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Friday, January 10, 2014

Overstock.com (1Billion In Sales) Is Now Accepting Bitcoins And Lloyd’s of London Now Insuring Bitcoin Wallets



The Grand Experiment Goes Live: Overstock.com Is Now Accepting Bitcoins

Overstock.com is now accepting payments in bitcoin, making it the first major online retailer to embrace the increasingly popular but controversial digital currency.

Since December, Overstock’s free-thinking CEO and chairman, Patrick Byrne, has been telling anyone who would listen that his company would adopt bitcoin sometime in the next six months. But Byrne is an impatient man. Last Tuesday, the company struck a deal to handle bitcoin payments through a service operated by the suddenly hot San Francisco startup Coinbase, and since then, a team of Overstock engineers has worked almost every waking hour to prepare the site for what is undeniably a key moment in the digital currency’s short history.

“I felt I had tipped my hand,” Byrne says. “I didn’t want someone else to beat us.”






Created just over five years ago by an anonymous computer programmer (or group of programmers), bitcoin entered mainstream consciousness this past fall, when U.S. government regulators seemed to give it their stamp of approval and its value topped $1,000 on popular exchanges. That shows a huge leap in demand, but many people are interested in the currency only as an investment — an asset whose value keeps going up. Overstock and Coinbase aim to turn bitcoin into a true currency that can be widely and regularly used to buy and sell goods and services.


You can already use bitcoin to buy hard goods from a hodgepodge of websites, from computer-parts seller Memorydealers to general stores like BitcoinShop.US. You can pay in bitcoins when using online services like the popular blogging tool WordPress and dating site OKCupid. You can even buy stuff like burritos and sandwiches in real-world restaurants and shops. But Overstock, with $1.3 billion dollars a year in sales, is by far the largest operation to accept bitcoin.

Coinbase co-founder Fred Ehrsam, who oversaw the deal with Overstock, says the move is important simply because Overstock is such a recognizable name. We’ve all seen their ads on cable TV, which is something you can’t say about the 19,000 other merchants using the Coinbase payment service, a kind of PayPal for bitcoin. “You have to consider the mainstream nature of it,” Ehrsam says. “Generally speaking, bitcoin merchants have fed the tech-early-adopter user base. But Overstock is not about that. This is about as mainstream as it gets.”

That said, Overstock is unlikely to see a huge number of bitcoin payments anytime soon. The bitcoin community remains relatively small, and with so many of them hoarding bitcoins as an investment, they’re reluctant to spend them on, say, patio furniture or an Xbox One. But Byrne is taking the long view.

“It does not worry me. ‘Mighty oaks from tiny acorns are sprung,’ and all that,” he says, before adding that some people will spend bitcoin on his site simply for the “thrill of contributing to this change.”

Many have assumed that Byrne and Overstock are taking a big financial risk in accepting bitcoin because the price of the digital currency is so volatile — at least for the moment. Overstock might accept a bitcoin payment when the digital currency is valued at $1,000, the argument goes, only to see the value rapidly drop to $750, or less. In the beginning, though, with relatively few payments going through the site, the risk will be low — and all of it will sit with Coinbase, not Overstock.

Before each payment is made, Coinbase sets an exchange rate, immediately converts the buyer’s bitcoin into dollars, and transfers the dollars to Overstock. The retailer never holds any bitcoin.

‘It’s algorithmic trading. It hedges that exchange rate risk in the background, every day.’

Still, Coinbase — which recently received $25 million from big-name Silicon Valley venture capital firm Andreessen Horowitz — is confident it can minimize the risk by using software to carefully monitor price fluctuations. Coinbase runs a system that manages bitcoin transactions not only for businesses like Overstock but for about 750,000 individuals. Much as a bank like Goldman Sachs runs software to track price fluctuations as it juggles billions of dollars, Coinbase uses its hedging software to track all of the bitcoins it manages, deciding when to buy and sell bitcoins and adjust its exchange rate in an effort to minimize risk.

