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Bitcoin virtual currency a reality for one Tampa Bay restaurant (w/video)

Nick Pappas is the kind of guy who waits in line overnight to buy the latest iPhone.

He likes bonding with other gadget geeks. With every new product, he sees new opportunity.

So when he started hearing about bitcoins, he was intrigued. A digital payment system that doesn't go through a bank or a middleman sounded revolutionary and made sense.

Pappas monitored the bitcoin market as the value fluctuated sharply, from $100 to $1,100 per coin, based on the latest news about the virtual currency. When the price hovered around $400, he bought two bitcoins from Coinbase, a San Francisco-based digital wallet company for buying and paying with bitcoins.

A month ago, Pappas started accepting bitcoins at his Flamestone American Grill in Oldsmar, becoming one of the first Tampa Bay businesses to test the virtual money. Instead of using a credit card to buy a gift card online, customers can pay with bitcoin.

So far, only one customer has used a bitcoin, but the novelty has gained Pappas a lot of attention from people curious about how the currency works. Eventually, Pappas hopes to offer it at his other restaurant, Besa Grill in Clearwater, and expand it to purchases made in the restaurants.

I give Pappas a gold star for taking a lead on this innovative, yet controversial, type of currency that, ultimately, could change how we buy things online.

Bitcoin has been around since 2009 as a fast way to make payments worldwide without the 2 to 3 percent transaction fee charged by credit card processors or PayPal. People can buy it through a private exchange or create it by completing a super complex mathematical algorithm — a bizarre process known as mining.

Bitcoin was thrust into the spotlight last year when its value spiked and the FBI seized millions of dollars worth of bitcoins from an underground drug website called Silk Road. Then, in February, Mt. Gox, once the world's biggest bitcoin exchange, filed for bankruptcy protection in Japan, saying it may have lost nearly half a billion dollars worth of the virtual coins due to hackers.

A few weeks ago, the Florida Office of Financial Regulation dove into the debate by issuing a consumer alert about bitcoins. Regulators warned that buying and trading the currency posed a risk because it isn't regulated by a bank or government and isn't insured against losses.

Supporters consider such action an inevitable obstacle for a system still working out the kinks. But its appeal to cost-conscious merchants and consumers is broad.

Pappas believes it's the way of the future and, for now at least, a good investment. "It's easy to use, instantaneous and takes the middle man out of buying anything,'' he said. "It could become another PayPal.''

He plans to hold onto any bitcoin payments, rather than convert them to cash. Each payment represents a percentage of bitcoin, rather than a dollar amount. A $50 gift card, for example, is about one-tenth of a bitcoin.

Pappas doesn't expect to gain a lot of business from bitcoins but sees huge potential for restaurants and retail businesses.

Overstock.com made recent headlines when it became the first major retailer to accept the virtual currency as payment. In the first few months, more than 4,000 customers paid for more than $1 million worth of goods with bitcoin, a tiny fraction of overall sales but impressive given the short time frame. Especially notable was that more than half of the bitcoin shoppers were new to the household goods' website.

Overstock's CEO Patrick Byrne has described bitcoins as "digital gold'' and anticipates Amazon and other retailers will follow suit in order to stay competitive.

There's no word yet whether Jeff Bezos will starting accepting bitcoin on Amazon, but many people are watching closely. If he does, you can be sure bitcoin will show up in a lot more digital wallets.

Susan Thurston can be reached at sthurston@tampabay.com or (813) 225-3110.

Bitcoin virtual currency a reality for one Tampa Bay restaurant (w/video) 04/01/14 [Last modified: Tuesday, April 1, 2014 8:59pm]
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