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Overstock.com starts accepting Bitcoins as payment


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#1 Grinler

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Posted 09 January 2014 - 08:12 PM

Overstock.com today announced that they have started accepting the digital currency Bitcoin as a payment option for all the items on its site. When purchasing items on Overstock.com visitors will now be presented with a Bitcoin payment option on checkout. If you do not currently own any Bitcoins, Overstock is working with CoinBase, which is a company based out of San Francisco that allows you to purchase and sell Bitcoins for USD.

overstock.jpg


Bitcoin is an digital currency where coins are created by solving cryptographic hashes. Though Bitcoins are currently being traded for around $930 USD, many people feel that this digital currency is purely speculative and is not something people should invest in. Now that companies like Overstock.com, Zynga, and Virgin Galatic accept Bitcoin, the digital currency may become more commonly accepted and used by other stores.


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#2 TsVk!

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Posted 09 January 2014 - 08:26 PM

This whole thing makes me shudder... I smell financial conspiracy.



#3 Who?

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Posted 10 January 2014 - 04:37 AM

pending mass inflation



#4 Stolen

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Posted 12 January 2014 - 10:41 PM

Interesting article from a financial blogger on Bitcoin and strategy for Target.
 
(Note: The entire article, including paragraph in italics below, is the opinion of the author)
 
Published here by Trace Mayer on January 7, 2014 (copying all article here due to need to register to access article). Comments on the site are good too. 
 
Why Target Must Accept Bitcoin Like Zynga And Before Walmart Or Amazon
by Trace Mayer
 
For emotional reasons five year old Bitcoin (BITCN) is very polarizing and has become magic Internet money; either rat poison or 'techno tour de force' to Charlie Munger and Bill Gates, respectively. And for all it has been the best performing asset over the past five years. But despite any personal sentiments or emotions corporate officers owe a fiduciary duty to maximize shareholder value.And Target (TGT) has an opportunity to immediately create significant amounts of shareholder value by accepting Bitcoin like Zynga (ZNGA) recently using Bitcoin processor Bitpay.
 
And if Target fails to develop a Bitcoin strategy then they will lag Overstock (OSTK) which has already announced it will accept Bitcoin payments in 2014. And Target will be at further risk of falling behind both Amazon (AMZN) or Wal-Mart (WMT) which might already be fast on the scent of lower prices with former board member Michele Burns who is currently on the boards of Goldman Sachs (GS), Cisco (CSCO) and Bitcoin startup Circle.
 
BITCOIN ADVANTAGES FOR CUSTOMERS
 
The customer is always right. When a customer wants to give a business money for a good or service then the business should figure out how to take it! Obsolete merchant processors like Visa (V), Mastercard (MA), Paypal (owned by EBAY) and innovators like Bitpay help smooth the user experience in transferring value which is why businesses use them.
 
Recent United States Senate hearings on Bitcoin included representatives of several government agencies like Treasury, FinCEN, Secret Service, DHS, etc. and industry including both Tony Gallippi CEO of Bitpay and Jeremy Allaire CEO of Circle testified sending the message loud and clear that Bitcoin is legal for US corporations to use in transactions.
 
How many Bitcoin customers?
 
Reddit reports 2.7% of site users pay using Bitcoin. People have valuable bitcoins to spend and a Lambroghini dealership in Newport Beach, CA sold 3 for Bitcoin in December when they usually average 5-10 per month. This evidences Bitcoin's growth as a transactional currency with Bitpay reporting in November 2013 15,550 merchants, $100,000,000 of gross processing volumes and 6,260% year-over-year growth in processing volumes.
 
Identity Protection
 
In December Target allowed their database breached resulting in the compromise of obsolete credit card transactions and personal information for over 40 million customers. There may be significant fines or other costs associated with this massive security incident. Bitcoin users would have been unaffected and shareholders would be better off if there was never any data to potentially leak in the first place!
 
And in the middle of holiday shopping season J.P. Morgan Chase (JPM) said, "it was temporarily limiting ATM withdrawals to $100 a day and purchases to $300 a day for customers whose accounts were at risk." What an inconvenience for customers! An inconvenience that would not even have been possible if Target's customers had been given the option to pay with Bitcoin instead of a credit card.
 
Bitcoin has identity protection built in and merchants cannot be victims of either fraud or chargebacks. As this 30 second video of a Zynga Bitcoin transaction shows the customer checkout process consists of two clicks with no personal information being submitted and the merchant knows instantly that payment is good. This could be even smoother and faster than the patented Amazon One Click Checkout!
 
