(Reuters) - Satellite TV operator Dish Network said it would accept bitcoin payments from customers from the third quarter, joining companies such as Overstock.com Inc and Zynga Inc in accepting the digital currency.

Dish said it selected Coinbase as the payment processor for bitcoin transactions with customers who choose to pay their bills online with the bitcoin wallet of their choice.

(Read: Hacker wrongfully imprisoned wants the US government to pay him in bitcoins)

Bitcoin is a digital currency that is not backed by any government or central bank and is bought and sold on a peer-to-peer network independent of central control.

Users can transfer bitcoins to each other online and store the currency in digital "wallets".

Coinbase, funded by venture fund Andreessen Horowitz, Union Square Ventures and Y Combinator, is one such digital wallet.

In March, it launched its Instant Exchange feature, which will be used by Dish to convert bitcoins to U.S. dollars. Dish's third quarter starts on July 1.

While bitcoins may not be an alternative to established currencies, they can cut the cost of moving money around.

PricewaterhouseCoopers estimates that credit card companies charge around 3 percent in transaction fees and PayPal's commission can go as high as 4 percent. The same transactions via bitcoin firms such as Coinbase and BitPay are likely to be free.

However, there's skepticism about the future of bitcoin, with critics pointing to recent setbacks such as the Mt. Gox bankruptcy.

Mt. Gox, at one time the biggest bitcoin exchange, abruptly stopped trading in February after it lost nearly half a billion dollars worth of the virtual coins due to hacking into its faulty computer system.

Dish shares closed at $59.19 on the Nasdaq on Wednesday.
Derek Wood at 9:40 AM