Overall I would classify it as a success, and it’s clear there are many more options available for Bitcoin purchases now than even a year ago.
That being said, the week wasn’t without challenges and these challenges exposed some of the growing pains Bitcoin continues to experience. Some of these pains were very evident during my Valentine’s date Friday.
A Romantic Evening With Bitcoin
Generally the date was successful. My girlfriend received her flowers sometime in the afternoon, and we were able to see The Lego Movie – which was quite enjoyable. However, our movie options were limited to theaters with gift cards available on Gyft. Furthermore, we could not purchase our tickets ahead of time online because the AMC gift cards available on Gyft do not have PIN numbers, meaning they must be redeemed in person. This is obviously a minor inconvenience, but it is indicative of the small issues you may face if you are determined to conduct your transactions in Bitcoin.
Our dinner at Aperitivo was excellent, and the manager was very accommodating — even sitting down with us to go over the Bitcoin payment after the meal. The manager also uses Coinbase, so the process was fairly straightforward. Although I did have to send Meg to the ATM next door to get some money for a tip (the manager told me for now he prefers Bitcoin users to tip the waitstaff in cash). But to pay the bill, I merely had to log into Coinbase through Safari on my iPhone and send Bitcoin to his email address.
Now at this point you may be thinking – that sounds a little risky. You have to contact Coinbase’s servers over the 3G network? You can’t store the Bitcoin on your phone? There isn’t at least an app that does this? These are all great questions, and they undergird the ongoing battle between Apple and Bitcoin users.
Apple vs. Bitcoin
As I mentioned previously, there are a few different options for storing one’s Bitcoin. Some users choose to use online wallets – like Coinbase — which stores your Bitcoin on their servers. The problem with this is fairly obvious: you’re involving a third party in your Bitcoin transactions. Bitcoin stored in online wallets are also at risk of being stolen by hackers, and if something happens to the service storing your Bitcoin you may have trouble accessing it.
The other option is to store your Bitcoin on a desktop wallet, or a mobile wallet on your phone. This gives the user greater control over their Bitcoin, as it only exists on that piece of hardware. That could be problematic if something were to happen to that piece of hardware (hard-drive failure, virus, etc.) and the user does not have a backup. That’s exactly what happened to James Howells, who infamously threw out a hard drive with 7,500 BTC — or almost $5 million — on it. Nevertheless, if a user takes the proper precautions a desktop wallet is ostensibly more secure.
The problem for iPhone users, however, is that Apple has banned every single Bitcoin wallet app from its store. The last one available – Blockchain.info – managed to avoid detection for years, before being bumped earlier this month — leading Bitcoin enthusiasts to take videos of themselves destroying iPhones in protest.
Apple’s reason for banning these apps is still somewhat of a mystery. Some have speculated that Apple is developing its own iPayment system and is trying to preemptively muscle out competition. Another explanation is that Apple is simply wary of Bitcoin’s involvement in illegal transactions and its tenuous legal status in various countries. Regardless, the absence of Bitcoin apps on the iPhone has proven a major problem for some users.
Fortunately, there are some workarounds being developed. Perhaps the most interesting of these is Coinpunk. Developed by Kyle Drake, Coinpunk is a web wallet that can run on any platform. Like Coinbase, Coinpunk allows users to house their Bitcoin through a hosted service, but what makes Coinpunk particularly appealing to tech-savvy individuals is that it’s open source. That means users can house their Bitcoin wallet on their own servers, which can then be accessed from any device. Drake and his team are still developing the software, and they are looking for funding through IndieGoGo, but the possibilities of Coinpunk are exciting, if for no other reason than it will give iPhone users a wallet option that Apple cannot ban.
My week on Bitcoin has taught me a lot (and I hope you as well). The currency certainly faces some serious challenges and I’m sure there are plenty of powerful people who would like to see it go away.
It’s volatility continues to be problematic, and that is probably the number one reason many merchants are still reluctant to accept it. Interestingly, I believe as more merchants begin to take the plunge, Bitcoin will become less volatile. If the currency can transition away from speculation and toward being used for more mundane transactions, its value should level out.
Regardless, I don’t think Bitcoin is a passing fad. The motivation for people to stop using credit cards and move away from traditional banking is strong. And everytime a new story breaks about a government or corporation breaching personal privacy, that motivation will only get stronger.
Bitcoin isn’t a cure-all in this regard either. As I’ve pointed out before, in its current form Bitcoin still requires users to register for numerous services and attach their name to transactions if they’d like to purchase everyday items. Even still, I think it’s clear that Bitcoin does provide greater anonymity than credit card purchases. Put another way, Bitcoin won’t erase your dots but it will make it harder for others to connect them.
I believe if Bitcoin can improve its anonymity protections and solve its volatility issues it will become a viable option for consumers. But those are two big ‘ifs’ and they are largely dependent on a number of developments going forward. For those who are interested, I’ll continue to keep an eye on those developments, and post updates here when I can. Thanks again for following along.