Consequently, Target needs to takes their customer's private information more seriously by (1) making sure their security systems and practices are secure and (2) accepting Bitcoin payments from customers so customers do not need to trust this corporation with data in the first place since it has already proven itself an untrustworthy steward.
 
New emerging markets
 
Additionally, debit and credit cards are only available in about 50 countries. Bitcoin is available anywhere there is an Internet connection. UPS (UPS) or Fedex (FDX) can ship to many of these countries.
 
Is Target looking for a potential expansion strategy for their lagging ecommerce division? You can be sure Amazon is already targeting this potentially huge and lucrative expansion possibility. Just watch their video Exporting With Fulfillment By Amazon and consider the implications with Bitpay's Fulfillment by Amazon plugin.
 
BITCOIN IS FINANCIALLY CHEAPER
 
But another tangible reason why Target should accept Bitcoin payments is because they are significantly cheaper than debit or credit cards.
 
Transaction Costs
 
Target, Wal-Mart and Amazon all generate tremendous amounts of revenue by selling retail products that are often commoditized. So there are extremely low profit margins. Hence, Wal-Mart's slogan "Always low prices. Always."
 
But credit card costs are on average around $0.30+2.9% although I am sure these giant retailers get massive discounts due to volume. Nevertheless, this is still a point of major contention since the middlemen, who can suffer disintermediation, siphon off material amounts in fees.
 
In July 2012 the Chicago Tribune reported, "Visa Inc, MasterCard Inc and banks that issue their credit cards have agreed to a $7.25 billion settlement with U.S. retailers in a lawsuit over the fixing of credit and debit card fees in what could be the largest antitrust settlement in U.S. history."
Bitpay's merchant solution
 
Meanwhile, for a flat monthly fee Bitpay offers to (1) process Bitcoin transactions, (2) convert to the fiat currency of choice like USD, EUR, YEN, etc. and (3) direct deposit to the bank account next day. Plus, there is no personal information from the customer for PCI compliance, no risk of fraud or charge-backs and no other hidden fees.
 
Bitpay offers two different pricing models either (1) 0.99% of gross revenue where they will process the Bitcoin transaction, convert to the fiat currency of choice and direct deposit to the bank account next day or (2) a unique Software As A Service pricing model. The SaaS model has three tiers at $30, $300 and $3,000 and with the highest tier where they will process $5,000,000 or more monthly volume.
 
Retailer volumes
 
In 2012, Target had $73.3B of gross revenue while Wal-Mart's was $469.2B and Amazon's was $61.1B. We do not know what percentage of revenue will have the Bitcoin payment method so we will assume the same 2.7% as Reddit.
 
We will assume the major retailers pay a mere 1% of gross revenue for credit card transactions which would include all transaction costs, PCI compliance, computer security costs, contingent liabilities from breaches of their systems, fraud or chargeback costs, foreign exchange conversion costs and all of the other hidden fees that have not been enumerated.
 
Proforma analysis of financial effect from Bitcoin acceptance
 
With those two assumptions this would mean Target would process via Bitcoin approximately $1.98B of annual revenue, Wal-Mart about $12.7B and Amazon about $1.65B with costs of .
 
Bitpay will process all of those amounts for a full inclusive flat fee of $3,000/month or $36,000 per year. This would save Target approximately $19.8m in processing fees, Wal-Mart about $127m and Amazon around $16.5m. In all cases, immediate cost savings would be in excess of 99.9%. Not a bad ROI for a few hours of a developer who is likely already on salary!
 
What this would look like for a consumer
 
Remember, Target, Wal-Mart and Amazon offer retail goods that are commoditized so there is very little differentiation they can do to boost margins. Here is the beautiful 70" Vizio TV.
 
image: vizio tv at walmart
nin4.jpg
 
vizio tv at amazon
 
66im.jpg
 
vizio tv at target
 
bnwm.jpg
 
So we see that Target is already offering the same high value item for $0.99 more than either competitor. Target is not the low price so why buy from them?
 
But if 1%, about $20, were knocked off that price which could easily be done by giving discounts to people who pay with Bitcoin because of the lower fees and zero risk of fraud or chargebacks then Target would be far and away the low price leader. Which major retailer will join Overstock first?
 
