The majority of bitcoins in circulation aren't used for actually buying stuff. A Bitcoin entrepreneur is looking to change that with Bitcoin Black Friday, a set of deals offered to users of the world’s most famous cryptocurrency the day after Thanksgiving.
It's the second such event organized by Jon Holmquist, currently a community liaison at digital-payment startup Ripple Labs. Last year, he held the event—then known as Bitcoin Friday—on November 9, a second anniversary of sorts for Bitcoin, and a moment when many people were first realizing that most bitcoins were just sitting in digital wallets.
“With news reports of 78% of bitcoins not being spent, we need to do something,” Holmquist wrote last year in a Bitcoin forum. Seventy-five merchants participated in the event. This year, Holmquist moved the event to Black Friday to encourage a larger turnout.
"We wanted to show Bitcoin is going mainstream," said Holmes Wilson, co-founder of the Internet advocacy group Fight for the Future, which is also backing Bitcoin Black Friday. "Black Friday is the biggest shopping day of the year and it's a great way to start."
Second Time’s A Charm?
Last year, the most prominent participants were themselves Bitcoin businesses or other niche concerns such as providers of DSL services. This year, more than 500 Bitcoin-accepting merchants are supposedly poised to join the event, at least according to a Bitcoin Black Friday press release.
At the moment, though, there aren't anywhere close to 500 merchants listed on the Bitcoin Black Friday site—on Tuesday, I counted 19 companies with deals and 12 charities accepting Bitcoin donations (Update: there are now over 275). But the company roster does include a few more recognizable names than last year—outfits such as Reddit, CheapAir.com (which bills itself as the world's first online travel agency to accept Bitcoin), and Gyft, which offers gift cards to mainstream retailers like Amazon and Target.
Of course, some of these retailers may be offering similar deals for customers paying in dollars. Bitcoin users, for instance, can get $10 off flights booked on Friday at CheapAir.com by using a coupon code; the airline is also currently running a $10 off coupon promotion for all users through November 30.
Theoretically, Bitcoin should be cheaper for merchants to handle, which at some level might translate into discounts or lower prices for users paying with the cryptocurrency. Bitcoin transaction fees are usually a fraction of a cent, and sometimes even zero. Credit cards typically skim merchant fees amounting to 3% to 5% of transactions, which retailers usually account for with higher prices.
It's not clear how often retailers' Bitcoin savings actually translate into savings for buyers, although it does happen in some cases. Gyft, for instance, currently offers Bitcoin users extra "Gyft points" equivalent to 3% of their purchase price; those points can be turned into discounts on future purchases.
Unlocking The Bitcoin Wallets
But the big question is whether Bitcoin Black Friday will have a lasting impact on the Bitcoin economy. The majority of bitcoins are still hoarded, researchers from the University of California-San Diego and George Mason University recently determined. A full 64 percent have never been spent; many have probably been lost by their owners. And roughly 60 percent of the bitcoins in circulation are spent at the gambling site Satoshi Dice.
Furthermore, a single bitcoin is now worth nearly $900. When the price of your bitcoin rises every day you don’t spend it, why would anyone who believes in Bitcoin choose to part with it?
Holmquist insists that these concerns are nothing new, and parallel the skepticism Bitcoin Friday faced last year.
“Before Bitcoin Friday, in early 2012, people were wondering whether Bitcoin could even exist as a currency, whether people would ever spend their hoarded bitcoins,” he said in a press release. “Last year’s wildly successful event alleviated those fears.”