Since it’s inception five years ago, bitcoin hype has spread across the globe. “Bitcoin accepted here” stickers have popped up in restaurants and stores. It’s even made it to Twin Mountain Country Store, a convenience store and deli in a remote corner of New Hampshire. But customers aren’t exactly flocking to pay with the digital currency.
Twin Mountain’s owner Bill Bochynski said he only sees about two bitcoin transactions a month in the $20 range. He said he started accepting bitcoin because someone came into the shop and wanted to pay with it, so he did some reading and set up a digital wallet to accept it.
“The number of people who want to pay with bitcoin is in the onesies and twosies,” he said. “It’s extremely technical and geeky.”
Despite the buzz, relatively few shoppers use bitcoin when buying from retailers that accept it. At least for now, the currency is more of a curiosity than a true rival to cash and credit cards.
In October, there were about 70,000-80,000 bitcoin transactions a day according to bitcoin.info, or about double from two years ago. But the numbers are minuscule compared with the 26 billion card transactions that occur each year according to a 2013 study by the Federal Reserve Bank.
Part of the reason why transaction volumes remain so low is bitcoin is very much the realm of the technorati. Created by a developer using the pseudonym Satoshi Nakamoto, bitcoin is an encrypted code exchanged between two people. To create bitcoins, people must solve complex math problems. Anyone using the digital currency can remain anonymous as long as they don’t deliberately reveal their names.
On the upside, this means bitcoin is harder to steal, and can be transferred instantaneously. On the downside the value fluctuates wildly (as of early November 2014 one bitcoin was valued at about $420, but a week earlier it was $330), making users reluctant to keep it. Plus, key point, there aren’t many places where you can spend bitcoin.
More retailers are starting to accept digital currency. The exact numbers aren’t entirely clear, but services like Coinbase and BitPay that help merchants convert bitcoins into dollars provide a window. Coinbase said it has 36,000 merchants signed up and that those ranks grow 10% monthly. Bitpay said it has over 40,000 merchants, or quadruple from the start of the year.
According to BitPay merchants who favor bitcoin tend to be enthusiasts or merchants who sell high-ticket items like TVs or non-refundable items like travel. Stephanie Wargo, vice president of marketing at BitPay explains the appeal. “If you buy a large ticket item, you want to make sure your information is safe and secure,” she said. “And from a merchant standpoint it’s not effective to accept cards for small ticket items. Fees eat into your profits.”
Despite Wargo’s enthusiasm, small retailers that accept bitcoin often only get a few transactions a month with the currency. Bill Finley started accepting bitcoin last October at his clothing store Hemp & Company in Victoria, B.C., and gets about three bitcoin sales a month, he said. But he gave the low sales numbers a positive spin.
“Most of these sales are because customers want to spend their bitcoin and searched us out,” Finley said. “We’re reaching a demographic we probably never would have.”
Finley remains hopeful about the future of bitcoin, despite the fact that merchants in his community aren’t joining in. “It’s a technology that isn’t going to go away,” he said.
The hype isn’t limited to small retailers. Some larger retailers have made the investment to start accepting bitcoin too. They reason that payment technologies will change and they want to be at the forefront.
Online electronics retailer Newegg, which started accepting bitcoin in July, said it did so because its client base is full of techies. “We are tech forward, our customer base is that way, we want to bring them that kind of innovation in payment technology as well,” said Soren Mills, the company’s chief marketing officer.
Newegg wouldn’t disclose number of transactions, but said the numbers are small but growing. Purchases tend to be for products that support solving the math problems that earn bitcoins: graphic cards, motherboards, hard drives. “We’ve doubled our run-rate over the last three months,” Mills said. “Bitcoin has brought us some new customers. It’s got a group of people that it’s really important to.”
Overstock.com, another online retailer, started accepting bitcoin in January 2014. Within the first seven weeks, it had over $1 million in transactions with the currency. CEO Patrick Byrne expects to close the year with 25,000 transactions totaling $6 million – but that’s only .25% of the company’s annual revenue.
“I realized there was a hunger for bitcoin, I wanted to get a slice of that market,” said Byrne. “I’m a limited government guy. I don’t like monopolies of any kind including the monopoly government has over money.”
Byrne’s sees bitcoin as opening the doors far beyond retail transactions. Last month, he disclosed plans to use bitcoin’s technology to create a decentralized stock exchange. The technology that is responsible for transferring bitcoin from one person to another will let people transfer company shares to each other, bypassing government regulators – at least in theory.
Byrne’s enthusiasm drives straight to the heart of the bitcoin frenzy. Enthusiasts aren’t excited about bitcoin for it’s own sake. They agree it’s clunky and not particularly user-friendly. Rather they are excited by the possibilities it presents. Stephanie Wargo joined BitPay because she saw bitcoin as the perfect solution for people who want to send remittance abroad without any fees. Billy Finley from Hemp & Company believes bitcoin is akin to email: the first iterations were rough, but now it’s here to stay.
As for Bochynski, the convenience store owner in New Hampshire? He’s not a exactly a fan of bitcoin. He thinks it’s a toy. But he can’t resist the lure of how bitcoin changes our understanding of currency. “It might not be around in a few months, but it challenges the status quo,” he said.