Poke around on long-time crytpocurrency forums and you’ll find the elder members there still talking about the newbies entering the marketplace. Of course, Bitcoin itself is only four years old, but that’s like…. fifty years ago in Internet time. A lot of the talk is centered around how the Bitcoin gold rush is bringing in a lot of people with a mentality starkly different from the one that many early adopters had, which is to think about BTC as an actual currency rather than a long-term investment geared toward making the investor rich.
Of course, there is nothing wrong with investing or wanting to be rich, but with this mentality has come a hoarding thought process and the community is turning into a bunch of miserly old gold miners hiding stashes of bitcoins atop their figurative hills.
Yet, in order to really help with increasing the value of Bitcoin in the long term while stabilizing its notorious volatility, we must remember that we can do a little more with our stash other than, well, stashing it. We can also spend it, and make an effort to spend it by supporting new online and offline stores.
So far there hasn’t been a whole lot of options for spending Bitcoins. Sure, there are a couple of great things happening in NYC such as EVR – a swanky upscale club that allows patrons to pay their tab in BTC – and Domino’s pizza even accepts BTC now. However, for the most part, users have been using BTC to buy consumer electronics through various BTC sites or on Silk Road (that is if they’re spending them at all).
Now we can add one more very practical online shopping option that allows BTC, and that is Bitfash.com – the first upscale apparel shopping site that allows Bitcoin enthusiasts to purchase from major fashion retailers. Vendors already include Forever 21, Zara, and Mr. Porter with many more to come.
What’s so exciting about this is it marks the first time that Bitcoin owners will be able to buy very practical and sought after clothing from major global brands – clothing they would be shopping for online anyway.
I recently connected with Keyur Kelkar – one of the co-founders of Bitfash – to talk about his vision for the site.
“We originally came from an investment banking background specializing mostly in acquisitions. So, our thought process crossed over such as option pricing, market theory, how to value something, how to value business, and so on – we tried to understand it from that perspective,” Said Keyur in a very analytical tone. “What we noticed was that people were using Bitcoin more as a store of wealth, but we wanted it to be used as an actual currency – we wanted to give users the ability to use this currency in real life.”
Although Bitfash.com is not affiliated with any of its retailers, what it does is service BTC holders by allowing them to buy things on the vendor websites using the digital currency. That way, Bitfash.com doesn’t mark up or down the cost of the product or the cost of shipping – the prices the vendor sets are the prices you pay other than a small service transaction on behalf of Bitfash.
Hopefully we’ll see many more services like this springing up that make it easier for people to pay for everyday items in BTC. However, the question still remains, “What advantages are there to using Bitcoin as payment when I can just use PayPal, credit card, or cash?”
People want to know of real-life examples where Bitcoin solves real pressing problems with payments that are not addressable in any other way, such as being cheaper and easier. It’s kind of like when email came out, people weighed the options of going out and spending a bunch of money on a fancy computer and Internet while having to learn the operating system versus simply using the post office. On the one hand, email seemed like a good idea, but a whole bunch of hassle to setup. On the other hand, they could just walk to the end of their driveway and flick up a red flag – done.
Yet, as time progressed, email became exponentially more refined. Not only that, but the technology as a whole became easier to understand, which dramatically broadened the user demographic, this is exactly what we need to see with Bitcoin, which is why so many startups are being funded.
But, even right now – right this second – paying for items in Bitcoin has a real, quantifiable advantage over credit cards, PayPal, cash, or wire transfers for various types of payments and situations. Let’s look at some of those now.
- Cheaper – Let’s say I’m a merchant in Texas and I need to import goods from China. My shipment costs $100,000. If I use a wire transfer or PayPal I will have to pay a fee of about 2.7% ($2,700). With Bitcoin my fee is closer to 1% or less, which makes a huge difference with that volume of money (it would cost $1,100 at 0.55%)
- Speed/ease – Let’s go back to that same shipment. If I pay the $100,000 for that shipment using PayPal or wire transfer it will take approximately a week to go through. The more money the payment, the longer it takes. But, with Bitcoin it will take about an hour.
- Less paperwork/more privacy – Let’s say I need to sign a contract for a loan that proves that both parties agree to the terms. Typically, I would need to send the money and the other person would have to make timely payments. I would need to use a notary at a bank, keep track of bank account numbers, and utilize the court system in case problems arise in a he-said/she-said fashion. However, with Bitcoin, I could just write out a contract and sign it using the private keys of the addresses of both lender and borrower. Then, I could use those same addresses to send out the loan and receive payments. There would literally be no need for either party to use personal information because the blockchain can publicly verify that the addresses used in the contract have sent and received money and at what times this occurred. This is also safer.
- Easier, cheaper Escrow – Let’s say I’m a service provider who is entering into a project agreement with a client. Of course, we have to be safe, so we decide to escrow the total payment and agree it should be released in full when the project is completed. I have to find a third party escrow service that will hold the client’s money for them, which can be quite pricy. Both parties have to trust the escrow, and there’s always a risk that the escrow is working with either party, which allows theft. With Bitcoin, I can create a multi-sig transaction where the money is sent from the client to me, but in a way that we both have to sign off on it in order for the transaction to clear. The client can’t run off with the money, which provides me with peace of mind and I can’t take the money and not do the job, which provides the client with peace of mind. All of this without a third party involved.
- International payments – Let’s say I live in the US and need to pay someone (perhaps a contractor) in Russia, India, Argentina, or another high risk country. I can’t use PayPal, because they don’t allow transactions there. I could do a wire transfer provided my bank trusts me to, but it would still cost $15 and take a while. Or, I could just pay with Bitcoin, it would cost a small transaction fee, and I will be guaranteed that the money reaches its destination.
- Safer overall online payments – There is always a risk that your credit card number or any other information you send through the Internet can be stolen, especially if you’re purchasing products online. With Bitcoin, money is transferred using a Bitcoin address, and no credit card information, or any other personal information is needed such as address, telephone number, or social security number.
Just as techie people in 1992 could see the value of Internet and its resulting technologies such as email while most of the rest of the world saw it as a fringe practice (just use the mailbox! Why? Because it’s already there!) we are faced with the same reaction to Bitcoin now. When you had Internet back then, you weren’t really sure what to do with it. If you didn’t have it, you didn’t understand the need for it.
As it is now, people that have Bitcoins aren’t really sure what to do with them, and those that don’t have them aren’t sure why anyone does.
So you could save your bitcoins – but you could try spending a few. Put into practice the currency, pay for things using it and encourage other vendors to accept them. The advantages over using traditional forms of payment may not be immediately recognizable, but they are there and they are numerous.