Jonathan Johnson is the chairman of the board of Overstock and the president of Medici Ventures, the Overstock subsidiary focused on advancing blockchain technology in financial systems and beyond.
In this entry for CoinDesk’s “Bitcoin Milestones” series, Johnson discusses his involvement in Overstock‘s decision to become the first major US merchant to accept bitcoin, and the influences that led it to kickstart what would be a frenzy of bitcoin activity in the retail industry.
Sometime in early 2013, my high school-aged sons began asking me when Overstock would accept bitcoin.
At this time, I was the president of Overstock and, I sheepishly admit, it was the first I’d heard of bitcoin. I began studying bitcoin and watching how it was used. Unbeknownst to me, my business partner, Overstock CEO Patrick Byrne, was doing exactly the same.
In particular, he was watching how bitcoin was being successfully used around the world after the Cyprus bailout and studying its underlying blockchain technology.
Toward the end of the year, the two of us began to talk about bitcoin…
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As bitcoin interest and adoption grew, we saw technological, capitalistic and philosophic reasons to offer our customers a secure, decentralized, immutable way to buy products. In December 2013, wanting to make it possible for bitcoin users to purchase products from us, we included our senior management team in the discussion.
And the team quickly decided bitcoin as a payment method was a good idea.
Because Overstock had lots of projects in the queue, we figured Overstock would get to coding the bitcoin project sometime during the first half of 2014. But, as news of this decision spread throughout the company, 40 of our best developers, all eager to be involved in the bitcoin project, wanted to speed it up.
“Why take six months? This is a big deal,” they said.
Our developers volunteered for immediate duty.
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Straight away, we formed a team that began work the week between Christmas and New Year’s.
Wanting to be undistracted and uninterrupted, the team locked themselves in a room (and asked that pizza be slid under the door) so they could work on integrating the technology into our website.
(At Overstock, we often create special project teams and give them their own “war room” so they can focus on the project.) This was just such a case.
The team was singularly focused on the project over the holidays. They were bitcoin believers and it showed in their dedication to the project.
After just two weeks of hard work, on 9th January, 2014, Overstock became the first major retailer to accept bitcoin.
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The buzz among the bitcoin community was huge. The press was quick to tout our pioneering action. Bitcoin holders came to Overstock in droves to purchase products.
In the following weeks and months, Patrick and I were asked to speak about bitcoin and why Overstock decided to accept the cryptocurrency.
While the decision to accept bitcoin seems like an easy and smart one, in retrospect, there were a number of factors that led our team to conclude an alternative currency was a good fit for Overstock.
Overstock is a technology company at its core. We built our brand around leveraging technologies to provide our customers with the best possible shopping experience. Because of this, we constantly experiment with new technologies across a variety of applications.
Bitcoin was no exception. As we began to better understand bitcoin’s underlying technology – the blockchain – it was clear the decentralized and distributed infrastructure allowed for almost no possibility of exploitation. That, when combined with the immutable nature of the ledger, provided a level of security and transparency never before seen in a currency.
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When we began accepting bitcoin, we accessed a new demographic of customers with plenty of bitcoin to spend, but few places to spend it.
The bitcoin community is a loyal and engaged one, and we believed they would return Overstock’s faith in the currency with continued patronage. We were right.
Fiscally, the decision made a great deal of sense, too. We eliminated credit card transaction costs on bitcoin purchases, thus increasing our profit within the tight margins of e-commerce.
Bitcoin still combines the convenience, transparency and security of an online-based payment method with the virtues of a currency that has a finite supply of infinitely divisible units and predictable growth patterns. This duality supports our belief that a limited government, without the power to create currency at will for self-sustaining purposes, is the best business model for any nation.
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While you might not hear much about its retail use cases anymore, Overstock still accepts bitcoin.
The digital currency’s non-governmental nature still allows for easy global adoption, leading to efficient trade between individuals and companies without the cumbersome currency exchange processes and costs.
Just as the internet allowed the world the freedom to communicate across borders and cultures, bitcoin and other non-governmental cryptocurrencies allow the world the freedom to trade goods in much the same way.
Other retailers and industries soon followed our lead and the public began to see bitcoin less as a fringe idea and more as a safe, globally accessible way to purchase goods and services from reputable organizations.
While bitcoin is responsible for less than 1% of our annual revenue, our experience integrating it with our website allowed us to understand the true potential of blockchain technology.
In late 2014, we went so far as to create Medici Ventures, a subsidiary company focused on developing and advancing blockchain technology.
Today, you can use bitcoin to pay for everything from a computer to a vacation to college tuition.
And, it all started with saying yes to accepting.
Boxes image via Overstock.com