eZanga, a tech business based in Middletown, recently became the first search engine and digital marketing company in the country -- and one of the first businesses in Delaware -- to begin accepting the much-hyped digital currency known as bitcoin.
eZanga has carved out a niche in the digital marketing industry by providing online advertising services at a fraction of the cost of industry giants, like Google and Bing.
Now the Middletown-based tech company is hoping to move a step ahead of its competitors by becoming the first search engine to accept the digital currency known as bitcoin.
With the re-launch of its search engine on Jan. 10, eZanga began accepting payments from online advertisers in bitcoin, as well as using it to pay the blogs and other sites where it places those ads.
"Bitcoin has gotten a lot of attention in the last year for its potential and possibilities, so we looked at it and found that it offers a lot of advantages to a business like ours," said Richard Kahn, the CEO and co-founder of the 11-year-old firm headquartered in the Middletown Professional Center. "Plus, by being the first out of the gate, we knew bitcoin would help get some press for the re-launch of our search engine that we might not have received otherwise."
Anonymous, decentralized and still subject to wild fluctuations in value, bitcoin has been alternatively hailed as a revolutionary online monetary system and derided as a high-tech Ponzi scheme in the making.
"Virtual currencies, perhaps most notably bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of many of us," U.S. Sen. Tom Carper (D-Del.) said during congressional hearings in November. "Indeed, based on conversations my staff and I have had with dozens of individuals both inside and outside of government, it is clear that the knowledge and expectation gaps are wide. Fundamental questions remain about what a virtual currency actually is, how it should be treated, and what the future holds."
Bitcoin was first introduced in 2009 with a software program created by Satoshi Nakamoto, the pseudonym of a mysterious programmer whose true identity remains unknown.
Today, it is both the world's leading form of digital currency, as well as an emerging payment technology, similar to Visa or PayPal, but without the transaction and currency exchange fees charged by those third-party vendors.
By existing solely online, bitcoin also avoids certain governmental controls. For instance, when the island nation of Cyprus announced last year that financial institutions would have to impose loses on shareholders and large depositors, many Europeans converted their cash to bitcoins to avoid the financial penalties for moving their funds abroad.
Kahn said one of the biggest advantages bitcoin offers for his company is that the digital payment systems allows for quicker transactions than conventional wire transfers.
"Especially when you're doing international business, those transactions can take up to a week to complete, while bitcoin transactions are completed almost instantaneously," Kahn said. "And for some reason, our international clients just don't seem to trust Pay Pal."
The biggest concern, he added, is ensuring that the non-regulated, virtual currency maintains its value. In November, for instance, bitcoin's value was at $569 on Nov. 20, but exceeded $1,000 for the first time on Nov. 28. Ten days later, it had dropped back to $722.
That's why eZanga has contracted with Coinbase, a San Francisco start up that processes bitcoin transactions and immediately converts the virtual currency into actual dollars, which helps prevent retailers from losing 5 to 10 percent of the currency's value in a single day.
Similar systems are used by Overstock.com, the online gaming company Zynga and the Sacramento Kings, all of which recently began accepting payments in bitcoins.
This week, snapCard, a San Francisco-based, third-party vendor that charges a 2-percent processing fee to convert bitcoins to dollars, also announced a program that allows U.S. taxpayers to pay the IRS with their digital currency.
"Bitcoin is a new innovation that's starting to get a lot of traction at the business and government levels," Kahn said. "We expect it's something that is here to stay and will eventually become just another payment method that everybody uses."