Goldman, where Coinbase’s Ehrsam previously worked, uses its software in an effort to make highly profitable trades, and Coinbase merely uses its system to protect its own position. But the inner-workings of the software are similar. “It’s algorithmic trading,” says Coinbase CEO Brian Armstrong. “It hedges that exchange rate risk in the background, every day.”

The Revolution Starts Here

In any event, Overstock has little to lose and much to gain, and Byrne believes the company’s move to bitcoin will have a knock-on effect, pushing other big online retailers, including Amazon, towards the digital currency.

Bitcoin, he says, can directly reduce the costs incurred by retailers like Overstock. Because the bitcoin system is driven by open source software running across thousands of machines around the globe and doesn’t answer to any one central authority, it’s a much less expensive way to accept payments than the major credit-card processors or PayPal. Yes, Overstock pays a fee to Coinbase, but Byrne says this is far less than what the company is paying to other processors. What’s more, bitcoin lets Overstock more easily and inexpensively accept payments from overseas, because bitcoin is available everywhere.

But Byrne sees an even bigger picture — one in which bitcoin provides new freedoms for the world at large, separating us from the whims and the flaws and the self-interests of banks and governments.

Many people remain skeptical that bitcoin can truly become a popular and reliable currency. Pundits like New York Times columnist and Nobel Prize-winning economist Paul Krugman believes the currency isn’t even a reliable store of value, much less a good means of transferring money from place to place.

But Byrne counts himself among the bitcoin proponents who see it as a currency whose value is controlled by people, not governments. That fits with his general worldview. As a philosophy student at Stanford, he studied the Austrian school of economics, which believes that our economy should rely on the judgments and choices of individuals, not a central authority, and he has long railed against what he sees as governmental overinvolvement in a precarious economy.

Like so many others, he says bitcoin is like gold. No government can devalue it simply by making more of it. “We want a money that some government mandarin can’t just whisk into existence with a pen stroke,” he says. “Bitcoin is that.” What’s more, it lets you store your money in a place that’s outside the control of big banks. “It just makes the world a better place,” he says. “It lets you get out of that world where you have to store your money with institutions you don’t trust.”

A bitcoin nirvana is still a long way off — if it ever comes at all. But, as Byrne says, you have to start somewhere. Mighty oaks, acorns, and all that.

This setup could ultimately undercut tiny Coinbase. Eric Posner, a professor at the University of Chicago law school who explores financial markets and other economic issues, says that the risk is similar to what businesses face when dealing with overseas currencies that can fluctuate with the dollar. “Importers and exporters have to deal with this all the time,” he says. But unlike with government-backed currencies such as the euro and the yen, there is no derivatives market to help companies hedge their bitcoin bets.

So, just minutes ago, Overstock started accepting bitcoin payments for everything it sells, from laptops and TVs to faucets and bar stools. Byrne believes this can ultimately boost the company’s bottom line, but that’s not his only aim. For Byrne, a rather opinionated libertarian who’s unafraid to take his company places others fear to tread, embracing the cryptocurrency is as much a political statement as a business decision. Like so many others, he believes bitcoin can free the world from the control of big banks and big government. “It helps us fight the machine,” he says.

Created just over five years ago by an anonymous computer programmer (or group of programmers), bitcoin entered mainstream consciousness this past fall, when U.S. government regulators seemed to give it their stamp of approval and its value topped $1,000 on popular exchanges. That shows a huge leap in demand, but many people are interested in the currency only as an investment — an asset whose value keeps going up. Overstock and Coinbase aim to turn bitcoin into a true currency that can be widely and regularly used to buy and sell goods and services.

The firm has chosen California-based online wallet and payment processing firm Coinbase to handle its transactions, in what must surely be a major coup for the company, which posted the following on its blog:

“This marks the largest retail Bitcoin implementation to date. For the first time ever, customers can purchase a wide selection of goods with bitcoins — from electronics to home accessories — from a trusted, branded vendor. We’re excited to serve as Overstock.com’s official digital wallet to facilitate all related transactions on their site.”

