VOL. 37 | NO. 52 | Friday, December 27, 2013
Bitcoin payments take Flyte: Online currency gains a foothold here as popular restaurant, other businesses cash in
By Joe Morris
When Flyte World Dining announced it would be add Bitcoin as a payment option, there were two responses: Tech types were intrigued, and everyone else wondered “what’s a Bitcoin?”
Those in the latter group can be forgiven since that very question was among Google’s top searches of 2013.
Here’s a quick primer:
Bitcoin is an experimental, decentralized currency using peer-to-peer technology to operate, with no central banking authority. The network manages transactions and issues coins, and Bitcoin itself is an open-source design.
It is often referred to as crypto-currency, since it relies on cryptography to create and transfer funds, rather than a central authority like a bank.
Paul Krugman, the 2008 winner of the Nobel Prize in Economics, described Bitcoin in his New York Times column this week as “a digital currency that has value because ... well, it’s hard to say exactly why, but for the time being at least people are willing to buy it because they believe other people will be willing to buy it.”
So, basically, Bitcoin is online money. And while many continue to write it off as a fad, there’s real money being generated.
This year, Bitcoin moved much more mainstream and made a pile of real wealth for people such as the Winklevoss twins of Facebook [lawsuit] fame. They got in on Bitcoin early.
Last January, a single Bitcoin cost $13, and over the next 12 months it roared up to $1,200 and, even though the price has dropped some, remains in the hundreds of dollars.
That volatility may keep Bitcoin from more widespread use now, but there will be more adopters in 2014 as the online currency finds broader usages, predicts Bill Butler, a tech entrepreneur who operates MusicCityBitcoins.com, a site devoted to sharing Bitcoin news and getting Nashville businesses interested and on board with the technology.
“We’re just serving as an advocacy group, and hope to educate businesspeople about what Bitcoin is and why they should consider adopting it,” says Butler, who’s worked on many area Internet startups, including Telalink, and which began following Bitcoin a year ago.
“There are so many tools coming out that make it easier to use, so I do think we’re going to see more adoption because it’s a compelling way for businesses to take payments.
To his way of thinking, Bitcoin might be superior to credit card transactions.
“If a business uses Visa or MasterCard, they deal with an outside company that can either accept or deny their ability to accept a payment, and they also are going to charge you 2.75 percent or slightly lower,” he says.
“With Bitcoin, you can either opt not to pay anything in terms of a fee or pay a 1 percent charge in order to have the Bitcoin converted to U.S. dollars immediately so you lessen the risk of volatility.”
That slight add-on may be worth it, he explains, because “a $10 drink with Bitcoin right now may be worth $11, or $9, in a couple of minutes.”
Other bonuses, he says, are the peer-to-peer aspect of it, so there’s no waiting period for a batch of sales to clear an outside entity, and that all sales are one-way, so there’s no risk of a customer denying a charge after the sale.
“A merchant can initiate a refund, so if you’re honest (and) there’s a problem, you can take care of it,” Butler says.
“But you’re not going to have someone buying something, and then claiming there was a problem. Some people see this as a plus, others a minus, for obvious reasons.”
For Flyte co-owner Scott Sears, whose tech credentials include Telalink and Emma, the decision to give Bitcoin a try at the restaurant is an effort to provide customers with a new payment option.
But, he adds, he made sure protections were in place for his wait staff, whose tips could be affected by the currency’s volatility.
“I really haven’t spent a lot of time following Bitcoin, but Bill [Butler] has,” Sears says.
“We’ve got a long history of working together, and so when he brings something to my attention, I’m going to look at it closely.”
Like many people, what he’d heard about Bitcoin had been mixed. But it dawned on him that if it was still around and that people were using it as an investment vehicle, then it might also have a future as legitimate currency.
“We discovered that it doesn’t have the anonymity that it was purported to have,” Sears says.
“Cash is the most anonymous form of payment, and this is actually fairly secure. There’s a ledger there for all to see, and that kind of public visibility is interesting to me.”
Because Flyte isn’t in the business of investing in currency, he wanted to focus on how to accept payments and then convert Bitcoin to dollars quickly and effectively.
Butler helped engineer that process, which is not integrated with Flyte’s point of sale system but runs to the side with converted funds being treated as cash at night’s end.
“There’s enough evidence that the transaction took place to make the staff feel good about having been paid, and for the business itself to have an accounting of,” he says.
Sears’ background in technology means that he’s got an eye out for who in the Nashville area tends to be an early adopter.
When he saw some of these tech-savvy types dipping their toes into Bitcoin, that further cemented his interest in taking part. It also led to a somewhat unexpected public-relations push.
“A lot of people follow our Twitter feed, and so far this has been the biggest Twitter campaign the restaurant has run to date,” he says. “And as for actually taking Bitcoin, so far, so good.”