Bill Gallagher bought a pair of socks Thursday.
For most people, that’s a routine purchase. But for Gallagher, it represents the first time he’s purchased something at a local merchant using bitcoins.
Bitcoin is, essentially, digital money. Users can sell or trade it, give it as a gift or use bitcoins to buy products from merchants who accept them. They’re not tied to an actual currency, but they are worth real money based on demand — more than $800 apiece as of last week, down from a high of about $1,000 this November.
There’s no centralized authority or “bank” for bitcoins; instead, they’re created by users who run complicated, mathematical software programs, a process known as “mining.”
Bitcoin isn’t the only digital currency on the market — others include Namecoin, Litecoin, Peercoin and Mastercoin — but it was the first and is the largest, with more than $1.5 billion worth of bitcoins being circulated today.
Bitcoins rely on codes that are exchanged during a transaction. You store bitcoins in a virtual “wallet” set up on a secure, third-party website. There have been instances where those programs have been hacked, and users recommend not storing all your codes in one place or keeping them on a computer connected to the Internet unless you plan to use them immediately.
While widespread acceptance has been slow, this virtual currency is catching on, particularly among venture capitalists who are eager to invest in the next big thing. Earlier this month, Overstock.com became the first major online retailer to accept bitcoins as payment.
Locally, the Nejad Gallery in Doylestown last week became what’s believed to be the first Bucks County retailer to announce that it will accept bitcoins. But Estetiks, a nearby sneaker and clothing boutique, beat the rug gallery to the first purchase when Gallagher used less than two-tenths of one bitcoin to buy a $15 pair of athletic socks.
Estetiks owner Shael Fisher said he was considering bitcoins as a form of payment even before Gallagher approached him about accepting them. He said accepting the virtual currency is just another way to help customers.
“I want to make it to the point where the customer’s comfortable spending their money,” Fisher said. “People may like Bitcoin because they don’t have to use their credit card. You want to make it as convenient for the customer as possible, with whatever way they feel comfortable.”
Nejad Gallery owner Ali Nejad said he enlisted the help of employee Mike DeLeo, a finance student at Temple University, to research bitcoins before deciding to accept them as payment for the Oriental rugs he sells in his store.
“It’s going to be the future of e-commerce,” DeLeo said.
Nejad said he believes customers will use bitcoins because the transaction is safer than using credit cards. He said that’s especially important in light of data breaches at large retailers like Target and Neiman Marcus. Bitcoins also have lower merchant processing fees — around 1 percent versus 2 percent to 4 percent for most credit cards.
“We’re very excited about it,” Nejad said.
As for Gallagher, he’s happy to learn local retailers are starting to accept bitcoins.
The 41-year-old New Britain Township resident wouldn’t divulge how many bitcoins are in his “wallet,” a term used for the app that keeps track of his account. He did say he has spent several thousand dollars since November buying the currency, whose value has increased. He said he’s also received bitcoins from other users, who can give them as “tips” for posts on social media sites like Reddit. And he accepts bitcoins from coworkers as payment for providing coffee at his office in Doylestown.
But using bitcoins hasn’t been without some hassle, Gallagher said. He changed banks after his bank threatened to close his account for using a site to buy bitcoins that had been flagged as a possible money-laundering source. Gallagher said he’s now a member of the Pennsylvania State Employees Credit Union, which he said has been more open to his bitcoin purchases.
Gallagher said he doesn’t believe bitcoins are for everyone — at least not yet. But he said he sees enormous potential, both as a currency and a way to track transactions.
“The functionality behind it has so much potential,” he said. “Credit cards weren’t designed for the Internet. This is the real money for the Internet.”
Source: http://www.theintell.com/business/virtual-currency-bitcoin-slowly-gaining-local-audience/article_281aebcb-00ac-5683-bc51-fb87d6116f24.html
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