You can already use bitcoin to buy hard goods from a hodgepodge of websites, from computer-parts seller Memorydealers to general stores like BitcoinShop.US. You can pay in bitcoins when using online services like the popular blogging tool WordPress and dating site OKCupid. You can even buy stuff like burritos and sandwiches in real-world restaurants and shops. But Overstock, with $1.3 billion dollars a year in sales, is by far the largest operation to accept bitcoin.

Coinbase co-founder Fred Ehrsam, who oversaw the deal with Overstock, says the move is important simply because Overstock is such a recognizable name. We’ve all seen their ads on cable TV, which is something you can’t say about the 19,000 other merchants using the Coinbase payment service, a kind of PayPal for bitcoin. “You have to consider the mainstream nature of it,” Ehrsam says. “Generally speaking, bitcoin merchants have fed the tech-early-adopter user base. But Overstock is not about that. This is about as mainstream as it gets.”

About $10,000 worth of bitcoins from about 100 customers has reportedly already been spent since Overstock made the announcement just a couple of hours ago.

That said, Overstock is unlikely to see a huge number of bitcoin payments anytime soon. The bitcoin community remains relatively small, and with so many of them hoarding bitcoins as an investment, they’re reluctant to spend them on, say, patio furniture or an Xbox One. But Byrne is taking the long view.

“It does not worry me. ‘Mighty oaks from tiny acorns are sprung,’ and all that,” he says, before adding that some people will spend bitcoin on his site simply for the “thrill of contributing to this change.”

"Digital currency will be an important part of the future and Overstock is excited to be the first major online shopping retailer to accept it," Chairman and Chief Executive Patrick Byrne said.

Mr. Byrne added that because he "believes in limited government," bitcoin "attracts me because it is a form of money that no government mandarin can will it into existence."

Overstock's move to accept bitcoin comes as the virtual currency generates rising interest among consumers. The currency is "mined" using computer algorithms and swapped electronically among users for purchase of goods and services, or as an investment.

The price of one bitcoin has been extremely volatile of late, though Overstock on Thursday said it believes the currency is poised for broad consumer adoption.

Overstock is collaborating with San Francisco-based Coinbase.com to process the payments and handle the conversion of bitcoin to the dollar.






World’s First Insured Bitcoin Storage Service Launches in the UK

The world’s first insured bitcoin storage service has launched in the UK, with insurance underwritten by Lloyd’s of London.

Named Elliptic Vault, the service uses advanced “deep cold storage” techniques to secure its customers’ bitcoins. Deep cold storage involves the use of both strong encryption and secure physical locations.

Tom Robinson, co-founder of Elliptic, which is based in London, said:

“Securing your bitcoins involves implementing advanced encryption and even then you are still at risk of losing them. Elliptic Vault secures your bitcoins for you and is insured against theft or loss, so our customers can have peace of mind that their bitcoins are safe.”




Demand For Security




Within the past week, the price of bitcoin peaked at over $1,020. Given that the price was only £125 just three months ago, many people have amassed something of a bitcoin fortune.

Unfortunately, there have been a number of instances recently of people losing their bitcoins, either due to human error, or the interference of criminals.

In November, for example, James Howells from Wales realised he had sent $6.5m worth of bitcoins to landfill after throwing out a computer hardrive that contained the wallet files and private keys required to access his coins.

Other bitcoiners have seen their digital currency hoards disappear due to hackers breaking into the wallet services they use. In early November, Inputs.io suffered two hacks, which saw 4,100 BTC emptied from user wallets. Following such developments, many people are anxious to find somewhere secure to store their bitcoins.

“We know a lot of people are concerned about the security of their bitcoin holdings,” said Robinson. ”We are providing a service that will give people peace of mind that their bitcoins are safe and secure,” he added.

Currently, the service is aimed at those with a relatively large collection of bitcoins, with the minimum level of cover set at £5,000. However, Robinson said his company is aiming to reduce this as the product evolves.


Insurance Partner

Robinson said that, as a bitcoin company, Elliptic found it difficult to find an insurance underwriter to work with.

“Insurance is a conservative industry, where relationships matter. It took a lot of time, but we are now working with an underwriter that understands and is comfortable with bitcoin,” he explained.

