Does Bitcoin Have Real-World Applications?
I really, really want to use my Bitcoin like cash, but I can’t. That is, I want to ditch my bank accounts and rely solely on the Bitcoin blockchain to hold and spend my finances. Today, however, that’s not possible. Of course, that’s not entirely true. I could potentially use software that instantly converts my BTC into dollars so that I can buy a coffee or pay for groceries, but then, why wouldn’t I just use cash?
The truth is that Bitcoin never achieved the vision set out by Satoshi Nakamoto in his (their?) Bitcoin White Paper. Satoshi envisioned a decentralized money system where banks no longer held power over economies, and where people could send and receive cash instantly without intermediaries or crippling fees. In fact, the Bitcoin White Paper doesn’t envision Bitcoin as an investment vehicle at all. The entire system was meant to be for regular people to control their own finances.
Of course, that’s not how it turned out.
The Reality of Bitcoin
Instead, Bitcoin turned into a speculative investment vehicle for those wealthy enough to be able to risk their money. In other words, Bitcoin became the plaything of the rich. Search Google for Bitcoin and you’ll get article after article extolling the spectacular rise of Bitcoin’s price. When Warren Buffet and Allan Greenspan are giving Bitcoin investment advice, you know it’s not for the average family.
Millionaires created giant mining farms so that they could become bigger millionaires. Governments got into the craze and helped to drive up the price of Bitcoin with massive purchases. Sure, Joe Blow the Electrician might own 0.003678 BTC, but there’s no way he’s going to own 1 whole Bitcoin at today’s valuation, let alone use it to fill his gas tank.
The fact is that Bitcoin does not have any practical real-world uses. At least, not like Satoshi envisioned. That said, Bitcoin does pave the way for another future crypto to fill that void.
Using Bitcoin As Cash
Personally, I would have liked to use Bitcoin like digital cash. When I first got involved with it, back in 2014, it was already over $800 per BTC. I sunk a measly $100 into it, not as an investment, but to try it out. Back then there were apps that advertised paying for ice cream with a simple scan of the QR code, and sending your mom money with the press of a button. I was instantly interested.
However, I was never able to use Bitcoin as a method of purchasing items. Not once was I ever given the opportunity to whip out my smartphone and buy anything with my BTC. Nobody accepted it. However, Apple Pay allowed me to whip out my phone and buy groceries, gas, and anything else with the cold cash in my bank account. So I made the mistake of cashing out my Bitcoin back into my bank.
Today that $100 would be worth nearly $2,000, had I let it sit in my crypto wallet.
It’s Not A Means of Exchange
The problem with Bitcoin is that it’s not a convenient means of exchange. The original purpose of currency was to enable exchange between two parties using something that had an agreed-upon value. Gold coins were useful, because everyone could agree on what value they represented. With modern fiat currency, the government tells us how much it’s worth, and we can conduct transactions with it. Bitcoin has never fulfilled this task.
Price fluctuations
For starters, Bitcoin’s value can’t be agreed upon. That is, the price fluctuations are wild, and Bitcoin can gain and lose hundreds of points in a few minutes. It’s a wild ride for investors, but for a merchant it’s completely unreliable.
Imagine a flower shop. They spent $100 buying roses, and need to make $200 back to cover the cost, expenses, wages, and profit. They could mark the roses at 0.0094 BTC, which is $200 at the moment of writing. But in an hour the value of Bitcoin could drop by hundreds or thousands of dollars. If they don’t stay on top of it, constantly adjusting their prices, they could lose money if 0.0094 BTC suddenly becomes worth only $90.
There’s an easier means of exchange for the merchant. It’s called cash.
High fees
Another problem that plagues Bitcoin is the ever-increasing cost of transaction fees. One thing that Satoshi envisioned was the ability to send money around the world for cheap. Bitcoin, and most cryptocurrencies for that matter, has become increasingly more expensive to use.
Every time you send your Bitcoin to another wallet, whether its from an exchange to your wallet, or from your wallet to another person’s wallet, there are network fees. These fees are used to reward the miners that power the entire blockchain for their effort. But as activity on the blockchain increases, so too does the cost of moving Bitcoin. At some point, Bitcoin cost over $50 to move it! Imagine buying a $2 coffee and paying $50 for the convenience.