CONCLUSION
 
It really seems like common sense for Target to accept Bitcoin. In one fell swoop they can tremendously benefit their customers and shareholders by (1) expanding accessibility globally, (2) lowering overhead, (3) improving the user experience, (4) protecting customer personal information and (5) cutting costs. And if Target does not move then it seems increasingly likely that in 2014 either Wal-Mart or Amazon will so that Overstock is not the sole major retailer accepting Bitcoin.
 
And looking at it objectively without any personal bias I have to conclude that there is little if any cogent articulate argument against accepting Bitcoin. Please, make the other case in the comments!
 
After all, Bitcoin is merely a protocol like email and Target started using email years ago. By accepting Bitcoin Target will gain a competitive headstart, has basically nothing to lose, a lot to gain and a fiduciary duty to increase shareholder value to fulfill.


#5 battyhippie

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Posted 13 January 2014 - 08:20 AM

A twist here on honour amongst thieves, the same "banking institution" that accepted payment to unlock your computer, CryptoLocker, now can be used at Overstock to purchase what you don't need....followed by Wallymart, etc. Now why does this not sit well with me?



#6 TsVk!

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Posted 13 January 2014 - 04:08 PM

I did mention financial conspiracy.



#7 battyhippie

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Posted 13 January 2014 - 04:58 PM

Yes you did, TsVk!...but why do I think of this as banking at the bank with "money" that not only does not exit but who what where backs it? Well, they do have off-shore banks, if that is any consolation. Eh...,right now, I don't like the smell.



#8 TsVk!

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Posted 13 January 2014 - 05:11 PM

I looked into Bitcoin years ago, whilst it was still under $10. Had I sunk $10k into it then I'd be a 'millionaire' now. But sadly I thought it was dodgy and improbable, like I still do. Lowest common denominator rules though, and value is only perceived rather than real. So if everybody accepts this new funny money it will hold some power, which with the media hype it is getting seems more likely everyday.



#9 battyhippie

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Posted 13 January 2014 - 06:01 PM

What am I missing here? Since when is peer to peer safe? No one knows who started Bitcoin nor what country headquartered in. And throw in that gamblers like it...too many unknowns.

 

http://www.crunchbase.com/company/bitcoin

 

Agree with you on this one, TsVk! Definitely a take the money and run, just when are they going to run.



#10 TsVk!

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Posted 13 January 2014 - 06:05 PM

I don't think they are going to run, the target is transaction fees... always was.

 

2 guys and a rack server could make a billion a year, if this scheme works out for them.


Edited by TsVk!, 13 January 2014 - 06:11 PM.


#11 lovedeedee

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Posted 13 January 2014 - 08:38 PM

Most companies to buy bitcoins, for merchants transfer the once bitcoins to the merchants account daily to avoid hackers from being encouraged to taking a huge heap of money from retailers.

 

It's confusing how some people say no one buys bitcoins but clearly from the sales that Overstock made in one day in Bitcoin sales (which was $126,000), people are clearly using them.

 

It is alot cheaper for these merchants to use bitcoins than having all the fees that Paypal and credit cards would charge, when bitcoin companies usually charge 0% - 1% transaction fee. Overall the retailer saves alot more money when their customers use bitcoins instead.

 

Here's a great article on more: http://blog.helpfulstart.com/e-commerce-software/even-overstock-now-accepts-bitcoins/

 

I would love to hear your feedback on the site.



#12 TsVk!

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Posted 13 January 2014 - 08:48 PM

Paypal and credit card companies are criminal, but have so much financial clout that the government can no longer regulate them. As an alternative to being ripped off by such crooks Bitcoin seems pleasant. The largest issue though, for me, is that BItcoin has no intrinsic value. It is just a code. Whoever though it up is brilliant.... the train of thought goes like this.

 

1st guy: "well, we can't print our own money legally... so.... let's make it up on computers! "

2nd guy: "Brilliant! I want to own half of all the money though."

1st guy: "sure no worries, as long as I can keep all the transaction fees"

2nd guy: "deal"



#13 lovedeedee

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Posted 14 January 2014 - 12:31 AM

I don't know. Bitcoins seem to have a similar concept to how a gift card works, in the sense that you buy a $100 gift card for $100 dollars. Then that value of money "is in the card" like how your money is in bitcoins and it is contracted to a specific store, but for bitcoins they are contracted to be only used at stores that accept bitcoins.

 

But it does have a changing value to it because well its supposed to be a type of currency. But overall, it just seem like value changing store credit.

 

True to the brilliant thing though. I wish I had thought of it..lol.






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