To get to Patrick Byrne’s house in Utah, one will drive by snow-covered trailers and the rusted-out trucks from which they’ve been unhitched. Overstock’s CEO does not live in a glamorous neighborhood. So when he opens his own garage to reveal two Teslas “gassing up” on their electric pumps, the contrast is jarring. The newer black one is the Model S and the older silver one is the Roadster, Tesla’s first $109,000 offering which Byrne bought as soon as it came out five years ago. His tall frame doesn’t fit in the small car unless he has the roof off. “I can only drive it three months of the year,” says Byrne, 51.
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Such is the pain of being an early adopter of technologies still working out their kinks. The latest to catch the libertarian-at-heart’s eye, and wallet, is Bitcoin. Overstock famously started accepting Bitcoin in January. The Bitcoin community was thrilled to have a big-name retailer start accepting their five-year-old digital currency and rewarded the site with orders. In just a month, the site that sells everything from furniture to jewelry saw $870,000 in sales with “almost 4000 orders.” The most popular items among Bitcoin buyers were, oddly, sheets, followed by computer equipment and cell phone accessories.
Byrne says that an offhand remark to a reporter in December about the site potentially taking Bitcoin led to massive press for Overstock, which resulted in a mad rush to get the payment system up and running as soon as possible. Thanks to Bitcoin payment processor Coinbase flying an employee to Salt Lake City to work with Overstock and “locking 40 people in a room for a week,” the site’s experiment was live months earlier than they had vaguely planned. And Byrne’s interest in the cryptocurrency was piqued enough that the gold bug cashed in “several million dollars worth” of the gold he was holding (for the inevitable zombie apocalypse/U.S. financial failure) to convert it to Bitcoin. He’s emphatic about that happening at the end of January, after Overstock started taking Bitcoin, to fend off anyone who might accuse him of pumping up the currency’s value for his own sake.
“I’m holding it like I hold gold. I want a robust safety net as things play out. I’ve always had misgivings about fiat currencies. Gold was the answer but it doesn’t translate as well in the digital age,” he says. Bitcoin would certainly be easier to carry around and spend after the apocalypse, though his gold holdings are still larger than his Bitcoin.
Byrne is reclining on a comfortable piece of furniture he calls the opium bed next to the fireplace in his snow-surrounded wooden cabin, which he rents rather than owns. The beads hanging in a doorway and the smell of incense give the place a New Age feel. Two cats rescued from a barn, one eyeless, wander the home in jeweled collars, while horses wander the backyard. The son of businessman Jack Byrne who headed Geico, Byrne grew up in Vermont and lived for a time in California. He says he chose Utah as his headquarters for the quality of life: “Biking, camping, climbing, Moab are all at my doorstep.”
Byrne made his millions as “e-tail’s undertaker” snapping up merchandise from failing dotcoms during the tech bust and selling it on the cheap. The company’s low 2-3% profit margins on sales were part of the appeal of Bitcoin, eliminating the cut taken by credit card processors. The company does still pay Coinbase an undisclosed fee to convert their Bitcoin to U.S. dollars but it’s lower than what credit card companies charge. Overstock is now going to pass some of those savings along rewarding Bitcoin shoppers with 1% on their spending. They’ll get $1 back in “Club O bucks” when they spend $100 worth of BTC.
“I want to be able to pay vendors and employees in Bitcoin too if they choose,” says Byrne. “I’m doing this because I want to further the cause of Bitcoin.”
And not just Bitcoin, but all stateless cryptocurrency. Byrne says he wants to accept other alt-coins, such as Litecoin, as soon as cryptocurrency payment processors add them to their rolls. Representatives from Coinbase and Bitpay said they have no plans to do that anytime soon.
It’s fair to say that Byrne has an eye for recognizing opportunity in new technologies, but like his first Tesla, Bitcoin still has kinks. This month has seen its value decline as Bitcoin exchanges experienced problems around a “malleability bug;” Tokyo-based Mt. Gox halted withdrawals because its customers were able to make double withdrawals by exploiting the bug. Critics said Mt. Gox could have coded around it, but these are the growing pains of a new technology.
On top of that, there have been a slew of Bitcoin-related criminal indictments of late, mainly for money laundering. “There are dodgy characters in Bitcoin,” says Byrne. “But there are dodgy characters in cash too.”
Byrne thinks Bitcoin’s security features will outweigh this. “I don’t want my credit card details with 100 different sites,” says Byrne. “Neither does anyone else.”
Famous for his criticism of naked short selling, Byrne says he is very interested in a Bitcoin version of the stock market, where settlement goes through the blockchain meaning you would have to prove ownership of a security to be able to sell it. It would be his “dream come true” if shares were issued in a Bitcoin-like blockchain and transfer of them happened as it does with the virtual currency. The use of the Bitcoin protocol to prove ownership of anything from car titles to shares of stock is one of the “bigger picture uses” its supporters are trying to popularize.
Byrne says he tuned into cryptocurrency reading science fiction books such as Snow Crash and Black Swan, science fiction books. He was also open to it as a long time “little l” libertarian, and someone who had studied computation theory in his Stanford days. Like many early Bitcoin enthusiasts, Byrne is attracted by the idea of having a financial option outside of state control. He’s extremely critical of the Federal Reserve’s policy in recent years, saying the country needs “chemotherapy” to recover from the decades fiscal problems.
“We are on a crazy strategy with our central bank,” he says. “It’s good to have alternative ecosystems. It’s not that the dollar will go away, but we need other options if it crashes or wildly inflates. I don’t think we ever got out of the recession. We’ve been reinflating the bubble and calling it recovery.”
When you hear Byrne talking like this, you realize that for him, taking Bitcoin at Overstock isn’t just a publicity stunt to get attention. He is a true Bitcoin believer.
“We want enough people adopting Bitcoin for a robust infrastructure,” he continues. “It’s an act of patriotism. It gives the country a robust parallel system.”
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