual currency has developed a somewhat better reputation – and value – as more legitimate sellers and buyers have adopted it.
The other issue was the volatile price of bitcoins. Currently (Nov. 27) the price of one bitcoin is about $1,044. But it was only bout $13 at the start of the year. That sounds good for investors, but bitcoins also went to $900 on Nov. 19 and fell to $500 – in one day. The relatively small number of bitcoins relative to other currencies, as well as the limited number of merchants that accept them, has been a recipe for big price swings. Investing in bitcoins has been compared to the tulip mania of the 17th century.
Then there are questions about its regulation as a currency. Some of that was cleared up in March when the Department of the Treasury issued its guidance.
But organizations like Fight for the Future hope that events like Bitcoin Back Friday will help the currency gain acceptance – one day making it as ubiquitous as PayPal.
Photo: Wikiedia Commons; Credit: Isokivi