Bitcoin is fast, secure, nearly free, has a stable supply and has a high level of user control… its just plain better than the banks. You have to wonder why the hell everyone isn’t using it? But the Bitcoin economy is still fragmented and dependent on payment processors and exchangers.
Merchants accept bitcoin only to convert it back into their local fiat currency, and who can blame them? There just aren’t enough bitcoin accepting businesses out there and they have suppliers and landlords to pay. But bitcoin was meant to be a peer-to-peer currency, not a peer to exchanger to bank to bank to exchanger to peer currency.
Crypto will win the currency wars, but it may be a while before it reaches your home town. Bitcoin is better, but change is hard.
Financial services are long over due for an upgrade. Credit cards weren’t made for e-commerce, charge backs are a serious and costly issue, fee’s are high and security is low. But in the developed world it really isn’t that bad. For the most part it works and a baker or a mechanic just doesn’t have the time to study monetary theory or information security. Accepting Bitcoin means a different variety of security concerns, new hardware, staff training, etc. Its not only an effort, its weird and uncomfortable and at the moment the reward might not be worth the pain.
Crypto-currency is certainly a break from the norm and most people are initially very skeptical. Adam Penn, owner of Veggie Galaxy, a Cambridge MA vegetarian restaurant, was initially skeptical of Bitcoin.
“I found it interesting, but wasn’t sure it was something I wanted to do at my restaurant. When I went home and told my wife about Bitcoin she was not thrilled with the idea of accepting ‘virtual money’! It seemed pretty risky and ‘out there’.”
For Adam one of the hardest parts of accepting bitcoins was teaching his staff to use the “out there” currency. The biggest hurdle many be becoming comfortable with something new the Bitcoin economy has grown many options which makes accepting the currency much easier than it may seem.
Daniel Mery of Planet Linux, a Miami based hacker space, finds accepting the currency to be no more difficult that accepting credit cards payments. The business, which includes a caffe, uses Square for credit card payments and leading Bitcoin payment processor BitPay, for Bitcoin payments. BitPay’s service allows them to control payments to their bank account, calculate taxes and download reports. Accepting Bitcoin has not caused complications for the business as they can choose when and how to accept Bitcoin payments and then simply download reports from their payment processors and forward it to the accountant. However, Daniel is certainly very technologically savvy and found Bitcoin to be intriguing rather than frightening and this is almost certainly the exception to the norm.
Bitcoin can be intimidating and it still a ways off ‘user friendly’. Most businesses will likely need a good push before trying to tackle it and that push is likely not being felt by your home town baker just yet.
Where the pain of our outdated financial system is readily felt is with international transactions. Anyone who has sent an international money wire knows this well. The bank charges you a conversion fee on top of a very unfavorable exchange rate, there are wire fees on both sides, it takes days and it has to pass through many hands, sometimes literally, and quite likely makes a trip through a large bank in New York whether or not the destination was in the US. And thats assuming everything goes according to plan. Just silliness for the transfers of ones and zeros in a globalized world. But most importantly, its enough of a pain in the ass to make you actively look for alternatives.
Bitcoin’s first mainstream use may be in international trade. Bitcoin is ideal for international transactions and there are businesses out there who are already finding real solutions in Bitcoin.
Stephen Pair, co-founder of BitPay which has experienced dramatic growth this year, sees strong demand from international commerce.
“E-commerce companies doing business internationally are really our target market right now. We have retail and POS capabilities and we use a lot of those businesses to showcase what the technology can do, but right now at BitPay the really sweet spot are the e-commerce companies that sell internationally because [traditional] international payments are very, very difficult. … And its not just businesses themselves selling to consumers but its also businesses transacting with other business.”
The currency may also be adopted in other areas experiencing a real and intimidate need for an alternative. Bitcoin may be the savior of savings accounts in places like Argentina which is experiencing an ongoing currency crisis and capital controls.
Little by little, people with a real need for an alternative try it and are converted. The network effect is what makes Bitcoin work, its what gives it its value. Often businesses begin accepting Bitcoin on the urging of an enthusiastic friend or relative. In small, but growing circles the currency catches on and networks form. An excellent example of this is the Kreuzberg neighborhood in Berlin.
Crypto-currency will go mainstream, it’s just too good not to use. But it won’t happen everywhere at once, where real need is being felt it is being adopted and networks are growing around it. In places and in specific networks of people and businesses the Bitcoin economy will lose its dependence on exchangers and traditional banking. The Bitcoin world often moves at an alarming speed and it may not be long before it becomes possible to live a modern life largely outside the reach of fiat currency.
One of the first steps will be businesses who accept the currency to hold and use it rather than exchange it. When will it happen? No one knows, but BitPay is seeing the beginnings of it, “it will happen and it is already happening.”