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on January 15, 2014 at 8:15 AM, updated January 15, 2014 at 9:33 AM
Email the author | Follow on Twitter
on January 15, 2014 at 8:15 AM, updated January 15, 2014 at 9:33 AM
At David's Antiques on Royal Street in the French Quarter, the owners revel in the irony of running a store that sells old-fashioned relics using one of the most newfangled technologies to take payments, the digital currency Bitcoin. The 60-year-old shop began accepting Bitcoin, a subject of much recent media attention, in April, making David's one of few small businesses in New Orleans participating so far.
Sharona Edry, whose family owns the shop, is a Bitcoin enthusiast. The store carries souvenir Bitcoin doubloons, money clips, cufflinks and lapel pins. The sign on the door announcing the store's receptiveness to Bitcoin and listings on Bitcoin retailer directories have attracted people who embrace the currency, Edry said.
"They were excited because they bought something physical," Edry said. "We get people once an hour commenting on our sign."
Like other business owners, Edry said the appeal of Bitcoin comes from a lack of credit card fees, cash-like properties that prevent charge-backs the store faces when customers later call credit card companies to stop payments on purchases, and international uniformity. "A Bitcoin is a Bitcoin, all over the world," said her mother, Ester Edry.
Bitcoin, made from nuggets of data and a bookkeeping network created by an anonymous entity called Satoshi Nakamato, has been a subject of media fascination, including an announcement that online retailer Overstock.comstarted accepting it, news that the Chinese government cracked down on it and coverage of wild price swings as speculators made bets on its rise or fall.
Supporters say it provides freedom from government and corporate control of money, transparency with its publicly viewable ledger allowing all users to watch the movement of Bitcoins between accounts, resistance to inflation with a plan to allow a finite number of Bitcoins to circulate and simplicity as a system with minimal fees and differences across borders.
Critics worry it is vulnerable to fraud, gives cover to illicit operations such as drug trafficking and suffers from instability. An economist writing in the South China Morning Post called it "a Ponzi scheme masquerading as a futuristic currency."
For Sharona Edry, Bitcoin factors into a small portion of her sales, but she hopes it will grow as a financial mechanism with less friction than traditional money.
"We just really support the system," she said. "We think it's a cool thing to do. Since the world is getting so small, we're getting to the point where we need to have one currency, maybe."
Another early New Orleans Bitcoin adopter is the Bywater restaurant Booty's Street Food, an eatery based on co-owner Nick Vivion's experiences as a travel journalist tasting food from street stalls around the world.
"The average customer doesn't understand how much we pay in credit card fees," Vivion said. He said the fees eat about 2 percent of revenue, which makes a big difference in a business where profit margins are typically 5 percent.
"And it's so complicated," he said about working with credit card companies and their varying systems. Of Bitcoin, he said, "It's much cleaner and simpler."
The way a Bitcoin transaction looks at Booty's Street Food, and similarly with other vendors, is that customers with access to Bitcoin "wallets" on their mobile phones scan a printout of a Quick Response code from the restaurant, which prompts the network to send money from the customer's online Bitcoin tally to the restaurant's line of Bitcoins. The QR codes are the square images with blocky patterns conveying data people scan using cameras on phones; they are bar codes for the smartphone era.
Vivion said the system has one drawback in that it takes about 10 minutes for the sale to appear in the restaurant's account, which could be too late to correct a problem if a customer has left. Another complication is that wide fluctuations in the price of Bitcoins mean units the restaurant holds could jump, or plummet, in value. Vivion said the restaurant has to hold coins as a side investment and not rely on them to cover everyday expenses.
With six to 10 individual sales using Bitcoin in the first month or so, Vivion said, the currency represents a fraction of the restaurant's business.
"This is more of an experiment," Vivion said. "The value is fluctuating so much. You have to accept the volatility."
He said it serves as a conversation piece. "It always helps to do things that people are interested in, that they talk about."
Vivion, along with other supporters, said he hopes wider use of Bitcoin will help stabilize the currency by moving it beyond the role it seems to serve so far as an instrument for speculators.
The experiment also is ongoing at an Uptown shop called Homestead that models itself after a vintage general store selling an assortment of products including wallets, bags, clothing, soaps, candles and flasks, where co-owner Rob Hohne embraced Bitcoin for the practical reason of avoiding credit card fees but also as an intellectual exercise. He studied economics in college.
"It's always fascinated me, just the concept of digital currencies, crypto-currencies," Hohne said. "I have a lot of interest in money and value and currencies."
At his store, which opened in October and started accepting Bitcoin in November, customers can buy items using their smart phones to scan a Bitcoin QR address on the store's iPad, so it's a device-to-device interaction. Hohne said he uses a mobile application for processing Bitcoin sales that yields a prompt result, avoiding delays such as those described by Vivion at Booty's Street Food.
"Part of the allure of Bitcoin is the transaction costs are almost nothing," said Hohne, who described credit cards as dinosaurs ill-suited to Internet commerce. "The technology of credit cards, it's just the Apple IIe of money."
So far, Homestead has made a handful of sales using Bitcoin, including a few international sales. The main interest seems to come from Bitcoin devotees. But if digital currency can achieve wider adoption, Hohne sees it as a great potential benefit to small businesses looking to operate efficiently using easily the accessible technology of mobile computing devices.
"I'm very bullish on the concept," Hohne said. "I think it's a little speculative still."
Another retailer accepting Bitcoin, a French Quarter shop called Queork that sells bags, shoes and accessories made from cork as wine makers turn to other materials for plugging bottles, has found the experiment uneventful.
Co-owner Amanda Dailey said nobody used Bitcoin to make a purchase after about two months of availability at her store. She said the currency could help simplify international sales she conducts online. But she said she hasn't promoted Bitcoin at Queork, and she thinks the currency won't be useful to retailers if it remains mostly a speculator's game.
Geoffrey Smith, visiting assistant professor of finance at Tulane University, described Bitcoin as an "alternate means of storing value" that investors are using as a hedge against the dollar. He said it needs more stability, but he thinks it has potential to catch on, particularly because of its inflation-fighting finite supply.
The system is expected to create 21 million Bitcoins and then stop issuing more. The coins often are traded as fractional units. The web sitesbitcoinexchangerate.org and bitcoincharts.com reported Wednesday morning that one Bitcoin translated to about $830.
"People can use anything as currency," Smith said. "In jail, people use cigarettes."
"There's nothing special about paper with green ink," and nothing wrong with competing currencies, he argued. "It's based on faith that it has value."
Merchants around Louisiana also are beginning to accept Bitcoin. And state regulators said they expect to treat it the same way they do foreign currencies for tax purposes.
Another Tulane faculty member, Casey Slaughter Stanton, an adjunct professor of marketing, has been playing the Bitcoin market personally and following developments with the currency, although not shopping with Bitcoins.
Stanton described the case of Silk Road, a web site the federal government shut down last year after accusing it of being a drug-dealing conduit that transacted its business with Bitcoin.
"The potential for fraud is limitless with it," Stanton said. But he said the idea of an updated form of money also is intriguing.
"It's a risk," he said. "But it's also kind of what we need. We need people who are willing to take risks."
