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Wednesday, Aug 20, 2014
Business News

Early local boosters embrace Bitcoin

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Published:   |   Updated: May 4, 2014 at 09:25 AM

— Flamestone Grill restaurant founder Nick Pappas loves gadgets and technology.

“It's my passion, other than the restaurant business,” he says.

So when he heard last year about the digital currency known as Bitcoin, he investigated and decided to buy a unit, which was trading online for $20. The value now is at about $500, after spiking in 2013 to more than $1,000 apiece.

Betting that using bitcoins for everyday transactions eventually would become commonplace, Pappas in February began accepting it for payment at Flamestone. He has since had two customers purchase two $50 gift cards each.

“If the customer wants to pay that way, why not make life easier for them?” he said.

Founded in 2009, Bitcoin is a digital payment system that has its own currency but no central body of control, unlike PayPal, which uses U.S. dollars and other official international currencies.

Without centralized management, Bitcoin's valuation can fluctuate according to its buyers and investors. The total worth of all bitcoins is estimated at about $3.5 billion.

Businesses are attracted to accepting Bitcoin transactions because they can be used in lieu of credit or debit cards but without fees charged per transaction.

But many are leery of security issues. To insulate their investments, Bitcoin investors can use third-party exchanges such as the San Francisco firm Coinbase to buy and sell at current market rates for a fee of about 1 percent of the valuation.

But exchanges have been susceptible to security breaches. Hackers attacked the Mt. Gox bitcoin exchange in Japan, causing a loss in value of 6 percent of all bitcoins in circulation.

Security concerns prompted Chris and Kell Egbert of Wave Unified Communications in Citrus Park to use Coinbase as an exchange for any bitcoins they might receive as payment in the future for their Web page design, social media and search engine optimization consultation services.

They have yet to attract any bitcoin-using clients, but they did decide that for future transactions they will cash out immediately to dollars rather than keep the profit as bitcoins.

To further insulate Wave, the Egberts opened a second, separate bank account to pair with Coinbase so that no major funds could be accessed if hackers bypassed any security checks. Chris Egbert said the two-tiered system was intended to provide a financial firewall.

Announcing that the company was accepting bitcoins provided a marketing boost of sorts. Search engine results showed that visitors to their site were searching for early-adopting local businesses that accept the currency.

“There's no question that there's a marketing aspect to it,” he said. “Anything that is a differentiator gives you a competitive advantage.”

Although adoption by Tampa area businesses has been relatively slow, the Bitcoin topic has generated enough interest for a Meetup group to gather monthly to discuss issues related to digital currency.

Matthew Branton of Tampa, who organizes the meetups, started a Bitcoin-related business nine months ago called Coinlock, a “content selling platform for the Bitcoin ecosystem. We want to make it easy for the entire world to sell anything and make Bitcoin.”

Branton became aware of Bitcoin four years ago but didn't use it actively until two years ago. He said businesses will be reluctant to accept Bitcoin until there is consumer demand.

Topics covered by the Meetup group include discussions of digital currency, how to invest it and how to use different applications.

“Most of the people we see now are technologists, like it was during the early Internet in 1992 and '93,” Branton said. “Like the Internet, it will take awhile for the technologists to use it and understand it before you can commercialize it.”

He predicted it will take years before consumers use Bitcoin easily or understand what the currency's potential is.

“You can make a direct payment to someone in Kenya the same way you can pay for coffee in a local Starbucks,” he said.

 

jhouck@tampatrib.com

(813) 259-7324

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