Bit on the side?

Since its inception in 2008 Bitcoin has taken off in the global economy but is the virtual currency going to become legal tender for the channel? Jack Gilbert investigates

"It's the closest you will get to money growing on trees," said Mark Purdy, marketing manager at Overclockers, one of a number of electronics retailers to start accepting the virtual currency Bitcoin.

Once solely for dark-web drug dealers and paranoid internet users, Bitcoin is beginning to grab the attention of IT resellers, with the likes of Scan, Overclockers, CeX and Aria Technologies all using it to accept payments. Effectively, Bitcoin currently has a market capitalisation of $6.3bn (￡3.88bn), and is beginning to be accepted as legal tender for everything from pizzas to laptops. So what is causing this rise of the virtual currency, and could Bitcoin become a mainstay of the channel?

One company to have embraced the rise of Bitcoin is Aria, a Manchester-based electronics retailer, which started selling Bitcoin manufacturing tools and accepting it for payments in January.

Aria's sales doubled in February to a record high, Aria chief executive Aria Taheri (pitcured below) said, on the back of sales of mining rigs (used to "mine" for Bitcoins) and graphics cards. Meanwhile, the crypto-currency is now responsible for between five and 10 per cent of its monthly sales.

Taheri started using Bitcoin because he saw that a certain percentage of his customers use it exclusively for their payments, so he was able to tap into a "niche segment of customers".

"There is quite a substantial sum of people who don't even have bank accounts, and are using Bitcoin because they don't trust banks. I think Bitcoin can help us reach out to more customers, and as it gains more confidence and there is more positive news about it, it will only gain more momentum," he said.

As part of Aria's checkout process you can select Bitcoin as an alternative payment, if you have a Bitcoin account, and Aria is then paid on a weekly basis via an agent in the US. The largest Bitcoin payment Aria has processed was for ￡700, and Taheri noticed that most of his Bitcoin transactions were coming from London and the south-east.

One of the biggest concerns with the virtual currency is fears over security and glitches, but Taheri commented that the process has been "very reliable" and says he trusts the currency. Following a major hack on Japanese Bitcoin exchange Mt. Gox in February, Taheri said his payments took a while to come through but other than that the process has been "fairly smooth".

Despite such security concerns, Aria is far from the only reseller to get on board with the virtual currency, with PC gaming retailer Overclockers also embracing Bitcoin as another revenue stream.

"It only takes one distributor to start taking Bitcoins and the others will follow suit."

"At the time, quite a few people had Bitcoins to spend and a couple of our rivals were tinkering with Bitcoin so we didn't want to miss out," explained Overclockers' Purdy.

Thumbs up from Dell

Hopes that Bitcoin could even become a fixture in the B2B market were boosted in July when Dell began accepting the payment method in a trial limited to its US consumer and small business customers. Dell's chief executive, Michael Dell, tweeted in August to announce a $50,000 server deal transaction using Bitcoin and in a statement to CRN, Paul Walsh, chief information officer at Dell Commerce Services, said the vendor is "pleased" with the initial response to the pilot.

Taheri is convinced that the crypto-currency could eventually become the payment method of choice between channel firms themselves.

"It only takes one distributor to start taking Bitcoins and the others will follow suit. I am sure that we will see payments between companies happen in the next couple of years or so," he said.

Having said that, Bitcoin still has some way to go to convince critics that it is not just a flash in the pan.

Since its creation in 2008 by the mysterious Satoshi Nakamoto, Bitcoin's price has fluctuated dramatically, going through several extreme booms and busts.

In November 2013, the price of one Bitcoin reached an all-time high of $1,242, but then dropped back down to $361 per unit in April 2014. These ups and downs have also been exacerbated by hacks when Bitcoin has been stolen.

Leander Bindewald, researcher and project manager in complementary currencies atthe New Economics Foundation, believes that because Bitcoin is not tied into any government structures, such as the Bank of England, "instability is written into the Bitcoin code".

Bindewald, who was the first student to pay for his university fees in Bitcoin, demonstrating the increasing reach of the virtual currency, does however believe there are clear advantages to using Bitcoin,
such as avoiding transaction fees on payments from banks and credit card companies.

The revolution has begun

Mike Hearn, a software developer and expert in Bitcoin, said using the virtual currency makes sending and receiving money "fast, cheap and easy". Bitcoin is more than just a fad, he added, asserting that its volatility will subside as the market matures and people come to understand its future better.

"There is good privacy as well," Hearn added. "Your money is yours, and it's an open protocol that allows people to innovate and do unexpected things - just like the internet," he said.

Whether or not it will stand the test of time remains to be seen, but many see Bitcoin as revolutionary in terms of how it has paved the way for digital currencies in general being accepted into the world's mainstream economy, with a host of others also being developed such as Litecoin, Namecoin and Darkcoin.

Bindewald believes Bitcoin may not be the future, but it has shown the world that virtual currencies can become a force in the world's economy.

"In a way, Bitcoin as a currency is just a proof of concept that is part of a much deeper idea that could be game changing," he said.