The price of the purchase is converted to bitcoin.
The customer sends the value of the purchase in bitcoin.
Bitpay confirms the transaction and locks in the dollar value and deposits the US Dollar amount in the merchant's bank account the next day.
So the merchant must still quote his prices in conventional currency (dollars, euros. etc.); he cannot quote in Bitcoins. And the Bitcoins he gets are instantly sold to the exchange agent.
If the same facility is given to the client (he buys the bitcoins moments before the transfer) then the Bitcoins are just an internal mechanism of transfer between exchanges; as seen by client and merchant, the transaction used traditional currencies with the exchange(s) playng the role of a bank, except perhaps with a reduced tariff.
If the client does not have the same facility, then the volatility problem I mentioned is shifted to his side. He buys US$ 100,000 in bitcoins in order to pay for a US$ 100,000 car, runs to the bathroom, when he comes back he finds that those bitcoins are worth only US$ 80,000.
I still do not see how Bitcoin could ever replace traditional currencies as an explicit instrument of trade if its value can change 20% in a few minutes, many times per day.