Those ridiculous prices didn’t last long. The fees depend on how much activity is on the blockchain, as there are tens of thousands of nodes competing to solve the next blockchain, and the highest bidder wins. Sometimes you can pay $0.30 per transactions, and other times it can cost over $10. You know what doesn’t cost anything to transact? Dollar bills in your wallet.
Transaction times
My final complaint about using Bitcoin as a means of exchange is with its transaction times. Once again, Bitcoin has failed the Satoshi vision. It was supposed to be fast. Satoshi thought that with the power of the internet and the technology of the blockchain, Bitcoin could be just as fast and easy to use as cash, thus replacing cash completely.
Turns out, however, that as Bitcoin grew in popularity, the entire blockchain slowed down to a crawl.
It takes six to ten minutes for the nodes on the blockchain to confirm each block. With thousands of transactions happening at any given time, it can take an hour or more for money to move. If you run a restaurant, you don’t want to wait an hour to figure out if your customers paid you or not!
The Most Complicated Bank Account
All in all, Bitcoin turned out to be the most complicated bank account I’ve ever owned. At first I hunted down a Bitcoin ATM, which were few and far between at the time. I had to set up a crypto wallet, and chose a mobile one on my phone. The entire process of turning my dollars into Bitcoin involved downloading an app and creating an account, then travelling across town only to discover that the ATM was “out of order.”
So I went home and signed up on an exchange. That required sending them copies of my driver’s license and linking my bank account. Then, after two days, they said I was “confirmed” and could now purchase Bitcoin. I had to email them the money and wait for it to appear in my account, and finally, a day later, I was able to buy Bitcoin.
Of the $100 I sent to the exchange, they took $6 in fees and the Bitcoin network took another $4, so I lost 10% of my money just buying Bitcoin and sending it to my wallet. My actual real bank account is free.
Are There Ways To Use Bitcoin In The Real World?
Bitcoin comes up short as a means of exchange. As a store of value, however, it’s fantastic. For that reason, Bitcoin is a fantastic investment device to keep in your portfolio. I suppose that’s why everyone does it.
However, there are a few practical applications for Bitcoin outside of investments. For example, you can make donations to charities with Bitcoin. Many charities accept it, including:
Also, you can make money transfers with Bitcoin. However, it can get expensive if you do it during peak network times, and it could take an hour or longer to arrive to its destination. That said, it may come out cheaper and easier than Western Union, depending on where it’s going.
Finally, you can use Bitcoin in a roundabout way by using gift cards or even a Coinbase debit card.
You heard that right.
BitPay has a Mastercard debit card that you can use anywhere that takes debit cards. The card is attached to your BitPay account, and converts Bitcoin to dollars when you use it. It then withdraws the appropriate number of Bitcoin from your account with the next block hash.
If you live in Canada (like I do), then you’re out of luck, but you can still buy gift cards using your Bitcoin from CoinCards. This will allow you to shop online at Amazon, order Skip The Dishes, buy groceries at Metro or Sobeys, etc.
Or you can just use cash. It’s much easier.
What Comes Next?
As disappointed as I am that Bitcoin never achieved its goal of becoming a useful currency for exchange, there are some things to be happy about. Bitcoin started something new. It’s the first generation of a new type of technology and new way of doing business. The blockchain is revolutionary and one thing Bitcoin proves is that the theory works in practice.
What comes after Bitcoin will only get better. In fact, the second generation is already here, and already showing how much more ambitious it is. Ethereum uses blockchain technology to decentralize computing. Smart contracts offer undreamed-of potential for the future. Ethereum wouldn’t exist had Bitcoin not paved the way.
Don’t forget about Facebook’s Libra cryptocurrency, which may or may not come to fruition. This represents a somewhat centralized blockchain cryptocurrency with the ability to use it as a means of exchange. It would be, in effect, a global currency that can actually be used for shopping and sending money. It’s Bitcoin 3.0.
So, what comes next?
Bitcoin, Ethereum, Libra, and a million altcoins and stablecoins are paving the way towards finally realizing the Satoshi dream: a truly decentralized global cryptocurrency using blockchain technology that anybody can use as a means of exchange AND a store of value.
In other words, cash.
