MOSCOW, August 28 (RIA Novosti) - Bitcoin, an alternative digital currency which is used to purchase goods and services online, is showing staying power, Reuters reported on Thursday, August 28.
Though virtually unknown only a few years ago, the electronic currency is now catching on among more and more online vendors, including Expedia, America’s largest online travel agent, and Overstock, an online retailer.
Although bitcoin sales hardly ever represent more than one percent of total sales, Reuters says many of the vendors it interviewed expect that the online currency “will one day be as ubiquitous as the Internet.”
"Bitcoin isn't going anywhere; it is here to stay," the news agency quoted Michael Gulmann, vice president of global products at Expedia Inc. in Seattle as saying. "We want to be there from the beginning."
Expedia started accepting Bitcoin payments for hotel bookings on July 11.
Bitcoin has become a software-based online payment system. It is easy for users to access: bitcoins are stored in international digital wallets with a unique identification number, like Coinbase or Blockchain. When buying something online, the user simply needs to choose bitcoin as a payment option and enter his wallet ID number.
However, Reuters says some analysts give the currency at least five more years to achieve broad-based acceptance, as most of the users still prefer more customary methods of online payment, such as credit cards, for example.
There are also concerns about bitcoin's volatility: having been designed as an alternative to traditional payment systems, it is not backed by any government and lacks a central bank to regulate it or issue more virtual currency. If a virtual currency fails, the government does not cover its users’ losses.
However, Reuters explains, that risk is borne by the consumer and the bitcoin payment processor, such as Coinbase or Bitpay, not the retailer. The vendor, however, doesn't maintain a bitcoin account and is paid in US dollars.
As soon as a customer pays in bitcoins, the digital currency goes to the payment processor and the processor immediately pays the merchant, for a fee of less than one percent.
The price of bitcoins changes every day. On Wednesday, August 27, a bitcoin was worth $514.09, up 0.4 percent.
"We don't have to deal with the actual holding of the bitcoin: it's the payment processor that assumes the currency risk on our behalf," Bernie Han, chief operating officer at Dish Network Corp in Englewood, Colorado was quoted as saying by Reuters. "That's what makes it appealing for us, and I guess for other merchants as well."
Dish Network Corp started accepting bitcoins in mid-August.
There is some minor risk for the retailer though, if the payment processor, for example, doesn't fulfill its obligation.
Gil Luria, a financial technology analyst at Wedbush Securities in Los Angeles, explained that both Coinbase and Bitpay are now well-funded start-ups and they have put a lot of resources into security. These e-currency operators might be considered secure counterparties, as opposed to a year ago, when they were still very small.