The great bitcoin debate
Putting the inefficiencies of dealing with small payment schemes aside, this is a good deal for the merchant. Whether Coinbase can make money with this fee structure also remains to be seen. Overstock would get bitcoins. It would use the bitcoins to pay suppliers. Those suppliers would either exchange them or possibly use them to pay other suppliers. This would set up a virtuous circle and get bitcoins in widespread circulation and use.
That is in fact how currencies get established. The fact that that is not happening for bitcoin is a huge problem for it. One of the things we know in B2B payments is that buyers, especially large ones, pretty much dictate how suppliers, especially small ones, are going to get paid. If Overstock told some of its smaller suppliers that they could either get paid in bitcoin, or go pound sand, my guess is they would take bitcoins.
They have been pretty flat for many months. I wrote a short elaboration which seems to have gotten a number of people even more riled up.
The stutter step of buying and selling BTC simply introduces inefficiency and friction into the exchange. And the consumer bears risks. This is a fundamental point. The consumer transfers dollars from their bank account to their wallet. Between the time they transfer dollars and the time they use their bitcoins to pay they incur exchange risk in addition to any fees they pay the wallet provider. If they go buy something from Overstock they could pay with PayPal or any other payment method for free, probably get various protections against the merchant, and possibly get rewards.
These wallets make a lot of sense for early adopters who want to support bitcoin for a variety of reasons or for exchanging bitcoins with other early adopters. This is another important point and the one bitcoin backers would be well advised to worry about.
Putting the inefficiencies of dealing with small payment schemes aside, this is a good deal for the merchant. Whether Coinbase can make money with this fee structure also remains to be seen.