First, the business reasons: There are large numbers of holders of bitcoin who are eager to patronize firms that will accept this form of payment, but so far, their options have been limited. I believe that by being the first major online retailer to accept bitcoin, we will tap into a significant group of loyal consumers, and as a result our share of the overall market will grow.
In addition, the cost of carrying out credit-card transactions is roughly 2 percent. Given that our net margin is also approaching 2 percent, the avoidance of such fees will make bitcoin sales that much more profitable.
(Read more: Buzzfeed COO: How I mined for bitcoins)
And, while it's true that the value of bitcoin has proven more volatile than that of gold, this will not be a risk to Overstock.com; we will either immediately convert bitcoin to dollars or hedge our bitcoin risk through bitcoin-dollar derivatives (should such a market develop).
Now, the philosophical reasons: I believe limited government is a better business model for our nation than is unlimited government (and limited government has the additional benefit of being consistent with our Constitution). Among the many vices of authoritarianism is that it can sustain itself only by offering more things to more people than it can actually deliver, and one way it makes up the difference is by debasing its currency.
(Read more: Bitcoin breaks $1,000 after Zynga opts in)
People who share my belief in limited government often favor gold-back money, because for millennia, mankind's stock of gold has increased at a rate of 2-3 percent per year, and no government mandarin has the power to will additional gold into existence.
As a digital currency, bitcoin is, of course, suited to online transactions. In addition, however, it possesses those key virtues of gold: Bitcoin is mathematically constrained such that there can be no more than 21 million (infinitely divisible) units, and the supply will grow in a predictable manner.
(Read more: Here's what should bolster bitcoin in 2014)
I am agnostic regarding the future value of bitcoin. I merely feel bitcoin is a viable medium of exchange that Overstock.com should embrace to better serve our customers, and that the U.S. should embrace to create a robust, viable alternative to our current monetary institutions.
— By Patrick M. Byrne
— Patrick M. Byrne is chairman and CEO of online retailer Overstock.com. Follow him on Twitter @overstockceo.