A $50,000 (£30,150) server deal is not something Michael Dell would typically crow about. But the CEO of the multi-billion-dollar IT vendor has taken to Twitter to announce a sale worth that much. What made this particular transaction interesting? It's the largest server purchase to date using Bitcoin.
Just who bought the boatload of PowerEdge servers with bitcoins is unknown. However, it does represent a proof point that Bitcoin can be a legitimate payment option for sellers and buyers, saving money on transaction fees.
Dell is the largest IT company accepting Bitcoin payment. Dell announced in July a partnership with Coinbase, a Bitcoin exchange, to facilitate payments. Other companies, such as Overstock.com and Expedia, have been using virtual currency in payments.
Currently, Dell has been accepting Bitcoin through its online purchases, which are mostly direct. No word on whether partners can acquire product for resale using the bits-and-bytes money.
The Dell server deal raises the potential for Bitcoin creeping into the channel as a payment option. In my view, there are numerous benefits for Bitcoin and similar virtual-currency systems. Saving money isn't the only advantage.
The most obvious advantage is the elimination of transit and transaction fees. Credit card companies such as Visa and MasterCard charge merchants between two and five per cent on the gross of credit card purchases, which comes directly out of profit margins.
Banks charge exchange fees when dealing in foreign currency. Virtual currencies thus far have no trading fees; costs only occur when bitcoins are converted back to real currency, and the transaction fees are typically nominal.
The real benefit, though, may be in looking at Bitcoin as a flexible commodity. Bitcoins - like hard currencies such as the US dollar, euro or pound - can be traded, and the value increases and decreases depending on the volume and demand of the market.
As such, a single Bitcoin today could have an equal value to the dollar. However, changes in currency trading might make that same Bitcoin worth $5 or $10.
Essentially, companies accepting Bitcoin are commodity traders. Bitcoin users can make more money if their virtual stashes appreciate in value through regular market trades.
If this sounds unnatural, it's not. Many companies deal in commodity trading and speculation to control their costs. Airlines, for instance, bet on oil futures to hedge against their fuel costs. Food producers do the same on crops and livestock to moderate their prices and safeguard against weather and market disruptions.
The downside of Bitcoin: the value can decline without warning. Currencies change value all the time, which affect the earnings and profits of international companies.
In recent years, the profits of companies such as Cisco, IBM and HP have been dampened by changes in the dollar's value and then lost when repatriating funds to the US. The same thing can happen with Bitcoin; the value of bitcoin reserves can fall, leaving the holder responsible for the difference.
Dell isn't saying how much business it's doing via Bitcoin, but it's enough to get Michael Dell's attention. If Dell's Bitcoin experiment proves successful, it could spark a broader acceptance of virtual currency across the IT market and channel, causing solution providers to rethink payment options and finances.
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