All it took was a machine in a train station. Two months ago, bitcoin was the preserve of tech junkies and rabid libertarians, something most people didn’t think about, let alone understand. But now that an ATM dedicated to the virtual currency has opened in South Station, bitcoin is all anybody talks about. People who couldn’t tell a gigabite from a CPU are now talking about virtual currencies. Even my mom is asking if she should get some. If bitcoin was a band, it would be HAIM.
The thing is, people are absolutely right to be talking about bitcoin. Despite all the bad press that the digital money has gotten recently (from theft at one of the web’s largest bitcoin exchanges to the currency’s use on Silk Road, the Internet’s most infamous online drug emporium) bitcoin is on the rise. And it is entirely possible that bitcoin, or some other virtual currency, will become the medium of choice for online transactions in the future.
Bitcoin is a form of currency that exists only online. It is untethered to governments or regulatory agencies. Instead of having the number of bitcoins in circulation determined by federal institutions, computers can “mine” for bitcoin by solving complex algorithms to add more coins to the system. And, much like cash, bitcoin is virtually anonymous — it is impossible to trace a spent bitcoin back to its original holder. These traits have bought the system plenty of fans among hard-core privacy advocates, but they also contribute to bitcoin’s volatility problem. It is almost impossible to predict where the value of your bitcoins will go. Last November, a single bitcoin was worth more than $1,200. As of March 5, that bitcoin was worth $674.
Businesses are usually allergic to that sort of uncertainty, but more and more companies are embracing bitcoin. And Boston retailers are leading the online charge. Karmaloop, a Hub-based e-commerce site specializing in streetwear, was quick to announce that it was going to accept bitcoin on the site (they’re still in the process of implementing the actual payment scheme). The move was specifically designed to fit in with the sites forward-thinking image. “It’s a bit like the wild west,” said Karmaloop CEO Greg Selkoe. “The first people to get in are a little edgier.”
But behind that edginess is a calculated business strategy. Karmaloop’s core demographic, Verge Culture kids raised on the Internet, dovetails nicely with the sorts of people who tend to be interested in bitcoin — males aged 18 to 34. Right now, no one at Karmaloop is expecting to make much money off the venture, but making a push into bitcoin will most likely buy them a lot of credibility with the sorts of customers that Karmaloop wants to retain.
According to Nick Tomaino, attracting young, male customers is one of the main reasons companies deal with bitcoin. Tomaino helps run business development for Coinbase, a bitcoin exchange that handles accounts for both consumers and merchants, and which is currently working with Karmaloop on integrating bitcoin. The best example of this trend is Overstock.com. Overstock integrated bitcoin into its website in early January, and since then it has done over $1 million in bitcoin sales. More impressively, 60 percent of the customers using bitcoin were new to the site, suggesting that while volatile, the online currency might prove to be a very effective mechanism for attracting new business.
For people like Selkoe and Tomaino, the future of online retail is obvious — bitcoin. But it will take a bit more than the support of a few online trailblazers to convince the rest of us to accept digital money. And in the grand scheme of things, that is where the bitcoin ATM in South Station fits in. I suspect very few people are running to the Red Line to invest their life savings online, but creating a physical way to interact with bitcoin has given the currency a sense of permanence and legitimacy that it didn’t have before. Being able to get cash out against your bitcoin wallet makes it seem like a lot more than zeroes and ones. Right now, I wouldn’t be too happy if I got my paycheck in bitcoin, but that probably says more about me than anything else. Who knows? In five years time, I might not have a choice.
[Photo: Darren McCollester/Getty Images]