Bitcoin, the virtual currency that’s generated headlines and controversy since it hit the scene in 2009, is finding its way into the mainstream, with tech-savvy merchants like Overstock.com and Zynga choosing to accept it as valid payment.
Now, you can add Tacoma’s Optic Fusion to the list.
“We’re doing it,” laughed Rick Shanaman, president and CEO of Optic Fusion. “We’re excited for it, certainly. It’s fun for us as a business to try something new.”
Optic Fusion, which provides colocation and connectivity services to clients up and down Puget Sound, knew relatively little about Bitcoin when it first surfaced.
“Two years ago, we had a customer come in the door and said they wanted to run some Bitcoin mining rigs, and we said, ‘What is that?’” said Shanaman. “That got us looking into that. More and more, we had customers who were at the forefront of this kind of thing talking about it, and so we took it upon ourselves to learn more and more about it.”
A Bitcoin “mining rig,” Shanaman explained, is a computer dedicated to perform complicated calculations that result in new bitcoins. With people now sending Bitcoins to each other over the Bitcoin network all the time, somebody has to keep a record of all of these transactions. That’s essentially Bitcoin mining is; in a very simplified nutshell, those calculations are actually a process to decrypt, confirm and re-encrypt Bitcoins to record them into a giant shared general ledger.
If that sounds like free money, well, that’s because it kind of is — with a catch. Perhaps the best way to think of Bitcoins is not as a currency, but as a commodity; Bitcoins are “mined” through mathematical formulas in the same way that gold is mined through pickaxes and carts.
And like gold, there’s a finite number of Bitcoins to be mined, as only 25 new Bitcoins are generated every 10 minutes. Mining, then, is a race of sorts for powerful computers in calculating data, and the new Bitcoins generated by mining are a “prize” for the miner’s rig performing the computations.
As these races have become more intense, more power has been necessary for hosting rigs to be efficient. That’s where Optic Fusion first came into the picture, with the aforementioned customer needing the company’s services to house and power his potent rig.
“Since then, we’ve had several people looking to us searching for places for their Bitcoin mining rigs,” Shanaman said. “It takes a lot of connectivity, and around here, people started looking at us as a place that can provide that.”
Optic Fusion itself actually threw its hat into the Bitcoin mining ring roughly a year ago, Shanaman said, to familiarize itself with the fledgling currency. It generated a few Bitcoins for a while, but as the logarithms required to mine them became harder to solve, its capabilities became eclipsed by other, more powerful machines.
“But our tech guys enjoyed working with Bitcoins and learning all about it,” Shanaman said. “Well, we ended up having some folks approach us over the last six months and say, ‘We’d like to pay with Bitcoins.’ That’s when we decided that, hey, we’ve already got some Bitcoins that we own, so why don’t we just go ahead and take Bitcoins as a payment. That’s when we noticed that some mainstream companies were starting to take them, so we thought, ‘Let’s do it.’”
For some of Optic Fusion’s clients, the Bitcoin option offers serious advantages.
“Some of the very tech-savvy clients we have who already deal in Bitcoin already have access to that currency,” Shanaman said. “They have customers who already deal in Bitcoin, there’s no need for them to convert them to cash to pay us. We’ll just take the Bitcoin as well.”
There is, of course, risk, Shanaman acceded, especially with a digital currency on the bleeding edge of an evolving global marketplace.
As Bitcoin isn’t established or backed by any standard commodity, its value could conceivably disappear overnight. And indeed, its “exchange rate” fluctuates wildly, sometimes multiple times during the day.
Shanaman, in fact, rang one of his staff members to get a real-time dollar value for one Bitcoin during his interview — $949 — only to laugh as he learned that it had already risen to $951 by the end of his phone conversation.
“It’s the Wild West of currency, man,” said a chuckling Shanaman. “It’s a risky play for us because we’re a traditional business. We’ve got to pay our bills and our employees or such. So far, they don’t want to be paid in Bitcoins just yet.”
The plan, he added, is currently to keep the Bitcoins for a while, rather than exchanging them for real world dollars right away.
“Who knows what the market is going to dictate — are they going to gain or lose value?” he said. “We just don’t know, but we’re committed to hanging on to them.”
“And here’s the fun part,” he continued. “When somebody tells us, ‘We want to pay our bill with Bitcoins,’ we’re going to have to figure out how much that is. We’ll have to figure out and say, ‘In the real word, you owe us, say, $1,500. But in the Bitcoin world, you owe us however many Bitcoins.’
“It changes so much that we’ll probably have to say, ‘As of this date, this is what you owe us,’ and you have this long to pay the bill. We’ll have to stick that post in the ground at a particular time. and we may end up making more money or less money on the deal based on when we peg the day of that’s when the value is. The real world value of Bitcoins fluctuates so much.”
Optic Fusion is currently still waiting for its first Bitcoin transaction, according to chief technology officer Eric Stockwell. Still, Shanaman said that, since the firm announced its intent to take Bitcoin as payment, “we’ve had several customers who have said they’d like to give it a whirl at the end of the month.”
“It’s fun to be in a situation where nobody’s done it before,” he said. “It’s a little bit of a gamble. But it’s an exciting gamble.”