For the past few years, people have been speculating as to when Amazon might begin accepting Bitcoin for payments. There are even some nifty work-a-rounds that allow you to make purchases from Amazon using bitcoins such as zinc or eGifter. However, these require a bit of effort and don’t offer the seamlessness of paying Amazon directly. Overstock.com, whose CEO recently made big news has even said Amazon will eventually start accepting bitcoin. It seems almost inevitable.
Let’s consider some numbers. Right now Overstock.com claims to be doing $20-$30k in Bitcoin based sales everyday. To put this in perspective, Amazon makes some $200 million in sales daily (though I’m unsure how much of this is for retail versus services). Even if Amazon were to garner a respectable $1 million in sales per day, it only represents 1/2 of 1 percent of Amazon’s entire sales. It certainly doable but not a big incentive for Amazon at this point unless they think they can garner additional sales volume by accepting bitcoin. That being said, I believe it is highly likely that within the next year, unless some catastrophic event occurs in the bitcoin community (no Mt Gox was not catostrophic), that Amazon will begin accepting bitcoin. It has to be on their radar at this point.
Two things are going to happen when Amazon does this
1) The banks and card associations are going to wake up. At this point many bankers are aware of bitcoin but do not view it as a threat. When Amazon starts accepting it, they will realize that this is serious and will move to counter it. Expect competition in transaction fees to drive down merchant rates.
2) Bitcoin will no longer be able to be regulated out of existence. Don’t get me wrong. The regulators will continue to push for more and better oversight but once Amazon is on board, any call for making bitcoin illegal won’t have a snowball chance in hell of passing. It will have reached enough mainstream acceptance and integration into the economy to warrant the “too big to fail” mentality. Shutting it down will create a crushing blow to the economy and no legislator will risk that.
Today I get to talk about two of my favorite topics: Bitcoin and the Zombie Apocalypse. Though both have entered popular culture, unfortunately only one is real. But there is a real phenomenon very closely related to the day of the dead that has relevance to the Bitcoin community.
That phenomenon is a pandemic.
A pandemic is an epidemic infectious disease that spreads far beyond a small localized population to infect whole countries, continents or even the globe. Why is this relevant to Bitcoin? Well Bitcoin is very well situated to survive a pandemic which affects large population. The decentralized and diverse nature of the ecosystem makes it extremely resilient to distribution. As long as the base network persists and at least one mining operation continues, Bitcoin will remain an effective value transfer system.
However, there are two Achilles heels. The first is that many Bitcoin users don’t interact directly with the Blockchain but rather go through a service which monitors to the blockchain for transactions. Whether it is a hybrid wallet or a payment service like BitPay or Coinbase, if these company’s servers go offline, it effectively cuts off their customers from the network. As we have seen to date (with the implosion of so many Bitcoin businesses), they are ill prepared for the significant risks they are undertaking.
Major financial institutions are subject to guidelines published by the FFIEC, including business continuity planning for pandemics. I would be willing to bet that even the most solid names in Bitcoin don’t have a good business continuity or disaster recovery plan.
The second issue Bitcoin has is the need for all transactions to occur online. While fully offline digital currency is not efficient nor realistic, a hybrid approach which has some offline capablities is important in a world that might have spotty internet service, electricity or intelligent devices. While a few people have tried to move Bitcoin offline by producing tokens with private keys embedded behind holograms, its a jerry-rigged and not very good method of creating offline money with Bitcoins. I do hope to change that.