Lloyd’s of London is a UK-based corporate body that was founded in 1688. It made a pre-tax profit of £2.77bn on £25.5bn of gross written premiums in 2012 offering insurance, reinsurance, and now life assurance.

CoinDesk has seen Elliptic’s Lloyds of London insurance certificate, so can confirm it exists, but can’t vouch for its authenticity or applicability.

Customers can choose the level of bitcoin insurance they require, specified in pounds sterling (although this service is available to those based both in and outside the UK). Users pay an annual rate of 2%, which is paid in bitcoin, in monthly instalments at the end of each month.

The insurance offered covers loss of bitcoins, whether caused by any negligence by Elliptic or due to theft by a third party.

If users have to make a claim, their bitcoins would be valued at the time of the claim, using the BTC/USD exchange rate on Bitstamp, and the GBP/USD exchange rate. Elliptic said it uses the BTC/USD exchange rate (rather than BTC/GBP), as the US bitcoin exchange market is the most liquid.







Previous Life

Robinson worked for some time on UK-based virtual currency exchange BitPrice, but was unable to bring the company to launch due to difficulties on finding a UK banking partner willing to go anywhere near a bitcoin exchange.

He has now changed the business model and rebranded the company as Elliptic. Elliptic Vault is the company’s first product, but it hopes to expand to offer a number of virtual currency-related services.

A Statement On The Elliptic Site Reads:

“Thank you for your support for BitPrice and of our mission to establish a fully-regulated digital currency exchange. We sincerely hope you’ll continue to support us as we move forward with a new name and new services. While an exchange is not Elliptic’s first service, we remain committed to achieving this goal.

Together with the digital currency community we continue to actively work with regulators and government, to ensure a sustainable future for digital currencies, both in the UK and globally.”

Robinson said he wants to create a “suite” of services that make digital currencies easier to use, more secure and more powerful.




GoldMoney Group Adds Bitcoin To Its Precious Metal Vaults







GoldMoney Group, one of Britain’s largest precious metal storage firms, has added bitcoin to the list of commodities it is willing to store in its vaults.

Established in 2001, the firm currently stores precious metals worth in excess of $1.4bn in secure vaults across five countries.

Today sees GoldMoney launch Netagio – a spin-off business that offers a cold storage solution for bitcoins. Cold storage is a form of offline storage where bitcoins are encrypted on storage devices and placed in secure vaults.

Pros And Cons

Security is the most obvious benefit of cold storing bitcoins with Netagio, as your bitcoins will be safely tucked away behind a few layers of encryption and physical security.

This might not be the best solution for speculators and those who require access to their bitcoins on short notice. However, Netagio will also allow users to freely access a few bitcoins if they happen to need them.

Even this service places an emphasis on security. It features two-factor authentication and users can set it up in such a way that their accounts can only be accessed from user-defined locations.

The service is free and you can check out the Netagio website for additional details. Simon Hamblin, managing director at Netagio, said:

“We are the only bitcoin wallet service in Europe to offer this type of free offline storage service, involving military-grade hardware, levels of encryption to give our customers comfort and security, all [...] backed by a reputable company who you can trust.”

He added: “Being a part of a larger established group that has a heritage in the dealing and safe-keeping of precious metal since 2001 makes it one of the most compelling storage offerings in Europe.”

Hamblin thinks cryptocurrencies have a future, but pointed out that they remain risky at this point. In any case, GoldMoney wants to let people to buy, store and sell digital currencies, regardless of whether they succeed in the long run. As Hamblin puts it: “Bitcoin might be the one, it might not be the one.”

UK Competitors

Netagio isn’t the first cold storage service to hit the market, nor is it the first of its kind in the UK. Elliptic Vault made headlines when it launched last week, underwritten by Lloyds of London.

Elliptic is planning to create a full suite of digital currency services that should make them more secure and easier to use.

At this point, however, both companies are offering what can only be described as niche service for people who cashed in on bitcoin and don’t plan on cashing out anytime soon.


Monty Henry, Owner














Some of Our Latest Articles:


Mixing Services Add Complete (NSA-Proof) Anonymity To Bitcoin Transactions






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